an ordinary company. These are: n To satisfy a community interest test n To add certain statutory clauses to its constitution n To deliver an annual CIC report with its accounts The community interest test looks at the
underlying motivation of the company in terms of what it will do, who it will help and how, and this information is made available on the public record after incorporation. You will need to allocate resources to producing the annual CIC report, but the report will serve as a good source of information for anyone considering providing funds to the entity. CICs can be a good vehicle for helping to generate
and secure funding. Because their purpose is to ensure any money generated is used for community interest, there is likely to be more of an incentive for funders and donors to provide funding to the entity (as opposed to a trading arm) as they will see this as a way of helping boost the local community. Bear in mind that it can take time to form a
CIC – sometimes taking nearly two months – and this is before a bank account is established. The other main difference is that a CIC is subject to business rates and corporation tax.
Subsidiary entities Both of the above options can be formed as a subsidiary of the academy trust, and this will help the trust maintain control over the performance of the entity. Having a subsidiary entity will mean that the academy trust may have to produce consolidated group accounts each year, but this will depend upon the reporting requirements and size of the group, as medium-sized groups have to produce consolidated accounts. The following requirements apply, and groups must meet two out of the three requirements in two of the past three reporting years: n Turnover not above £10.2m (net) or £12.2m (gross) n Gross assets not above £5.1m (net) or £6.1m (gross) n Number of employees is more than 50 Many multi-academy trusts of a reasonable size
will breach these limits quite comfortably. However, a controlled subsidiary may be excluded from the consolidation if its inclusion is not material for the purposes of giving a true and fair view in the context of the group. As each academy trust will
have very different plans and ideas, in line with their culture and values, it’s important to seek professional legal and accountancy advice so that you can make the most relevant and informed decision to suit your school.
For more information, visit
gov.uk/guidance/charities- and-trading. A longer version of this article appears on
funded.org.uk.
FundEd AUTUMN 2019 13
WHAT ABOUT MAINTAINED SCHOOLS?
Unfortunately, maintained schools have limited options available to them when it comes to trading. They do have the ability to form ‘school companies’ – this can be standalone or as part of a collaboration with other schools – under the Education Act 2002 section 11 and the School Companies Regulations 2002. Consent must be sought from the relevant local authority – which
is unlikely to be a ‘yes’ and it can only be used for certain purposes, such as providing services/facilities to schools, procuring services/ facilities for schools from third parties or exercising local authority functions that the local authority may contract out. However, what many maintained schools do have are Parent
Teacher Association (PTAs), and these could be formed as an unincorporated charity. This will give them charitable status and therefore the option to claim Gift Aid on donations – amounting to an extra 25p for every £1 received. However, PTAs will need to ensure their paperwork is sufficient
by retaining Gift Aid declarations and that donors do not receive anything for their donation, e.g. entry to a quiz night. The best way to avoid this is for schools to charge say £8 entrance then ask for a contributory donation on top (perhaps £2 per head to make a nice round £10) and include a Gift Aid declaration form with the booking form for the event. We’d recommend that school leaders work with their PTA to ensure that the GDPR is adhered to with reference to data collection, storage and retention of Gift Aid records.
Phil Reynolds is a Senior Manager at accountants, business and financial advisers Kreston Reeves. Phil specialises in advising clients in the academies and education sector. Outside of work, Phil is a governor at a local primary school and is active on social media. To find out more about Kreston Reeves visit
krestonreeves.com
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