Charitable Incorporated Organisations – Questions Answered
Charity update courses that we’ve been running this Autumn have prompted lots of questions about Charitable Incorporated Organisations (CIOs). Here are the some of the more interesting ones.
What is a CIO?
A charity structure which gives trustees limited liability but which, unlike the charitable company structure, is a ‘one stop shop’, only requiring the CIO to register with the Charity Commission (CC), not Companies House.
Why all the interest right now?
Because since 2018 charitable companies, as well as unincorporated charities, have been able to convert to CIOs.
Would a charitable company really want to convert?
For many established charitable companies, having to report to CC and Companies House is not particularly burdensome. On that basis many will carry on as they are.
Are there any other benefits in re-registering?
CIOs can prepare accounts on a receipts and payments basis, as opposed to applying FRS 102 and the SORP. This can be a lot easier for a simple charity.
I’ve heard re-registering can be a chore for an unincorporated charity.
Potentially. Assets will need to be transferred across, which can involve producing vesting declarations. Also, contracts may need to be novated. This can be time consuming, though the benefit of limited liability may make it a good investment of time.
So is it really worth it for a company charity?
The conversion process for company charities can be easier. The charity approaches CC regarding the conversion. Having approved it, CC then approaches Companies House which deregisters the company. The charity maintains its existing charity number. There is no particular need for cessation accounts. Accounts preparation carries on as if there had been no change in status (unless the CIO elects to move to receipts and payments accounting).
What about property?
Government guidance states that property transfers automatically on a company to CIO conversion, without a need to formally effect a transfer.
What about a Community Interest Company (CIC) to CIO conversion?
These conversions are proving popular. It is not uncommon for someone setting up a CIC to realise that there are far more benefits to being a ‘proper’ charity and to look to convert. The conversion process is the same for CICs as it is for charitable companies.
Are CICs a bad idea then?
Not necessarily. Although CIC profits are taxed, they apply ‘normal’ financial reporting rules. This means that they can prepare simple accounts under FRS 102 Section 1A or FRS 105, which charities can’t.
Peter Herbert, Insight Training