GeneralTAX For Companies

You can now convert to a Charitable Incorporated Organisation (CIO)

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What is a CIO? A CIO is a type of organisation that is only regulated by the Charity Commission, as opposed to both the Charity Commission and Companies House.  It is easy to incorporate and easy to maintain. To incorporate a CIO you only need to complete one of the model constitutions and apply online with the Charity Commission.  The whole process is straightforward. Conversion From 1 January 2018 it has been possible for charitable companies to convert to a CIO.  The Charity Commission have offered this possibility as part of a phased timetable:
  • Company annual income £12.5k 1/1/18
  • Company annual income £12.5k - £25k 1/3/18
  • Company annual income £25k - £100k 1/5/18
  • Company annual income £100k - £250k 1/6/18
  • Company annual income £250k - £500k 1/7/18
  • Company annual income more than £500k 1/8/18
As the company converts into a CIO the company will cease to be registered with Companies House and instead only with the Charity Commission. Note that there is no ability to convert an unincorporated charity to a CIO.   The pros and cons of a CIO over a company limited by guarantee
  • Companies limited by guarantee have a minimum income threshold of £5000, whereas CIO’s have no threshold.
  • Companies Act 2006 does not apply to CIO’s. Instead Charity Law applies.
  • CIO applications can take approximately 45 days, whereas companies limited by guarantee can be incorporated within days.
  • If the CIO loses its registration with the Charity Commission then the organisation will cease to exist. For companies limited by guarantee the company will continue to exist despite not being a charity any more.
  • CIO’s are not fully understood by funders and donors.
  • A CIO cannot register charges, and as such may find it difficult to take on a lease or borrow money.
  Tax and CIO’s Generally charitable organisations have few tax obligations.  However, if the charity has suffered tax on interest or on donations (gift aid) then the organisation will need to register with HMRC.   Also note that the organisation may need to pay tax if the income received does not qualify for tax relief; or where any of the charities’ funds were spent on non-charitable purposes. You will be required to complete a ChA1 form in order to notify HMRC what the organisation does, how it is structured, how it is funded, what the organisation intends to do and who is involved. The benefits of converting are:
  • Small CIO’s (less than £250k of gross income) can prepare accounts on a receipts basis as opposed to an accruals basis
  • There are no late filing fees with the Charity Commission
  • Trustees do not have a requirement to have a working knowledge of company law
  • Filing deadline is 10 months as opposed to 9 months
  • No longer the need to register with Companies House
  • Contracts and legal obligations in the old entity should continue seamlessly in the new entity (take legal advice where relevant)
Wisteria act for many organisations in the charity sector. If you have any questions or queries about charity structures, accounting, auditing or tax within the charity sector please call us on 020 8429 9245 or email us at [email protected].

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