Community Interest Companies The Future for Ethical Business?

1
Community Interest CompaniesThe Future for
Ethical Business?

• Gavin Smith
• Dublin 9th November 2006

2
What is a CIC ?

• New Type of Legal Entity in the UK
• Created in September 2005
• Assets are Locked-in
• Delivers Community Benefit
• Has Shareholders and Limited Liability
• Has a regulator John Hanlon www.cicregulator.gov
  .uk

3
Who are the CICs ?

• Care Education Local Transport - Health
• Talentstar CIC - performance and media work
  experience
• EQ Health CIC psychotherapy for children using
  horses
• SM Pride - Devon
• Fetish group bids to join sector -
  sadomasochist group is one of the first
  organisations applying to become a community
  interest company Third Sector - September 14th
  2005

4
Benefits

• Raise capital and Pay Dividends to investors
• Annual Community Interest Report produced
• Borrow more easily than Charities
• Assets Distributed to a CIC, or Charity only
• 33 CICs registered by 1st November 2005

5
Limitations

• No tax advantages to the CIC or the Investor
• Dividends are capped
• No asset appreciation for the Investor
• Less control for the Investor
• Social Business seen as less professionally
  managed and more risky investment

6
The Future for CICs ?

• Investments made by UK taxpayers in CICs should
  attract full income tax relief
• Triodos Bank
• CICs should be granted
• the same 80 relief on business rates
• exemption from corporation tax
• ability to give interest, or dividends, tax free
  to the investor
• Stephen Lloyd of Bates Wells Braithwaite

7
The Evidence for Investment

• UK Community Interest Tax Relief (CITR)
• The model for future CIC development
• Tax incentives for investments by individuals
• Funds raised via banks finance bodies
• Triodos Bank raised 3.8m from individual savers
  through CITR to lend to community groups in 2
  weeks

8
The Childrens Scrapstore
9
More Evidence

• The Green Funds Netherlands
• Triodos manages 400m of funds for lending to
  environmental businesses
• Other banks control similar funds
• Volume of investment has been huge
• Creating competition to lend to green
  businesses
• The cost of funds to green businesses fell below
  European base rate for lending

10
Conclusion

• CICs provide a more flexible way for socially
  motivated organisations to operate
• Tax incentives for investors in CICs could raise
  much needed development funds
• CICs deserve similar tax breaks to charities
• CICs are being set up by people with a genuine
  interest in community benefits

11
Gavin Smith 00 44 (0)117 9809 743
gavin.smith_at_triodos.co.uk

• Triodos Bank
• Brunel House, 11 The Promenade, Bristol BS8 3NN
• www.triodos.co.uk