Individuals and groups will often have ideas for voluntary, community or not-for-profit projects and automatically propose that charities should be set up. That may be appropriate, but other formats should be considered, including community amateur sports clubs and community interest companies.
CICs can be described as limited companies with special features, their purpose being to use business activities to advance community benefit rather than personal gain. At the heart of CICs is the community interest test - the public benefit test of the CIC regime. The assets within each company must be shown to be for community benefit. An 'asset lock' means funds can be used only for the community. CICs do not receive the tax advantages that charities get, but benefit from a 'regulation-lite' framework in comparison with bodies regulated by the Charity Commission or the Office of the Scottish Charity Regulator.
CICs are usefully employed to promote projects related to urban regeneration or to develop localities through, for example, tourism. They are lightly regulated to provide community catalysts to particular objectives without any undue burdens being placed on the taxpayer. The legal form was launched two years ago. It has been particularly popular among social enterprises, and there are now more than 1,200 registered CICs in the UK.
The public benefit test faced by charities can cause difficulties for sports clubs. CASCs provide a solution to these problems. Charity status can be denied or lost on the basis of an organisation's balance of activities or type of membership, especially if there are 'social' members. For amateur sports clubs with tax advantages - such as 80 per cent mandatory rates relief, the ability to use Gift Aid, inheritance tax relief on legacies and tax exemptions on trading receipts up to certain limits - CASCs reduce red tape. The benefits of being a CASC are very attractive to sports clubs that are unable to satisfy the public benefit test or do not wish to be charities.
New players in the community and voluntary field should therefore consider all the options available to them. There is more to the third sector than charities.
- Alan Eccles is a solicitor at law firm Maclay Murray & Spens LLP.