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Conversion to CIC

I have a members club which is incorporated under the Industrial & Provident Societies Act 1968.  The club is for social activities and provides drink at lower than pub prices.  Due to the audit/reporting accountant requirements we are exploring the possibility of changing the legal structure.  I was wondering if anyone had any experience of converting this type of club to a CIC and if so:

a) was there any problem in meeting the requirement to provide a community benefit

b) what happens to the mutual trading status for tax purposes?

Any comments or suggestions much appreciated.


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10th Dec 2012 13:45

Do you realy mean a CIC?

A CIC is just a company with additional reporting requirements, in this case you would probably use a Company Limited by Guarantee and would report as normal to companies house and send the additional report to the CIC regulator. The mutual trading discussion with HMRC does not change, however community benefit would be difficult to show if it is just a drinking den, are there no worthwhile community activities carried out?

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By johnt27
10th Dec 2012 16:58

Audit requirements

Most I&Ps can make an election to waive the audit requirement if the members agree. If they don't then I can't see how they wouldn't expect an audit under a different corporate structure.

Both the CIC Regulator and FSA have guidance on switching from one to the other. As Chris has said a CIC has additional reporting requirements which can be more onerous than those of an I&P.

You want to just consider a straight company limited by guarantee rather than a CIC but either could risk the mutual trading status hence the reason for so many I&Ps still being around.

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By julie b
11th Dec 2012 11:20

Thank you for your comments.

They can opt out of audit (by members agreeing) but they would have to appoint a reporting accountant who has to be a registered auditor so that doesn't get round the need for an 'auditor'.

I think that they would consider just converting to a company limited by guarantee as long as the mutual trading status was not compromised.  Has anyone done this in practise?

The comment re a CIC is valid as it is effectively just a drinking den!

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11th Dec 2012 17:16

If the records are good

A reporting accountant should not cost that much. Talk to a few local firms like us!

Chris Smail

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By julie b
12th Dec 2012 17:39

The records aren't good!

despite years of training & nagging.  The problem with these sort of clubs is that the committee and officers are volunteers and it is always difficult to get anyone to give up their time.  Most of our time is actually spent balancing up the records and on accounts preparation.

I think that converting to a company limited by guarantee might be the way forward.  They do not have any investment income to speak of and they are aware that they are not supposed to admit or serve non-members in the club.


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By johnt27
12th Dec 2012 11:47

Mutuality of trading

This status shouldn't be lost as long as you go down the company limited by guarantee route. You couldn't use a normal company as this would jeopardise the mutuality argument.

The only thing you would have to worry about, is whether or not there is a risk of HMRC challenging any non member and investment income to become chargeable under CT.

This is less of an issue for I&P's hence the reason many people don't convert.

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