Community interest companies (CICs) should be entitled to an equivalent of Gift Aid, according to the law firm behind the legal structure.
Abbie Rumbold, a partner with Bates Wells and Braithwaite, which helped set up the CIC structure four years ago, is working with the Social Enterprise Coalition to push for tax relief for the 2,600 registered CICs.
She said the success of the CIC structure showed it was seen as a valuable legal structure and that tax incentives would see it grow even further.
‘The idea of calling it Gift Aid for CICs is probably not accurate as Gift Aid provides tax relief to donations of cash made to charities, but this would need to be a tax relief for individuals making investments,' she said.
Rumbold said that, although she did not agree that the CIC structure and its 35 per cent cap on dividends puts off investors, tax relief would definitely be an incentive, as well as a way to publicly promote CICs.
It would also be easy for the government to introduce, she said.
‘This would give a greater return on investment over and above what could have been achieved,' she said.
‘But the interesting thing is that a tax relief would cost the exchequer very little. There are only 2,600 CICs and almost none are companies limited by shares. The government could do it for a year or two and see it would be cheap, but it would really push people towards the idea of social investment.'
She added that a tax relief would mean the regulation of CICs would need to be tougher, but that in the long run it would attract investors and social entrepreneurs to the structure and allow people to ‘put their thinking hats on and use this vehicle'.
‘The CIC regulator must be pleased with the success of CICs. It shows introducing the structure was the right move by government, but this is the next challenge, Rumbold said.
