Governance · Comparison
CIC vs charity: which structure actually fits?
A community interest company and a registered charity are not the same thing — and not interchangeable. Here’s how they actually differ, where each one wins, and how to switch if you started with the wrong one.
Published by The Committee Room·Last updated 24 September 2026·9 min read
What each one is, in one sentence
A Community Interest Company (CIC) is a limited company with an extra regulator and a permanent asset lock, designed to let social enterprises trade like a business while keeping profits and assets tied to the community purpose. There were 37,081 registered CICs as of March 2025.
A charity is an organisation whose purposes (as defined by the Charities Act 2011 s.2) fall within the recognised charitable purposes and which exists for public benefit. In England and Wales, registration with the Charity Commission is mandatory once income passes £5,000 in a year (or any income, for a CIO). Charities can take several legal forms — CIO, charitable company limited by guarantee, unincorporated charity, or charitable trust.
The side-by-side
| CIC | Charity (CIO) | |
|---|---|---|
| Regulator | Companies House + CIC Regulator | Charity Commission only |
| Setup cost | £115 online (single Companies House fee from 1 Feb 2026; no separate CIC36 fee) | £0 to the regulator |
| Annual filing fees | £15 CIC34 + £50 confirmation statement (online, from 1 Feb 2026) | £0 |
| Corporation tax | 19% to £50k profit, 25% above £250k, marginal between (full rates) | Exempt on income applied to charitable purposes |
| Gift Aid | Not eligible | Eligible — 25p per £1 from qualifying donations |
| Business rates relief | Discretionary only (often refused) | 80% mandatory, up to 100% with discretionary top-up |
| Trading freedom | Unrestricted | Restricted: primary-purpose only, or small-trading limits (25% of income / £80k, lower) |
| Paying directors / trustees | Yes — director salaries normal | Trustees normally unpaid; payment for services possible but tightly controlled |
| Distributing profit | CLS only: dividends capped at 35% of distributable profits | No distribution allowed |
| Asset lock on dissolution | Yes — assets to another asset-locked body | Yes — assets to another charity with similar purposes |
| Identity verification (ECCTA) | Yes — directors and PSCs (mandatory since Nov 2025) | Not for CIO trustees |
| Convert to the other | CIC → CIO is statutory (since 2018) if purposes are charitable | CIO → CIC not permitted |
When to choose a charity
Pick charity status if all of these are true:
- Your purposes are exclusively within the recognised charitable purposes (Charities Act 2011 s.3) — education, relief of poverty, advancement of community development, the arts, religion, environmental protection, amateur sport, and so on.
- You can demonstrate public benefit rather than private benefit.
- Your income will likely cross £5,000 a year (or you're registering a CIO, where any income level is fine).
- You want access to gift aid, business rates relief, charity grant funding (which is a huge slice of the funding market), and SDLT relief on premises.
- You are comfortable with trustees being unpaid by default and with the trading restrictions.
For most groups in this position the right charity form is a CIO — limited liability, no Companies House, single regulator.
When to choose a CIC
Pick CIC status if one or more of these apply:
- Your social purpose is community benefit but not strictly charitable in law (think: community pubs that aren't for the relief of poverty, community broadband, some local journalism, some advocacy work).
- You want to trade commercially as the main activity — café, shop, energy, design studio, training provider — and would breach the charity small-trading exemption.
- You want to pay directors a market-rate salary without seeking Charity Commission authorisation.
- You want the option (in a CIC limited by shares) to raise equity and pay modest dividends back to investors (capped at 35% of distributable profits; there is no carry-forward of unused dividend capacity).
- You expect to need light-touch governance and corporate decision-making, rather than the Charity Commission's regulated-alterations regime.
The funding question
This is the single biggest practical difference. Most UK grant funders restrict applications to registered charities— including the National Lottery Community Fund's main community programmes (with some exceptions for CICs and BenComs in specific funding streams), most trusts and foundations, and many corporate community funds. Some grant programmes accept CICs, CIOs, BenComs and charitable companies equally; others do not.
On the other side, impact investors, social investors and patient capital lenders(Better Society Capital, formerly Big Society Capital; Resonance; Bridges; Charity Bank's commercial book; community shares platforms) actively want to work with CICs and BenComs because the structures permit a financial return that charities cannot offer.
If grants will be more than half of your funding for the foreseeable future, charity status is usually the right call. If sales and contracts will dominate, CIC is usually fine.
If you got it wrong
CIC to charity (CIO): there is a direct statutory conversion route under the Charitable Incorporated Organisations (Conversion) Regulations 2017, in force since 1 January 2018. Members pass a special resolution adopting a CIO constitution; the Charity Commission tests whether the purposes are exclusively charitable; the CIC Regulator decides whether the CIC can cease to be a CIC. If both agree, Companies House cancels the CIC and the Commission registers the CIO. Legal personality is preserved — bank accounts and contracts continue, in principle (some banks insist on opening a new account anyway). See converting a CIC to a CIO for the process.
Charity to CIC: not permitted. A CIO cannot be converted to a CIC. A charity that wants commercial flexibility usually sets up a wholly-owned trading subsidiary (an ordinary company that gift-aids its profits to the parent charity).
Frequently asked
Can a CIC become a charity later if it grows?
Yes — but only if its purposes are charitable in the strict Charities Act sense. The usual route is the statutory CIC → CIO conversion process; a CIC can also become a charitable company under ss.53–55A of the Companies (Audit, Investigations and Community Enterprise) Act 2004. Many CICs cannot convert because their purposes (e.g. some advocacy, some commercial-focused activity) fail the public-benefit test.
Can a CIC pay its directors?
Yes, freely — director remuneration is normal company practice and the CIC Regulator's only requirement is that remuneration is reasonable and disclosed in the annual CIC34 report. By contrast, charity trustees are normally unpaid; payment to trustees (or persons connected to them) needs specific authority: a clause in the governing document, an order of the Charity Commission or the court, or the statutory power in Charities Act 2011 s.185. The s.185 power covers goods or services (not acting as a trustee) and requires a written agreement, a reasonable amount, and paid trustees to be a minority of the board.
Is a CIC tax-exempt?
No. CICs pay corporation tax at standard rates — 19% on profits up to £50,000, 25% on profits above £250,000, with marginal relief between. They do not qualify for Gift Aid income on donations, the charity small-trading exemption, the charity VAT reliefs, or mandatory business rates relief.
What’s the difference between a CIC limited by guarantee and a CIC limited by shares?
Limited by guarantee (CLG):no shares, no dividends. Members each guarantee a nominal amount (typically £1) on dissolution. Use this where you want a community-owned feel and don't need to raise equity.
Limited by shares (CLS): has share capital, can pay dividends within the regulator-set cap (currently 35% of distributable profits). Use this where you want to raise investor capital and offer a modest financial return.
Does a charity protect trustees from personal liability?
Depends on the form. CIOs and charitable companies give trustees limited liability — claims attach to the organisation, not the trustees personally, subject to the usual exceptions for fraud, breach of duty, and personal guarantees. Unincorporated charities and charitable trustsdo not — trustees are personally liable, though indemnified out of charity funds where they've acted properly. This is one of the main reasons unincorporated charities increasingly convert to CIOs.
Related guides
UK community group legal structures compared →
The full seven-structure comparison — CIO, charitable trust, charitable company, CIC, BenCom, unincorporated, SCIO — side by side.
Charitable Incorporated Organisation (CIO) explained →
The default charity form since 2016 — Foundation vs Association, the November 2023 model constitution, registration walk-through.
Community Interest Company (CIC) explained →
What CIC36 actually asks, the dividend cap in practice, and the annual CIC34 report.
Converting a CIC to a CIO →
The statutory conversion process — special resolution, model constitution, what the Charity Commission tests.
Unincorporated association explained →
The structure most small groups start with — and the signals that say it’s time to incorporate.
Sources
- Charities Act 2011 ss.1–5 (charitable purpose, public benefit); ss.30–34 (registration); s.185 (payment for goods or services); ss.228–234 (conversion to CIO); ss.280A–B (Phase 3 power to amend, in force 7 March 2024)
- Charities Act 2022 — substantially in force; ss.15–16 (small ex-gratia payments) commenced 27 November 2025
- Companies (Audit, Investigations and Community Enterprise) Act 2004 and Community Interest Company Regulations 2005 (as amended 2014)
- Charitable Incorporated Organisations (Conversion) Regulations 2017 (in force 1 January 2018)
- Charity Commission guidance: CC22a Charity types: how to choose a structure; CC3 The essential trustee
- Office of the Regulator of Community Interest Companies: Community Interest Companies Guidance (updated April 2025); annual report 2024 to 2025
- Companies House fee schedule (effective 1 May 2024 and 1 February 2026)
This page is general information, not legal or tax advice. For a specific decision, speak to a charity-sector solicitor or the CIC Regulator.