What Is a Community Interest Company (CIC)?

Not every business exists to make its owners rich. Some are built to tackle a social problem, support a community or protect the environment — while still trading like any other company. For these social enterprises, the UK created a purpose-built legal form: the community interest company, or CIC. It blends the discipline of a normal limited company with a legal guarantee that its assets and profits serve the public good. This guide explains what a CIC is, how its defining "asset lock" works, who regulates it, and how it differs from a charity. This is general information, not legal or tax advice.

What a community interest company is

A community interest company is a type of limited company designed for social enterprises that trade for the benefit of a community rather than for private profit. It was introduced in 2005 specifically to give socially minded businesses a recognisable, trusted legal structure that sits between an ordinary company and a charity.

Like any company, a CIC is registered at Companies House, is a separate legal entity, and can employ people, sign contracts and own property. What sets it apart is that it must demonstrate it works for the community interest — and it is legally bound to keep its resources committed to that mission. In most other respects, setting one up resembles the process to register a UK company, with some extra steps.

A CIC can take one of two forms:

• Limited by guarantee — typically with no shareholders, where profits are wholly reinvested. This is common for community-focused organisations.
• Limited by shares — which can have investors and pay them a capped dividend, while still committing the bulk of profits to the social purpose.

The shared thread is purpose. A CIC has to pass a community interest test, showing that a reasonable person would consider its activities to benefit the community.

The asset lock

The single most important feature of a CIC is the asset lock. This is a set of legal provisions that stop the company's assets and profits from being taken out for private gain. In plain terms, the money and property tied up in a CIC must be used for its social purpose — not extracted by the people who run it.

The asset lock works in two main ways:

1. During the company's life, assets and profits must be used to benefit the community, or transferred only at full market value or to another asset-locked body.
2. If the company is wound up, any remaining assets, after paying debts, must pass to another asset-locked organisation — such as another CIC or a charity — rather than to members or directors.

The asset lock is the promise that makes a CIC trustworthy. Whatever the company builds up stays committed to the cause, even if the people change or the company closes.

For CICs limited by shares, there are caps on dividends to ensure that investors can be rewarded modestly without the social mission being hollowed out. This balance — allowing some private return while protecting the public purpose — is what lets a CIC attract investment that a charity often cannot.

Who regulates a CIC

CICs answer to two authorities. First, like every company, they must comply with Companies House rules: filing annual accounts and a confirmation statement, keeping registered details up to date, and meeting all the usual obligations.

On top of that, CICs are overseen by a dedicated regulator: the Office of the Regulator of Community Interest Companies (the CIC Regulator). This light-touch regulator:

• Approves new CICs, checking they meet the community interest test.
• Reviews the annual CIC report, a document each CIC must file alongside its accounts explaining how it has benefited the community.
• Has powers to intervene if a CIC stops serving its purpose or misuses its assets.

The annual CIC report is central. It is how a CIC stays accountable to the public, setting out its activities, its impact, and how it has involved its stakeholders. This dual oversight — companies law plus a purpose regulator — is what gives the CIC brand its credibility, and it is part of the wider transparency that helps small organisations build trust, much as sound cash flow management builds financial credibility.

CIC versus charity

This is the comparison most people want, because both serve good causes. They are genuinely different structures suited to different organisations.

The headline trade-off is flexibility versus tax advantage. A charity enjoys substantial tax reliefs and can claim Gift Aid, but operates under strict rules, must pursue exclusively charitable aims, and generally cannot pay its trustees. A CIC is far more flexible — it can pursue a broader range of community purposes, pay its directors a reasonable salary, and is quicker to establish — but it is taxed broadly like an ordinary company, including paying Corporation Tax on its profits. There is no single right answer; some organisations even operate a charity and a trading CIC together.

How a CIC pays tax

A common misconception is that a CIC, being for the public good, is somehow tax-exempt. It is not. A CIC is treated largely like any other limited company for tax: it pays Corporation Tax on its taxable profits, must register for VAT if it crosses the threshold, and operates PAYE for employees.

The social mission affects how profits are used — reinvested rather than extracted — but it does not, by itself, reduce the tax due. This is the practical price of the CIC's flexibility, and one of the clearest dividing lines between a CIC and a charity. Because a CIC trades commercially, the financial disciplines of any business still apply, and for anything involved it is worth taking professional advice.

Setting up a CIC

To form a CIC, you broadly:

1. Decide whether it should be limited by guarantee or by shares.
2. Define a clear community purpose and the community it serves.
3. Prepare the constitution (articles), including the asset lock provisions.
4. Complete form CIC36 with a community interest statement explaining your purpose.
5. Submit the application, which goes to Companies House and is passed to the CIC Regulator for approval.

The community interest statement is the heart of the application — it must convince the regulator that the company genuinely serves a community wider than just its members. Once approved, the CIC operates like a company but with the extra annual CIC report to file.

The bottom line

A community interest company is a limited company built for social enterprises that trade for community benefit rather than private profit. Its defining feature is the asset lock, which keeps assets and profits committed to the social purpose and, on winding up, passes them to another asset-locked body. CICs are overseen by the CIC Regulator as well as Companies House, must file an annual CIC report, and are taxed broadly like ordinary companies. A CIC is not a charity — it is more flexible and can pay directors, but it does not get the same tax reliefs. Choose based on your mission, your funding needs and your appetite for regulation, and treat GOV.UK and the CIC Regulator as the authoritative sources.