Yes. A Community Interest Company must register for and pay Corporation Tax on its taxable profits, and it must operate PAYE if it employs staff. It does not receive the automatic tax exemptions that registered charities enjoy.

A CIC limited by shares is owned by its shareholders, while a CIC limited by guarantee is owned by its members who act as guarantors. In both cases, the asset lock means the underlying assets must always be used for the community.

What is a CIC: a diverse team discussing community interest company social enterprise business goals in a modern office

Community Interest Company Explained

What is a CIC? A Complete Guide to Community Interest Companies

Q: What is a CIC in simple terms?

A Community Interest Company is a limited company that exists to benefit the community rather than to generate private profit for its owners. It can trade and make a profit, but its assets and earnings must be used for a social or community purpose, enforced through an asset lock and, for share companies, a dividend cap.

Q: What is the difference between a CIC and a charity?

The biggest differences are tax and regulation. A charity enjoys broad tax reliefs and is regulated by the Charity Commission, while a CIC is generally taxed like any other limited company and is regulated by the CIC Regulator. A CIC can pay its directors a salary and, where limited by shares, pay capped dividends, both of which are restricted in charities.

Q: Can a CIC become a charity?

Not directly. A CIC cannot simultaneously be a registered charity, and it cannot simply convert itself into a charity. This is why choosing the right structure at the start is so important.

Q: How many directors and shareholders does a CIC need?

A Community Interest Company needs at least one director and, in most cases, at least one shareholder or member, who can be the same person. There is no maximum number of directors or shareholders.

Q: Are CIC directors paid a salary?

Yes. Unlike charity trustees, CIC directors can be paid a full market salary and receive employee benefits. The only restriction is on dividends, which are capped for CICs limited by shares.

What is a CIC? In short, a Community Interest Company is a special type of UK limited company that exists to benefit the community rather than private shareholders. It combines the flexibility of a normal business with legal safeguards that lock its assets and profits into serving a social purpose. In this guide, our specialist CIC accountants explain exactly how these companies work, who they suit, and everything you need to know before you set one up.

Call 01582 487594 Ask a CIC Accountant

2005

CICs Introduced in UK Law

30,000+

CICs Registered in the UK

100%

Profit Locked to Community Benefit

35%

Dividend Cap on Share Returns

The Basics

What is a CIC? The Simple Definition

A Community Interest Company (CIC) is a limited company created specifically for people who want to run a business or other enterprise for community benefit, rather than purely for private profit. It was introduced by the UK government in 2005 and is regulated by the Office of the Regulator of Community Interest Companies.

When people ask us "what is a CIC", the answer usually comes down to one idea: it is a halfway house between a charity and a standard limited company. A CIC can trade, charge for its services, and pay its directors a proper salary, just like any other business. But unlike a standard company, the assets and profits of a CIC must be used for the benefit of the community. This is enforced through two key legal mechanisms that we explain below.

The Asset Lock

A CIC must include an asset lock in its constitution. This means its assets can only be used for community benefit, both during its life and if it is ever dissolved. Find out more in our guide to the asset lock in a CIC.

The Dividend Cap

CICs that are limited by shares are subject to a strict dividend cap. This restricts how much profit can be paid out to shareholders each year, keeping the focus firmly on community benefit.

The Community Interest Test

Before a company can be registered as a CIC, it must satisfy the CIC Regulator that it will operate for the benefit of the community. A "community" here can mean the general public, or a specific section of the public, such as people living in a particular area or people with a shared characteristic.

Criteria	What It Means
Community Benefit	The company's activities must reasonably be considered to benefit the community.
Not Primarily Political	A CIC cannot be set up to support a political party or a political campaigning organisation.
Asset Lock	The constitution must lock assets to the community, now and on winding up.
Ongoing Reporting	The CIC must file an annual CIC34 report showing how it delivered community benefit.

Want to understand the CIC34 report in depth? Read our dedicated guide, CIC34 Report Explained.

Who Is It For?

Who Should Consider Setting Up a CIC?

A Community Interest Company suits people who want to run a genuinely social enterprise but need more commercial freedom than a charity allows. In our experience as CIC accountants, these are the people we most often see forming one.

Community enterprises

Shops, cafes, farms, or energy projects run for local benefit.

Education and training providers

Skills workshops, adult learning, and youth programmes.

Health and social care groups

Counselling, wellbeing services, and community care projects.

Environmental initiatives

Recycling schemes, conservation work, and green transport.

Types of Community Interest Company

There are two main forms of CIC, depending on how you want to structure ownership and reward the people involved.

Feature	CIC Limited by Guarantee	CIC Limited by Shares
Ownership	Members rather than shareholders	Shareholders
Profit sharing	Surpluses reinvested, no dividends paid	Dividends allowed but capped
Best suited to	Non-profit style community projects	Social enterprises wanting to raise investment

Still deciding between structures? Our comparison of CIC vs charity will help you choose.

CIC vs Charity

How Is a CIC Different From a Charity?

This is the question behind most "what is a CIC" searches. The two structures share a social purpose, but they operate under very different rules.

Feature	CIC	Registered Charity
Regulator	CIC Regulator and Companies House	Charity Commission
Tax reliefs	Few. Generally taxed like a normal company	Broad reliefs including Gift Aid and rates relief
Can directors be paid?	Yes, unrestricted salaries allowed	Usually unpaid trustees
Share dividends	Allowed but capped	Not allowed
Governing law	Companies Act 2006 (with CIC rules)	Charities Act 2011

Should You Choose a CIC or a Charity?

Choose a CIC if

You want to run a trading social enterprise.
You want to pay directors a full market salary.
You want lighter regulation than the Charity Commission.
You may want to raise money from investors.

Choose a charity if

You rely on donations and Gift Aid income.
You want generous tax exemptions.
You want access to grant funding restricted to charities.
Your activities are purely charitable in law.

Running a CIC

Running a Community Interest Company: Tax and Compliance

A common misconception is that a CIC gets special tax treatment. It does not. Once registered, a CIC is taxed and regulated much like any other limited company, with a few important extras.

Corporation Tax

A CIC must register for and pay Corporation Tax on its taxable profits. There is no automatic exemption. Read our full guide, Do CICs pay Corporation Tax?

PAYE and Payroll

If a CIC pays staff or directors a salary, it must run payroll and report to HMRC in real time. See our CIC payroll services.

Annual Accounts and CIC34

Every CIC must file annual accounts at Companies House and a CIC34 report with the CIC Regulator showing its community benefit. Learn more in our CIC34 report guide.

Auto Enrolment Pensions

CICs that employ staff must comply with workplace pension auto enrolment rules. See our auto enrolment services for CICs.

How Directors Are Paid in a CIC

One big advantage of a CIC over a charity is that directors can be paid a proper salary. There is no restriction on director pay, which makes the structure attractive for founders who need to earn a living while running a social enterprise. However, dividend payments are tightly controlled.

Directors can receive an unrestricted salary and benefits.
A CIC limited by shares can pay capped dividends to shareholders.
A CIC limited by guarantee cannot pay dividends at all.

For the full rules, read Can a CIC director be paid?

Getting Started

How to Set Up and Fund a CIC

Setting Up a CIC, Step by Step

1
Choose whether to form a CIC limited by shares or by guarantee.
2
Write a community interest statement explaining who you will benefit.
3
Prepare articles of association that include the asset lock.
4
Submit your application to Companies House and the CIC Regulator.
5
Receive approval and register for Corporation Tax and PAYE where needed.

Step by step guidance is available in our How to Set Up a CIC guide, including CIC registration cost and timeframes.

How CICs Raise Money

Because a CIC is not a charity, it cannot claim Gift Aid on donations. But it can raise funds in several other ways.

Trading income from selling goods and services
Grants and contracts from councils and funders
Social investment and community shares
Sponsorship from local businesses

Explore the options in detail with our guide, How to get funding as a CIC, and find out whether CICs can claim Gift Aid.

Pros and Cons of a Community Interest Company

Advantages

Clear social brand that builds trust with funders and customers.
Directors can be paid a salary.
Lighter regulation than the Charity Commission.
Can raise equity investment.

Disadvantages

No charity tax reliefs or Gift Aid.
Dividends are capped for shareholders.
Must file an extra CIC34 report each year.
Assets are locked, so founders cannot extract value on exit.

FAQs

Frequently Asked Questions About CICs

The questions our CIC accountants hear most often from founders.

What is a CIC in simple terms?

What is the difference between a CIC and a charity?

Does a CIC pay tax?

Who owns a CIC?

Can a CIC become a charity?

How many directors and shareholders does a CIC need?

Are CIC directors paid a salary?

Need Help Deciding What a CIC Means for Your Organisation?

As specialist CIC accountants, we help social enterprises across the UK with everything from business structure advice and annual accounts to payroll, CIC34 reports, and ongoing compliance. Our team works with Community Interest Companies every day and can help you make the right decision from the start.

Book a Free Consultation See Our CIC Accounting Services

Or call us directly on 01582 487594