SHRUB Coop is now a registered charity!

After months of hard work, SHRUB Coop is now a SCIO. This change is a result of a proposal that passed at an Extraordinary General Meeting held on 07/06/18.

Why are we doing this now?

SHRUB has always been heavily grant funded and this has meant that we have always had a tax burden as we were registered as a Company Limited by Guarantee. These costs were in the region of 2% of our turnover per year, which has reduced our ability to create a stable level of reserves. As we’re growing and increasing our impact, the cost of being a company as opposed to a charity has increased substantially to approximately ~ 10% of our total turnover. This cost is now prohibitive to the continuation of our mission.

Why a SCIO?

A SCIO is the simplest form of limited liability charity that can also be registered as a cooperative. This style of company will allow us to continue our mission and maintain our cooperative principles, without major changes to the spirit our constitution or the way we work.

Key questions

What are the requirements of becoming a charity?

The charity test is in two main parts:

  1. an organisation has to show that it has only charitable purposes and
  2. that it provides public benefit in achieving those purposes

The charity test also states that an organisation cannot become a charity, or continue to be one, if:

  • it is set up to be or advance a political party
  • its governing document allows it to use its assets (cash or property) for non charitable purposes
  • its governing document allows Scottish Ministers to direct or control its activities.

SHRUB does meet these tests, our current objectives are in line with environmental protection and the draft SCIO articles make this explicit along with other services that SHRUB provides for our community.

What about member benefit?

Member benefit is part of the cooperative principles, this is often cited as a reason cooperatives can’t become charities. However, many charities benefit their members directly. The barriers to becoming a charity would be:

  • allowing our assets to provide reasonable private benefit to members
  • Unreasonably restricting access to membership
  • Providing benefits that aren’t incidental to our charitable objectives.

None of these are things that we do or are in our mission statement to do.

What about trading income?

“Trading can be carried out directly by the charity, if it has the power in its governing document.”

Many charities carry out trading activities to support their charitable objectives:

  • Primary – directly as a result of charitable activity
  • Ancillary – related to but not directly as a result of charity activity
  • Non primary – Unrelated to charity activity, but to raise funds for charity.
  • Trading subsidiary –  a company set up not as a charity to raise funds in a non charitable way, but provides funds to the charity.

These forms will allow us to continue to carry out the activities we currently use to support our charitable mission financially and the new programmes we are engaged in. How these activities are taxed is an issue for HMRC, when we apply to OSCR we’ll have to address how we charge for any services we offer.

What was the process?

We submitted an application and the approved draft constitution to OSCR after the EGM. OSCR then discussed the application with us in order for them to make a decision on whether we meet the charity test.

On 08/11/12, our application was successful and the current company limited by guarantee was automatically converted to a SCIO. This means that the current company will be marked as closed or converted on Companies House and the assets of the company have been transferred to a new SCIO company registered with OSCR.