Understanding the options for delivering local services Bernie Wills, PCDT

Context Town and Parish Council and / or Community groups looking to take on / develop new local services or services / assets devolved from Cornwall Council

Basic options 1.Approach / use existing group / organisation 2.Town and Parish Council trading arm – Limited company or IPS 3.Charitable Incorporated Organisation (CIO) 4.Community Interest Company (CIC)

General Power of Competence Localism Act 2011 Elections Trained Clerk “An eligible council is one which has resolved to adopt the GPC, with at least two thirds of its members being declared elected and the Clerk must hold an appropriate qualification (Parish Councils (General Power of Competence) (Prescribed Conditions) Order 2012).” If not, limited powers under Local Government Act 1972.

If have General Power Can set up arms length Limited Company (by shares or guarantee) or IPS that can trade These are the ONLY permitted forms for ‘arms length’ orgs under the General Power. OR: Can enter into funded / unfunded arrangement with new or existing CIO / CIC

If don’t have General power Can still support / encourage a new or existing CIO / CIC that independently runs local services. Councils without the general power of competency who wish to grant funds to a new voluntary organisation set up to run local services can do so to a limited extent under Section 137 (3) of the Local Government Act 1972 provided that the organisation is a charity (i.e. a CIO, not a CIC) and such funding complies with the limits set out in the Act. Grant funding would be a maximum of approximately £7 per head of population benefiting, (e.g. £7 x 1500 people = £10,500 per annum), but this would the maximum total for all such services / grants, not just to the new organisation.

Features of a CIC Relatively new format, but proving very popular Regulated by Companies House Can pay directors Asset Lock Unlimited trading Discretionary business rate relief only Liable for corporation tax, but unlikely to pay unless very successful Perception as a ‘social enterprise’ Legal entity for contracts etc.

Features of a CIO New format Regulated by Charity Commission (only) Voluntary unpaid trustees (normally) Limited ‘trading’ within certain restrictions Mandatory 80% business rate relief Some VAT reliefs (e.g. utilities bills for ‘backoffices’ limited to 5% VAT) Some external funds only accessible to charities Public perception as a ‘charity’ Legal entity for contracts

Limited Company Long established format, Ltd by Guarantee version often combined with registered charity (can be both) Simple to understand Unlimited trading Limited by Shares or Guarantee Regulated by Companies House Can have a social purpose, but perception as a company Can pay directors No built-in asset lock Normally liable for full business rates, corporation tax etc.

Other formats IPS. Rare, complex. Undergone changes to format recently. Existing. Don’t forget to examine possibility of an existing group taking on services. Are they incorporated? If not, strongly suggest that they should set up a new legal entity, otherwise will be personally liable.

Questions and discussion