Summary
A company registered at Companies House, owned by the members. It can be limited by shares or by guarantee; however most are limited by guarantee, as this tends to suit the non-profit motive better. If it is limited by shares, then the amount of dividend it can pay is limited. All CICs have an asset lock. This means that in the event of a winding up, assets have to be transferred to another entity with similar objectives which also has a similar asset lock.
Accounting regulations
Must prepare accounts in accordance with:
- Companies Act 2006
- Small Companies Regulations
- FRS102 (section 1A if applicable)
Tax implications
- Subject to corporation tax
- May or may not be able to distribute post-tax profits by way of dividend, depending on how constituted
- May be eligible for some VAT exemptions such as education and culture
Advantages
- Can have a non-profit aim as its main objective
- Cheap and easy to create
- Limited liability
- High audit threshold – unlikely to need an audit
- Listed on Companies House website, and all directors details and filings available there
Disadvantages
- Cannot pay a dividend (if limited bu guarantee) and so exploit the tax advantages of dividends; can only reward people by wages, or contracted freelance payments.
- The Financial Services and Markets Act 2000 applies, so cannot advertise for loan investment from the public, therefore this structure is not a good investment vehicle
- Need to complete form CIC34 when submitting annual accounts, which cannot be filed online
Services required
- Accounts preparation
- iXBRL tagging of accounts and submission to HMRC with Corporation Tax return CT600
- Payroll (if employing people)
- VAT advice, if necessary
- Book-keeping, if required