The Madeleine Fund - Leaving No Stone Unturned Ltd.

[Alice Purjorick]

Sorry Alice - the company is liable to corporation tax on its profits.

May be you should read my post again; specifically the bit about the fund being a NON PROFIT making organisation and therefore exempt from corporation tax.
According the Companies House web check it is set up as such.
So if it pays corporation tax it is not a non profit making organisation.

[ferryman]

May be you should read my post again; specifically the bit about the fund being a NON PROFIT making organisation and therefore exempt from corporation tax.
According the Companies House web check it is set up as such.
So if it pays corporation tax it is not a non profit making organisation.

Not for profit companies: Get the details right
Posted by JAADAMS PM | on Fri, 23/09/2011 - 14:16  16702  13 comments
More social links Twitter Facebook Linkedin Google+

Odds are that at some point during your professional life as an accountant you will come across what is termed a ‘not-for-profit’ (NFP) company, explains Jennifer Adams.

Queries placed in past Any Answers show that most at least know that these companies exist but problems can occur if not met on a regular basis. This article attempts to assist by bringing together the most relevant points in a short text indicating websites where further information can be found.

Various legal structures

A useful schedule comparing possible legal structures for such enterprises can be found on the Business Link website.

Ordinary Limited Companies

Companies can be run for a social purpose and still make a profit. These companies are set up in the usual way via form IN01 being either limited by shares or more usually by guarantee using the same proforma memorandum and articles, as per the Companies House website. The company is then run as any other company - paying dividends (if limited by shares) and salaries, submitting accounts and returns, paying corporation tax on profits and registering for VAT as necessary. The only difference is an additional clause to the articles stating that the object of the company is for a social purpose (new companies automatically have unrestricted objects unless a specific cause is detailed).

IDEA: A charitable donation to a registered charity relevant to the company of the profit made before the year end would ensure a reduced or no corporation tax charge.

‘Not-for-profit’ company

This also needs its articles amended but this time to state that the company is a ‘NFP’ company such that should any surplus profit be made then the profit is to be reinvested back into the company or social purpose for which the company was created rather than distributed as dividends (which is the reason why these companies are usually limited by guarantee). Again, as above, the company is run as any other company.

Community Interest Companies (CIC) - currently 5,650 registered in the UK

CIC’s are true ‘NFP’ companies. The concept was created in 2005 to enable better access to funding by companies set up for a social purpose. Additional eligibility tests need to be passed before CIC status is awarded.

Creation is again via the usual IN01 form (share or guarantee - public or private company) plus form CIC 36 (‘Declarations for forming a CIS company’) which includes a community interest statement certifying that the company is being formed to serve the community (rather than for private profit) plus a section to describe how the community will benefit. The CIC Regulator approves the application only if the statement passes the community interest test. CIC’s cannot register with Companies House electronically as each company has to be vetted by the CIC Regulator.

(For detailed information see the BIS website which also includes proforma memorandum and articles.)

CICs do not have charitable status and as such cannot receive the tax benefits of a charity, but in return they do not have the strict reporting requirements of a charity. A charity can set up a CIC subsidiary company.

How CICs operate

CICs follow specific rules, including:

Having an ‘asset lock’ - the assets are retained within the company or if transferred, are done so at not less than the full market value unless to another CIC as stated in the articles or permitted by the regulator.

A CIC created as a company limited by shares can be financed by selling shares although dividends are capped at an amount set by the regulator; this is to protect the ‘asset lock’ ensuring that the majority of the money invested is tied to that company and its social objectives rather than distributed to its shareholders.

The usual annual accounts and return are filed at Companies House with the addition of a CIS Report (CIS 34). This report is confirmation to the public that the community interest test is being complied with. CIC’s pay corporation tax and submit returns to HMRC as other companies. CIC annual accounts cannot be filed using the Companies House WebFiling service.

CIC companies are usually limited by guarantee as outside funding bodies appreciate members being unable to take a dividend. However, a company limited by guarantee has limited fund raising capacity as there are no shares to sell.

Charitable Incorporated Organisations (CIO’s)

A new structure enacted by the Charity Act 2006 Sch 7.

Similar in format to a CIC in that there is a ‘community interest statement’ and assets are ‘blocked’.

Created because it was felt that charities needed a structure that would provide the benefits of a company (particularly with the raising of finance and liability of debts) but without the administration and governance of two sets of legislation.

CIC’s are registered with the Charity Commission and not Companies House - therefore not a true company but it has a constitution, a trustee body and members. It will be required to file annual accounts and return but to the Charities Commission, not Companies House.

Members will have either no or limited liability.

For detailed information see the Charity Commission website.

FINAL NOTE: some ‘NFP’ companies are exempt from notification under the Data Protection Act 1998. See the ICO website.

 

Jennifer Adams FCIS TEP ATT is a freelance writer and author specialising in tax and company secretarial issues; she can be contacted at Abacus Business Solutions.

 

http://www.accountingweb.co.uk/article/%E2%80%98big-society%E2%80%99-companies-get-details-right/518951

[Jean-Pierre]

May be you should read my post again; specifically the bit about the fund being a NON PROFIT making organisation and therefore exempt from corporation tax.
According the Companies House web check it is set up as such.
So if it pays corporation tax it is not a non profit making organisation.

Alice -  the company in question is a company limited by guarantee.  It is generally termed a "not for profit" company because the shares (and therefore the shareholders) do not benefit from an increase in the value of the shares (and thus turn a profit by virtue of their ownership of the shares). 

However, this does not mean that the company cannot engage in activities (eg trading in goods, provision of services) which will create a profit, and if it does so then those profits (correctly termed a "surplus) will be subject to tax - Corporation Tax.  (unless of course it is a registered charity in which case it will be tax exempt).   

If you look at the accounts for the comapny in question you will see that in the year to 2013, they did in fact pay CT of £9756.   

There is an exception to this - Small, not-for-profit, non-charitable CLG are allowed to carry on a trade purely between its own members. They are deemed to trade "mutually" and as such are exempt from Corporation Tax.  Clearly this does not apply to the Madeleines Fund.

http://www.mccannfiles.com/id474.html
 

[Alice Purjorick]

Alice -  the company in question is a company limited by guarantee.  It is generally termed a "not for profit" company because the shares (and therefore the shareholders) do not benefit from an increase in the value of the shares (and thus turn a profit by virtue of their ownership of the shares). 

However, this does not mean that the company cannot engage in activities (eg trading in goods, provision of services) which will create a profit, and if it does so then those profits (correctly termed a "surplus) will be subject to tax - Corporation Tax.  (unless of course it is a registered charity in which case it will be tax exempt).   

If you look at the accounts for the comapny in question you will see that in the year to 2013, they did in fact pay CT of £9756.   

There is an exception to this - Small, not-for-profit, non-charitable CLG are allowed to carry on a trade purely between its own members. They are deemed to trade "mutually" and as such are exempt from Corporation Tax.  Clearly this does not apply to the Madeleines Fund.

http://www.mccannfiles.com/id474.html

I understand what you say J-P. however a CLG does not have shareholders so will not pay out a distribution and the profit  less tax will be returned to the company. We could have a nice esoteric discussion on this  but will probably bore the pantaloons off the rest of the posters and incur the wrath of the mods for being off topic.
My original point was that HMRC would only be interested in whether CT was payable not in examining the companies accounts to see if it was operating fraudulently (unless it jumped off the page at them).