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Transfer of funds into CIC - Income

Transfer of funds into CIC - Income

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I am preparing accounts (and will need to submit tax comp in due course) for a newly set-up CIC (a professional sports club and not a CASC) which at its outset had transferred into it the remaining surplus funds of the unincorporated body that previously had, for many years, run the club.

What is the nature of this "transfer in" of these funds?  Donation?  

And is it taxable?  The money was, as HMRC says in BIM41810, used to supplement trading and carry on the business of course.

Many thanks.

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By BKD
27th Oct 2014 15:38

Why ...

... should it be treated differently from any other incorporation?

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By HeavyMetalMike
27th Oct 2014 15:47

I had one of these a few months ago.

Do you mean it was an unincorporated entity an not it's a ltd co? The fund introduced is just that. Dr assets Cr Fund.

Not taxable.

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By Jon Sparkes
27th Oct 2014 17:40

Transfer of a trade in effect

CIC's are no different to a normal company in tax terms.  The old unincorporated club is also a body corporate for tax purposes and would be subject to the normal rules for transfer of a trade/reorganisations involving connected parties.  You say that club is not a CASC and is professional so I assume no mutual trading income and that all profits are subject to tax - that would mean the accumulated funds from the old club would all be post tax income and any other treatment would therefore result in a double tax charge!  Should definitely be non-taxable.

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By Myshkin
28th Oct 2014 16:23

Funds tranferred

Thanks everyone.  

I am not sure what you mean BKD - it is not share capital or a loan.  Which leaves some kind of income (can't think of a 4th option).  (Sorry didn't mention that the CIC was limited by guarantee)

Mike I assume you mean I credit some sort of reserve in the Balance Sheet?

 

And Jon I agree it would not be fair for it to be taxable but what legislation there is to say that I have never been able to find.  Since my post I have read up on Sharp v Lincolnshire Sugar which impies that it is taxable.

 

But all food for thought.  Nothing from Portia though.

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