A guide to third sector trading - WCVA
A guide to third sector trading - WCVA
A guide to third sector trading - WCVA
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It’s an idea, but is it business? A <strong>guide</strong> <strong>to</strong> <strong>third</strong> sec<strong>to</strong>r <strong>trading</strong><br />
1: Getting<br />
started<br />
2: First steps 3: Business<br />
planning<br />
4: Legal and<br />
governance<br />
5: Funding<br />
and<br />
resourcing<br />
6: Financial<br />
controls<br />
7: Managing<br />
growth<br />
8: Management<br />
and<br />
governance<br />
9: Social<br />
enterprise<br />
10: Sources<br />
of support<br />
• The ‘CIC club’: The government hoped that the CIC would<br />
become a recognised format for social enterprise <strong>trading</strong>. This<br />
seems <strong>to</strong> be happening rather slowly, but there is a modest<br />
cachet in groups being able <strong>to</strong> say they are members of a small<br />
club using the latest legal structure.<br />
• Flexibility: CICs offer almost everything that ordinary<br />
companies limited by guarantee and companies limited by<br />
shares can already do.<br />
The ‘charity lock’ – some disappointments for smaller<br />
enterprises: The idea that CICs are a way of encouraging social<br />
enterprise seems somewhat questionable for the many small<br />
struggling <strong>trading</strong> organisations in the <strong>third</strong> sec<strong>to</strong>r which find<br />
themselves bound <strong>to</strong> charitable status as the surest way of<br />
surviving. It’s not that there’s anything wrong with CICs – just that<br />
many people won’t want <strong>to</strong> use them and many of those who do<br />
will find that that they don’t make much difference. (Tax breaks<br />
for CICs and VAT regulations <strong>to</strong> benefit <strong>third</strong> sec<strong>to</strong>r organisation,<br />
on the other hand, could have changed the climate and improved<br />
the prospects for new as well as established enterprises.)<br />
• Corporation tax: CICs do not enjoy any of the tax advantages<br />
of charities. For many small community <strong>trading</strong> ventures (which<br />
often depend on the support of volunteers) charity tax relief<br />
may be the difference in their early years between survival and<br />
failure. This particularly applies <strong>to</strong> charities with mixed sources<br />
of income and a <strong>trading</strong> turnover of less than £50,000. There<br />
will be few if any advantages for them in converting from<br />
charities <strong>to</strong> CICs and starting <strong>to</strong> pay corporation tax.<br />
• Flexibility and constitutional simplicity: Enterprises which<br />
for tax reasons cannot afford <strong>to</strong> be CICs will be stuck with the<br />
restrictions of charity law and the existing messy constitutional<br />
structures for charity <strong>trading</strong>.<br />
• Duplicating the charity asset lock: The main innovation of<br />
CICs is the asset lock, which is already an essential aspect of<br />
charitable companies. So enterprises which are able and happy<br />
<strong>to</strong> trade as charities (or through <strong>trading</strong> subsidiaries owned by a<br />
charities) will see little advantage in CICs.<br />
Benefits for larger and expanding enterprises: The main<br />
beneficiaries of the legislation which created CICs will be larger<br />
and expanding enterprises (not necessarily all of them in the<br />
<strong>third</strong> sec<strong>to</strong>r), who will doubtless find that the asset lock makes it<br />
easier <strong>to</strong> access loans <strong>to</strong> invest in their development and <strong>to</strong> attract<br />
private sec<strong>to</strong>r partners <strong>to</strong> help extend the scope of their activities.<br />
The problem, of course, is that the legislation makes it no easier for<br />
small enterprises <strong>to</strong> grow in<strong>to</strong> bigger ones in the first place.<br />
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