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Alternatives to setting up a charity

Is setting up a charity your best option?

There are many reasons why you might be considering setting up a charity; reduced rates, specialist VAT treatments, tax relief (to name just a few). However setting up a charity may not be the best option for everyone – with the many pros, there are also cons – please read our blog article The Pros and Cons of Setting up a Charity.

Many ‘charitable organisations’ exist without registering as a charity and there are a number of alternatives options to consider.

We will discuss 5 alternatives to setting up a charity below;

Community Interest Company (CIC)

CICs are subject to less regulation than charities, which can make them an attractive option (CICs are registered by the Office of the regulator of CICs, not the Charity Commission) . But the main difference between a charity and a CIC is the source of funding – CICs largely raise funds through trade, whilst charities usually raise funds through donations and grants. A CIC is expected to make a profit, whereas a charity is considered ‘not for profit’. CICs may distribute a percentage of their profits to trustees, whilst a charity cannot. Like charities, CICs can range from small community interest groups to multi-million pound organisations.

Registered Community Amateur Sports Club (CASC)

The main difference between a CASC and a charity is that a charity must register with the Charity Commission and HMRC, whilst a CASC is only registered with HMRC. Therefore a CASC will benefit from less regulatory control and fewer limits on trading than a charity. CASCs can benefit from business rate relief, however there are fewer tax reliefs available for CASCs than for charities.

Trading Subsidiary

A charity must have exclusively charitable purposes, which can limit its ability to trade. However, a trading subsidiary can be used to carry out trading activities, with any profits being filtered back to the charity.

Named Fund or Trust

Instead of setting up a new charity, you may consider setting up a Named Fund or Trust. This is a simple system that will allow you to put money into a trust account and specify what charitable purposes the money can be used for.

Support for existing charities

Many organisations wish to support charitable organisations without being charitable in nature themselves. Donations from businesses can be structured in a tax efficient manner by using facilities such as Gift Aid.

We hope that you’ve found this article helpful. If you’re thinking about setting up a charity, or if you would like to discuss your options in more detail, please get in touch with our specialist team, we would be happy to help.

Find out more about or specialist accountancy services for charities.

Here are some other resources that you might find useful;

The Pros and Cons of Setting up a Charity