What is the difference between a CIC and a charity?

Applies in: England and Wales · Scotland · Northern Ireland. The CIC form is UK-wide and most of what follows applies identically across it. Two areas are covered for England and Wales only: business rates and the grant-making guidance — the Scottish and Northern Irish equivalents are a gap, not a “same as England” finding. The conversion routes differ by nation and each is recorded separately.

Why founders confuse a CIC and a charity

A community interest company (CIC) is a limited company for social enterprises. The CIC Regulator oversees it, and an asset lock protects its assets. Both forms are regulated and both have an asset lock of some kind.

People call both not-for-profit, and the words used for each overlap almost completely. The CIC is one of several alternatives to a charity, and the choice is made when you decide whether to start a charity.

The CIC Regulator’s own complaints data shows this. “Confusion CIC or Charity” was the largest single complaint type in 2024-25. It came ahead of activities, financial mismanagement, governance and political activity — see 7.

The numbers are small and should not be given as a rate, but the ranking tells you something. Today 37081 CICs exist. The Commission names CICs converting to charities as one reason its own application numbers are rising.

The single most misunderstood point is this: an asset lock is not charitable status and confers no tax advantage. An asset lock is the rule that stops a CIC handing its assets to its owners. It binds the assets, and that is all.

An asset lock does not limit purposes to charitable ones. Nor does it bring in trustee duties, charity regulation or charity tax reliefs.

What a CIC gets you that a charity does not

• You can pay the directors. The CIC Regulator says directors “can be paid or unpaid and have the same rights and duties as any other directors”. You do not need the regulator’s consent first. Pay must be reasonable and open, and must be disclosed in the annual CIC report. Disproportionate pay may itself breach the asset lock. See Yes. CIC directors may be paid remuneration (including a salary) for their services. Remuneration should never be more than is reasonable, arrangements should always be transparent, and directors' remuneration must be disclosed in the annual CIC report (form CIC34). Disproportionate pay may itself breach the asset lock and trigger Regulator action..
• Your purposes need only benefit the community, not be exclusively charitable. That is the real freedom. It is why some groups that could not pass the charity test choose this route.
• Light-touch regulation. The Regulator of Community Interest Companies is an independent office-holder set up by law and based at Companies House. It says its approach “does not envisage pro-active supervision of individual CICs”. A charity stays under the ongoing supervision of the charity regulator. See The Regulator of Community Interest Companies (Office of the Regulator of CICs), an independent statutory office-holder appointed by the Secretary of State under s. 27 CAICE 2004, based at Companies House, Cardiff. Not the Charity Commission, OSCR or CCNI..
• Investors can be paid a return, within caps. A CIC with share capital may pay dividends up to 35% of distributable profits, and performance-related interest is capped at 20%. Ordinary commercial interest has no cap. The Regulator sets the interest figure itself, not by an amending instrument. So you will not find it in the regulations as published.

The charity rule on the first point needs care, because “charities can’t pay trustees” is too blunt.

Being a charity trustee is usually an unpaid role. No general power in law lets a charity pay someone for acting as a trustee. That needs an express power in the governing document or Commission consent. The Commission expects it only in rare cases and for a short time.

A separate power, Charities Act 2011 s.185, allows payment for goods or services supplied to the charity. Four conditions apply. The power does not cover services given as a trustee, and it does not cover employment. See Being a trustee is generally a voluntary role. There is no general statutory power to pay a trustee for acting AS a trustee — the trustees must have an express power in the governing document or authority from the Charity Commission, and the Commission expects such payment only in exceptional circumstances and for a temporary period. A separate statutory power (Charities Act 2011 s. 185) allows payment for GOODS OR SERVICES provided to the charity, subject to four conditions, but s. 185(3) expressly excludes services provided in the person's capacity as a trustee and excludes employment..

What a charity gets you that a CIC does not

• Charitable tax reliefs. A CIC pays Corporation Tax as a company on trading profits, investment income and gains. It gets the normal reliefs, and no special CIC exemptions at all. The reason is direct. The tax definition of a charity in Finance Act 2010 Sch.6 says a body must be “established for charitable purposes only”. Section 26(3) deems a CIC not to be. So a CIC can never meet the first condition. See A CIC cannot itself have charitable status. It is liable to Corporation Tax as a company, chargeable on trading profits and on investment income and gains. It is eligible for normal CT reliefs but there are no CIC-specific tax exemptions or reliefs available..
• Gift Aid. Gift Aid applies only to gifts of money to a “charity” as defined for tax. HMRC cannot recognise a CIC as a charity for tax, so a CIC cannot claim Gift Aid. Company donations to a CIC get no charitable donations relief either. See Gift Aid relief on donations by individuals applies only to gifts of money to a 'charity'. For that Chapter, 'charity' includes only the Trustees of the National Heritage Memorial Fund, the Historic Buildings and Monuments Commission for England, and a registered community amateur sports club. A CIC is none of these and cannot meet the Finance Act 2010 Sch. 6 definition..
• Mandatory business rate relief. Mandatory charitable rate relief applies in two cases. The first is where the ratepayer is a charity or trustees for a charity, and the property is used wholly or mainly for charitable purposes. The second is where the ratepayer is a registered CASC. A CIC fits neither. The council may still give it discretionary relief as a non-profit body. That is a choice for the council, not a right. See Mandatory charitable rate relief applies only where the ratepayer is a charity or trustees for a charity and the property is wholly or mainly used for charitable purposes, or the ratepayer is a registered CASC. A CIC qualifies under neither limb. A CIC may still be given DISCRETIONARY relief by the billing authority as a non-profit or voluntary organisation.. One warning on citations. Most sector content still cites Local Government Finance Act 1988 s.43(6) for this relief. That section was removed for financial years starting on or after 1 April 2024. The relief moved to Sch.4ZA para.2.

Funding: the asymmetry that decides most cases

A CIC can lawfully be funded by charitable trusts and foundations.

A charity may make grants to bodies that are not charities, CICs included. The funded work must carry out the funding charity’s own purposes. But the Commission’s guidance adds conditions that shape what a CIC is offered. A grant to a non-charity:

• must be restricted
• needs more due diligence
• must not give rise to more than incidental personal benefit

A charity with the same or narrower purposes may get an unrestricted grant. That imbalance is why CICs are offered project money, and rarely core or unrestricted money. See Legally yes. A charity may make grants to organisations that are not charities, expressly including CICs, provided the funded work carries out the funding charity's own purposes. Grants to non-charities MUST be restricted, require more due diligence, and must not give rise to more than incidental personal benefit. In practice funder policy varies: some major funders exclude CICs outright..

Funder policy then varies. It is policy, not law, so it can change without notice. Three funders were checked, and they do not agree with each other:

• The National Lottery Community Fund (Awards for All England): CICs can apply, whether limited by guarantee or by shares. A CIC with shares must also follow the Regulator’s guidance on sharing profits.
• Garfield Weston Foundation: not eligible. Its eligibility quiz says it can support only UK registered charities, CIOs, and exempt or excepted bodies.
• Esmée Fairbairn Foundation: can apply if the work is legally charitable. It supports “constituted organisations, including charities and non-charities doing charitable work”.

Three funders is a sample, not a survey — see The National Lottery Community Fund (Awards for All England): CICs eligible, limited by guarantee OR by shares. Garfield Weston Foundation: NOT eligible — only UK registered charities, CIOs, and exempt or excepted organisations. Esmée Fairbairn Foundation: eligible if the work is legally charitable — 'we support constituted organisations, including charities and non-charities doing charitable work'.. The useful lesson is not that CICs cannot get grants. It is that you must check each funder. The answers differ, and one of the three large names shuts CICs out.

Cost, and moving between the two

Registering a charity is free in all three UK jurisdictions. Forming a CIC is not, and it carries a recurring fee a charity does not have.

	CIC	Charity
To form	£115 online, £139 by post — a composite of the Companies House incorporation fee and the Regulator’s eligibility decision fee	£0 to the regulator; a charitable company additionally pays the Companies House incorporation fee
Every year	£15 to file the CIC34 report, payable even by a dormant CIC, plus the company confirmation statement	No annual return fee
To convert in	£45 for an existing company, paper only	No conversion fee; a CIC converting to a charitable company pays a Companies House name-change fee

The widely repeated older CIC formation figures are out of date; the fees rose on 1 February 2026.

Charity to CIC is possible in England and Wales, but only for a charitable company. An unincorporated charity cannot convert, because a CIC must be a limited company. The change needs the Charity Commission’s written consent first.

Property gained while the body was a charity stays held on trust for charitable purposes. The CIC becomes a charity trustee of those assets. It must use them for the purposes it had before the change.

In Scotland the same route needs OSCR’s consent. If the registered office is in England and Wales, you need both regulators’ consent. In Northern Ireland it is banned outright under s.40A. There is no consent route and no power to repeal.

The section names HMRC to enforce it, because the section is older than CCNI. That is a real difference, and few sources report it.

The consolidated text holds a trap on the Scottish route. Section 40(1) said a Scottish charity may not become a CIC. It is still displayed in square brackets, but it was repealed on 1 October 2009. If you read the text without the note, you get the wrong answer.

CIC to charity works by two routes in England and Wales:

• to a charitable company, by special resolution plus a Charity Commission statement that the company will be a charity and not an exempt charity. The Regulator then decides if it may stop being a CIC.
• to a CIO, under the 2017 Conversion Regulations.

Several blockers apply, and company law sets limits. A CIC limited by shares cannot become a company limited by guarantee. A CIC with partly paid shares cannot convert to a CIO. See Possible by two distinct routes. (1) CIC to charitable COMPANY: special resolution under s. 54 plus a Charity Commission statement that, if the changes take effect, the company will be an English charity and will not be an exempt charity; the Regulator then decides eligibility to cease being a CIC under s. 55. (2) CIC to CIO: application to the Charity Commission under the Charitable Incorporated Organisations (Conversion) Regulations 2017 — ss. 53-55A of the 2004 Act are disapplied for this route..

What cannot be done is reverse out entirely. Once a company is a CIC it cannot become an ordinary company. The exits are dissolution, conversion to a charity or CIO, or becoming a registered society. See Once a company is a CIC the only exits are dissolution, or conversion to a charity or CIO. 'This means that once a company is a CIC it cannot become an ordinary company.'.

What to do about it

Ask three questions in this order. First, check whether your purposes are exclusively charitable. If they are not, the charity route is closed.

Second, decide whether anyone needs to be paid for running it, or to take a return on money they invest. If so, the CIC is built for that and the charity is not.

Third, work out where the money will come from. It may come from donations, legacies, Gift Aid, rate relief and funders who give only to charities. If so, the tax and funding gap is large and lasting. That gap sinks most CICs that wanted to be charities.

Next: Decide whether to start a charity. That step ends in a recorded decision with the alternatives named and the reasons minuted. If you have already settled on a charity, choose your legal structure next.