Finance News: Community interest companies 'should benefit from tax reliefs'

The Department of Trade and Industry officially launched community interest companies last week, amid calls for them to be granted tax reliefs.

Since July, 13 organisations have been granted community interest company (CIC) status.

The CIC format combines traditional company structure with an 'asset lock' to prevent profits being distributed to shareholders.

Speaking at the launch, Alun Michael, the enterprise minister, said: "Successful business activity includes social enterprises that are soundly based and that meet public needs.

"CICs provide a unique and innovative structure that offers a creative solution to challenges of regeneration and economic and social inclusion."

But the lawyer who convinced the Government to legislate to create community interest companies said that more needed to be done to encourage people to invest in them.

"Here are organisations for which investors are putting on hair shirts," said Stephen Lloyd, a partner with Bates, Wells & Braithwaite. "They are getting a cap on their return and they can't share the capital growth.

Any investor is doing it for a mixture of social and commercial purposes, but it's heavily skewed towards the social."

Lloyd argued that CICs should be granted the same 80 per cent mandatory relief on business rates enjoyed by charities, exemption from corporation tax and tax-free interest on the shares or bonds they issue.

Jonathan Bland, chief executive of the Social Enterprise Coalition, echoed the call for tax advantages for CICs. "Incentivising people with tax reliefs could be a very powerful way of scaling up investment into CICs," he said.

"It is something we would like the Treasury to explore."

He added that social enterprises in general should be granted tax reliefs for public benefit activities.

The first registered community interest company was TalentSTAR, which provides performance opportunities and media work experience for young people. Adam Chetter, its director, said: "Being registered as a community interest company allows investors, schools and the artists themselves to have confidence that our projects are for community benefit."

Community interest companies are supervised by a regulator and must pass a "community interest test" to be registered.

John Hanlon, the CIC regulator, said: "I am delighted my office in Cardiff is now up and running, dealing with real applications from real people trying to make a difference for the good across this country."

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