Corporation tax for CIC

Hi, I have just registered a CIC - we are a youth organisation running sessions for the community. Our entire income is from grants or donations. We take no profit and all of the funds we raise will be spent on the young people we work with - if we end the year with any surplus, this will be reinvested into the CIC for the following year. Will these grants and donations be taxable?

Hi John Hopkins,
HMRC guidance on the taxation of CICs is available at CTM40145 - Particular bodies: clubs: Community Interest companies. 
Grant income is subject to the normal taxation rules, and the tax treatment of grants will depend on whether they are capital or revenue in nature.
HMRC guidance on the tax treatment of grant income is available at BIM40451 - Specific receipts: grants and subsidies: introduction. 
Whether a particular receipt is taxable depends upon the facts of the case.
The tax treatment of donation income depends on the character of the income in the company’s hands. 
HMRC guidance to help you decide whether the income is a taxable receipt is available at BIM15035 - Trade profits: receipts not chargeable - source doctrine and
BIM41810 - Specific receipts: voluntary receipts: others.
Thank you.

Thanks so much for your reply. I just wanted to clarify - if we received a grant for £25k to hire a staff member employed at £25k pa, my understanding is that this would be a trade receipt, as it is a grant to cover revenue. Does this mean we would therefore have to pay tax on the grant, leaving us without the entire amount being covered for the staff member's salary? Thank you.

Hi John Hopkins,
Thank you for your query. 
Grant income that is revenue in nature and relates to trading activities will be subject to corporation tax. If you have received a grant to defray a specific expense, there may be no tax liability even though the income itself is taxable. 
If the grant is to be used to offset future expenses, you may find the guidance here useful:
BIM42215 - Deductions: timing: deferred revenue expenditure
HMRC is not able to provide specific tax advice.
If, after consulting HMRC guidance, you still need advice about the accounting and tax treatment of grant income, you will need to speak to an accountant. 
Thank you. 

I have recently taken over as the Treasurer for a local CIC. Our income is a mix of grants, donations and some feed in tariff (FIT) income. The independent examiner has advised that only the FIT income is liable for CT. However, when submitting our CT return there is no option that I have found where I can separate this amount out for CT calculation purposes. Having searched through various HMRC webpages, and reading through and following the links in this post, it seems to me that the advice that we have received appears to be wrong. Therefore, our profit of £18k is all subject to CT and not just the FIT income amount of £1.1k. Am I correct? If not, please advise what I need to do.

Hi,
Grant income is generally taxable, the same as any other income and is recorded in the Profit & Loss account.
However, you may not pay tax on this income as it will be matched with its intended expenditure, the income and expenditure cancelling one and other out.
Complications arise if the expenditure is not made in the same accounting period the income was received, although the income can be deferred as to when it is spent.
These are complex accountancy procedures and you may need to seek professional advice.  Also, some grants are received in relation to non-trading activities and these may be non-taxable. 
Donations are not normally subject to tax where no services are provided in return. However, if for example, advertising rights are provided in return then the "donations" may very well be taxable as trading income. Again, if you aren't able to self-assess the companies liability for corporation tax, you may need to seek professional advice, from for example, an accountant. 
Thank you.

I'm seeking clarification as to whether the statement above that suggest donations are not subject to tax when the donor receives no services in return is accurate as it is the view of our accountants is that it isn't . Please advise as this seems to contradict all other available HMRC information in relation to the taxable status of donations to CIC's .

Hi ,
 

It is unclear to which above statement you are referring however, the following is accurate . Donations are not normally subject to tax where no services are provided in return. However, if for example, advertising rights are provided in return then the "donations" may very well be taxable as trading income. Again, if you aren't able to self-assess the companies liability for corporation tax, you may need to seek professional advice, from for example, an accountant . Thank you .