Can a CLG be "owned" by a Charity

Can a Company Limited by Guarantee be "owned" by a charity?

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I'm looking at this in relation to CT relief for the Trading Company on donations made to the Charity.

The Trading Company is a Company Limited by Guarantee, its directors are also the members and those directors are also the directors and trustees of the Charity.

The question, with which I am struggling, is, "does the above structure mean that the Trading Company is owned by the Charity and thus do donations made by Trading to Charity within 9 months of Trading's period end qualify for CT relief?"

If not, is there a way that the Charity can own the Trading Company, bearing in mind it's structure as CLG? 

Replies (5)

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By paul.benny
05th May 2020 09:54

The scenario you have described is one of common control, not of the company being owned by the charity.

Companies limited by guarantee are usually not-for-profit entities. Whilst a trading company can be not-for-profit, the mention of donating profits suggest otherwise.

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Replying to paul.benny:
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By BromleyBob
05th May 2020 10:25

Thanks. Yes, as you say, they are both in common control.

Is there a way to have the Charity owning the CLG?

The CLG (Trading Company) does make a profit but gives it to the Charity. The issue is, does it need to calculate the profit before YE so that the profit is CT deductible?

Can a company be a Member in a CLG?

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By Tax Dragon
05th May 2020 11:08

The great thing about the law (when it imposes tests such as "wholly owned"), is that it normally defines the terms used in the tests.

In this case, the definition is in s200 CTA 2010.

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Replying to Tax Dragon:
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By BromleyBob
05th May 2020 11:22

Thanks. And this would be the relevant part, I believe:

(3)Condition B is that—
(a)the company is limited by guarantee, and
(b)every beneficiary of the company is or must be a charity or a company wholly owned by a charity.

I then move on to wonder , what is a beneficiary? And the answer seems to be:

(5)A beneficiary of a company is a person who—
(a)is beneficially entitled to participate in the company's divisible profits, or
(b)will be beneficially entitled to share in any of the company's net assets available for distribution on its winding up.

But then I get a bit stumped as I'm not sure how to ensure that the Charity is "beneficially entitled".

Any thoughts on where I might find that answer please?

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Replying to BromleyBob:
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By the_drookit_dug
05th May 2020 13:48

You amend the articles to ensure the charity is beneficially entitled. Include a winding up paragraph such as:

"In the event that the company is wound up the members declare and agree that [charity], being a registered charity having the charity number [XXXXXXXX], will be beneficially entitled to the Company's assets as shall exist at that time notwithstanding that they may or may not be a member of the Company at that time."

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