CIC vs charity: which structure actually fits?

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.

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.

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, with up to 5 years of unused capacity carried forward).
• You expect to need light-touch governance and corporate decision-making, rather than the Charity Commission's regulated-alterations regime.

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(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.

CIC to charity (CIO): there is a direct statutory conversion route under the Charitable Incorporated Organisations (Conversion) Regulations 2017, in force since 1 September 2018. Members pass a special resolution adopting a CIO constitution; the Charity Commission tests whether the purposes are exclusively charitable and, if so, registers the CIO and asks Companies House to cancel the CIC. 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).

• 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.

• Charities Act 2011 ss.1–5 (charitable purpose, public benefit); ss.30–34 (registration); ss.228–233 (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
• Charity Commission guidance: CC22 Choosing the right structure; CC4 The essential trustee
• Office of the Regulator of Community Interest Companies: Information and Guidance Notes (latest 2024 edition)
• 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.