Learning Objectives:

By the end of this lesson, you will be able to:

• Understand what makes a CIC distinct from other legal structures.
• Know the difference between a CIC limited by guarantee and one limited by shares.
• Understand the tax treatment and management requirements for a CIC.
• Follow the correct registration process with both Companies House and the CIC Regulator.
• Weigh up the advantages and disadvantages of this structure for your social enterprise.

What is a Community Interest Company?

A Community Interest Company (CIC) is a formal UK legal structure designed specifically for social enterprises. It sits between a charity and a commercial company — allowing trading activities while ensuring a clear community benefit remains central to the business.

Key characteristics:

• A formal legal structure for social enterprises in the UK.
• Can be limited by guarantee or by shares.
• Must have a clear community interest or social purpose.
• Can have one or more directors, who may be members or shareholders.
• Must have a dedicated community or business bank account.
• Company name must end with Community Interest Company, CIC, or c.i.c.
• Regulated by both Companies House and the CIC Regulator.

Limited by Guarantee vs. Limited by Shares

CIC Limited by Guarantee

• Directors are called Members or Guarantors.
• Liability is limited to a nominal guaranteed amount, usually £1.
• No dividend distribution — profits are not paid out to members.

CIC Limited by Shares

• Directors are called Shareholders.
• Liability is limited to the value of fully paid shares.
• Dividends can be paid to shareholders, but are capped at 35% of Distributable Profits.

Taxation

• A CIC is taxed only on its commercial (for-profit) activities and revenues.
• Charitable or non-profit-making activities are exempt from corporation tax.
• Corporation Tax rates: 19% Small Profits Rate on profits up to £50,000 (from 1 April 2023); 25% on profits above this.
• Directors may be paid a salary through payroll (PAYE).
• VAT registration is required once turnover reaches £85,000.

Management and Control

• The company is accountable to a Board of Directors if there is more than one member or shareholder.
• Directors are responsible for financing the business through a combination of personal investment, trading income, grants, and social investment.
• Confirmation Statement must be filed every 12 months (£50).
• Annual Accounts must be filed every 12 months and are publicly available.
• An annual Community Interest Report (Form CIC34) must also be submitted alongside the Annual Accounts.
• For CIC Limited by Shares: dividends are capped at 35% of Distributable Profits.
• For CIC Limited by Guarantee: no profit distribution or dividends are permitted.
• A minimum of one director is required. However, to apply for public funding, you will need at least three directors who are not family members and do not live at the same address.

Business Registration

In addition to the standard company registration process, a CIC must complete specific forms to demonstrate its community purpose.

• Check your company name is available at Companies House.
• Check domain name availability if applicable.
• Identify any People with Significant Control (PSC) if applicable.
• Refer to the Step by Step Guide for Registering a Community Interest Company.
• Complete and sign the IN01 form (company registration) and the CIC36 form (Community Interest Statement).
• If applicable, identify an Asset Lock company for the transfer of assets.
• Prepare your application pack: IN01, CIC36, Memorandum and Articles of Association, and the applicable fee.
• CIC Limited by Guarantee: registration by post only. £139 registration fee.
• CIC Limited by Shares with Model Articles: online registration. £115 registration fee.
• Review and submit your application.

All fees as of 1 February 2026.

Advantages

• Directors are personally liable only to the value of their nominal guarantee or their shares.
• Directors can be paid salaries or fees.
• Favourable tax regime — only commercial activities are subject to corporation tax.
• Reduces dependency on public funding compared to charities.
• Must operate with a sound business model, which builds long-term sustainability.
• Easier to trade with corporate clients than operating as a charity.

Disadvantages

• Must report to both the CIC Regulator and Companies House, creating a greater administrative burden.
• Annual accounts and reports are publicly available.

Reflection

Is a CIC the right structure for your social enterprise? Consider whether you have a clear community purpose you could demonstrate to a regulator, and whether you would benefit from the ability to trade commercially while also applying for grants and public funding.