What is a Community Interest Company (CIC)?

A Community Interest Company (CIC) is a type of limited company designed for organisations that want to trade for the benefit of a community rather than for private profit. It sits between a conventional company and a registered charity, offering a flexible trading structure with built-in safeguards to ensure that community benefit remains central to the business.

TL;DR: A CIC is a limited company with a legal lock on its assets and profits, overseen by the Office of the Regulator of Community Interest Companies. It is easier to set up and run than a charity, but it cannot claim Gift Aid and does not attract the same tax reliefs. It suits social enterprises that earn most of their income through trading rather than donations.

The Legal Framework: The Companies (Audit, Investigations and Community Enterprise) Act 2004

CICs were created by the Companies (Audit, Investigations and Community Enterprise) Act 2004, which came into force for CIC registrations on 1 July 2005. The Act introduced CICs as a distinct company type — one that uses the existing framework of company law but layers on specific requirements to protect community benefit.

To form a CIC, an applicant must submit the normal documents required to register a company at Companies House, plus two additional documents prescribed under the Community Interest Company Regulations 2005:

1. A community interest statement — a written explanation of what the CIC intends to do, who it will benefit, how activities will serve the community, and how any profits will be used. This is not a marketing document; it is a legal declaration.
2. A declaration that the company is not, and will not be, a political party or controlled by one.

The community interest statement must pass the community interest test, which asks whether a reasonable person might consider the activities to be in the interests of the community. The test is applied by the Office of the Regulator of Community Interest Companies (the CIC Regulator), which is an independent body within the Department for Business and Trade.

As of the 2024–2025 financial year, there were 37,081 CICs in existence in the UK — a 12% rise on the previous year. (Source: Regulator of Community Interest Companies Annual Report 2024 to 2025, GOV.UK)

The Asset Lock and Dividend Cap

The two features that most clearly distinguish a CIC from an ordinary company are the asset lock and the dividend cap.

Asset lock

The asset lock prevents a CIC from distributing its assets for less than their full market value, except to another asset-locked body — that is, another CIC or a registered charity. This means that if a CIC is wound up, its remaining assets cannot simply be divided among shareholders or directors; they must pass to another community-purpose organisation. The asset lock must be explicitly stated in the CIC's articles of association.

Dividend cap

CICs with share capital can pay dividends to investors, but only within strict limits. The current regulations cap aggregate dividends at no more than 35% of distributable profits in any financial year. Dividends paid to another CIC or a charity do not count towards this cap. This structure allows a CIC to attract private investment while ensuring that the majority of profits are retained for community benefit.

These protections are set out in the Community Interest Company Regulations 2005, as amended by the Community Interest Company (Amendment) Regulations 2014. (Source: Community Interest Companies Guidance, GOV.UK)

In 2024–2025, 120 limited companies converted to CIC status — a 4% increase on the previous year — reflecting continuing interest from trading businesses wishing to formalise a community-purpose mission. (Source: Regulator of Community Interest Companies Annual Report 2024 to 2025, GOV.UK)

CIC vs Charity vs CIO: Key Differences

Choosing between a CIC, a registered charity, and a Charitable Incorporated Organisation (CIO) is one of the most common questions facing those setting up a community-focused organisation. The answer depends on your income model, your need for investment, and your appetite for regulatory oversight.

The critical practical difference is tax. A CIC pays corporation tax on its trading profits and investment income in the same way as any other company. It cannot claim Gift Aid on donations, which means fundraising campaigns are less financially attractive to individual donors. A registered charity or CIO, by contrast, is exempt from corporation tax on most income and can claim Gift Aid, boosting the value of each donation by 25p per pound at the basic rate.

CICs are therefore better suited to organisations that primarily earn income through trading — delivering services under contract, running a café, operating a social enterprise — rather than those that rely heavily on public donations or grant funding. If your main revenue will come from grants and donations, a charity or CIO structure almost always offers more financial advantage.

A CIC can, however, convert to a charity or CIO at a later stage if circumstances change, providing some flexibility as an organisation matures.

When is a CIC the Right Choice?

A CIC is likely to be appropriate when:

• The organisation will trade commercially to generate most of its income, rather than relying on donations or charitable grants.
• Founders want to attract investors who expect a return, but wish to cap that return to protect community benefit.
• The organisation wants the credibility of a recognised legal structure without the regulatory requirements of registered charity status.
• Speed and simplicity matter — CIC registration is generally faster and involves less ongoing regulatory burden than charity registration.
• The work does not meet the legal definition of charitable purposes under the Charities Act 2011 (for example, because it benefits a restricted community or has a partly commercial character).

A CIC is unlikely to be the right choice if the organisation will depend significantly on public fundraising, individual donations, or access to charitable grant funding, where registered charity status delivers clear financial advantages.

FAQs

How is a CIC regulated?

The Office of the Regulator of Community Interest Companies approves CIC applications, monitors CICs' compliance with community interest requirements, and has powers to investigate complaints and, in serious cases, appoint directors or wind up a CIC. Each year, CICs must file a CIC Report (form CIC34) alongside their annual accounts at Companies House, confirming that the company has continued to serve the community and describing how it has done so. The Regulator reviews these reports and can take action where community benefit is not being maintained.

Can a CIC receive grants?

CICs are not charities and are generally not eligible for grant funding that is restricted to registered charities. However, some public sector bodies, lottery distributors, and trusts do fund CICs where the community benefit is clear and the funding criteria permit it. Eligibility varies significantly between funders and should be checked on a case-by-case basis.

What is the difference between a CIC limited by guarantee and a CIC limited by shares?

A CIC limited by guarantee has no share capital. Members guarantee to contribute a nominal sum (typically £1) if the company is wound up. This structure is common for organisations that do not need to raise equity investment. A CIC limited by shares can issue shares to investors and pay capped dividends. This structure suits social enterprises seeking patient capital from investors who accept a limited return in exchange for social impact.

Recommended Next Pages

• What is a CIO? — The Charitable Incorporated Organisation is a popular alternative for organisations wanting charity status with incorporated legal protection.

• What is a Social Enterprise? — CICs are one type of social enterprise. This guide explores the broader landscape of trading-for-good models.

• What is a Charity Trustee? — If you are considering registered charity status, understand what governance obligations come with it.

• CRM for Small Charities — Once your structure is established, effective contact management is key to building relationships with funders, beneficiaries, and partners.

Published by the Plinth Team. Last updated 21 February 2026.