Should I set up a charity, or something else?

England and Wales: This page sets out the position in full. Scotland: the same decision, but the Scottish charity test is harder to satisfy in places than the England and Wales one — see public benefit and the purposes comparison, both covered in Steps 3 and 4. Northern Ireland: the same decision, but registration is currently compulsory at any size, so choosing a charity is a larger, more permanent commitment for a very small body than it is in England and Wales.

The trade-off: tax relief and trust against permanent regulation

Whether you should start a charity turns on one trade-off. It is the first decision in starting a charity, and nothing else in this guide is worth doing until it is made. The trade-off is the same for founders in England and Wales, Scotland and Northern Ireland.

Charitable status brings tax relief and a level of public trust that a new body cannot otherwise buy. It also opens grants that are closed to almost every other structure. But it also constrains you, and the constraints do not expire. The Charity Commission, OSCR or the Charity Commission for Northern Ireland regulates the charity for as long as it exists.

A charity’s purposes must be exclusively charitable. Being charitable-and-something-else, or mostly charitable, is not enough. A single purpose that is not charitable is fatal to the whole application, however worthwhile the work.

Each of the three nations works from a different list of charitable purposes, and each applies a public benefit test. How to meet both is covered when you write your purposes and show public benefit.

This step only needs you to accept two things before going further. The test is real. It does not bend to fit a good cause with a mixed purpose.

Once you are a charity, you stay regulated permanently. You cannot decide to stop being one at will. And a trustee cannot be paid for trustee work. The narrow exceptions are ones most founders will never need.

If what you want is closer to a business with a social mission, look at the alternatives to setting up a charity. The same goes for a project that could sit inside a body that already exists. Several of them are far easier to unwind, too, if you change your mind.

The alternative most likely to trap you: a community amateur sports club

A community amateur sports club (CASC) cannot become a charity and cannot leave the scheme by choice. For a sports club, it is close to a one-way door. HMRC’s CASC scheme is often presented as the simple, tax-saving route. The trap in it is rarely explained. A community amateur sports club (CASC) is a club registered with HMRC under Corporation Tax Act 2010 Part 13 Chapter 9 (ss.658-671), which grants specified corporation-tax exemptions and (via other legislation) mandatory business rates relief in exchange for meeting three statutory conditions.

A CASC and a charity are mutually exclusive statuses, not two rungs on the same ladder. The statute is direct:

“A registered sports club established for charitable purposes is to be treated as not being so established, and accordingly cannot be a charity.” — Charities Act 2011, s.6(1), verbatim.

HMRC has no power to waive this for a club that would rather have charitable status. And a CASC cannot change its mind later.

HMRC’s own guidance says: “CASC status is intended to be permanent. A CASC can never ask to be deregistered and an application cannot be withdrawn once it has been sent in to us.” The only ways out are deregistration by HMRC for non-compliance, or winding the club up. Both trigger an exit charge.

When it stops being a registered club, the club is treated as disposing of and immediately reacquiring its assets at market value.

The usual CASC gains exemption is withdrawn. That includes withdrawing it retrospectively from earlier disposals that fed into an asset’s base cost. HMRC can also backdate the deregistration to the date the club became non-compliant. In HMRC’s words, “this includes the date of original registration in which case the club would be treated as if it had never been a CASC.”

Converting to a charity later does not dodge this. HMRC’s own sequence is:

• set up an entirely new charity
• register it
• get it recognised as a charity for tax purposes
• only then wind up the CASC and transfer assets across

Winding up the CASC is itself what triggers the exit charge. A club with property that has grown in value should treat the CASC/charity choice as final in practice, not as a stepping stone.

The one place a CASC does better than an unregistered club, and often better than a charity, is business rates. A CASC gets 80% mandatory non-domestic (business) rates relief on a hereditament occupied by a registered CASC and wholly/mainly used for the club's purposes (or for that club and other registered clubs); local authorities may grant further DISCRETIONARY relief, potentially up to 100% total. in England and Wales. In 2024 the rule was recodified. So any source still citing the old s.43(6) is citing a repealed provision. Scotland’s figure is the same headline rate: 80% mandatory relief, with local-authority discretion to top up to 100% (75% Scottish-Government-funded, 25% local-authority-funded for the top-up; the mandatory 80% element is 100% Scottish-Government-funded)..

Northern Ireland is more generous for most clubs. An unlicensed CASC, or one holding only an occasional licence, gets Uplifted to 100% specifically for CASCs, PROVIDED the premises are not licensed (other than an occasional licence) to sell alcohol and are not registered under the Registration of Clubs (Northern Ireland) Order 1996. A CASC holding a full club liquor licence stays at the 80% base rate, not 100%.. That is better than the England, Wales and Scotland position, not merely equal to it. A CASC with a full club liquor licence stays at the 80% reduction for hereditaments used solely for a 'prescribed recreation' by a not-for-profit club/society/organisation (general sports/recreation relief, not CASC-specific). base rate.

The alternative most often confused with a charity: a community interest company

A community interest company (CIC) is not a charity; the difference between a CIC and a charity is set out in full separately. But it is regulated, has an asset lock and is often described as not-for-profit. That is why it gets mistaken for one.

It has a different regulator, different tax treatment and different grant eligibility. Nor is confusion between the two a rare mix-up.

“Confusion CIC or Charity” was the single largest category of complaint to the CIC Regulator in 2024–25. It accounted for 7 of 36 complaints across the whole register. It was ahead of activities, financial mismanagement, governance and political activity combined as separate categories.

The costs run the other way from what founders often expect. A CIC pays HMRC nothing extra to register. But it must file a community interest company report every year, even while dormant. The filing fee is £15, whether filed online or by post.

Converting an existing company, including a charitable company, into a CIC costs £45 in Companies House fees. A CIC does not get the charity sector’s mandatory business rates relief either: 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.

The full CIC-versus-CIO structural comparison belongs to the structure decision itself, when you choose your legal structure, not here. It covers director pay, grant eligibility, the asset lock, and the one-way conversion routes between charity and CIC. This step only needs you to see that a CIC is a real alternative to a charity. It is not a lighter version of one.

Charitable community benefit societies: a different answer in each nation

A community benefit society (BenCom) is a separate legal form registered with the FCA, not the Charity Commission. A society for carrying on any industry, business or trade may be registered as a community benefit society if: it is shown to the FCA's satisfaction that the business of the society is being, or is intended to be, conducted for the benefit of the community; it has at least 3 members (or 2 members that are themselves registered societies); its rules contain provision on the matters required by s.14; and its registered office is to be in Great Britain or the Channel Islands. The Act does not require charitable purposes — 'A community benefit society can be wholly charitable or benevolent, but it does not have to be, as long as it is conducting its business for the benefit of the community' (FCA Handbook).

Unlike a CASC, a BenCom can be wholly charitable. But where it registers depends entirely on which nation it is in. So does whether it registers with the Charity Commission at all. The three answers are not variations on a theme.

In England and Wales, a non-housing charitable community benefit society currently must not register with the Charity Commission. It is an exempt charity. Applying to the Commission wastes time going to the wrong regulator.

It files with the FCA instead. This is less a settled policy choice than a twenty-year-old drafting relic. A 2006 amendment would have narrowed the exemption to housing-only societies. It was enacted but never separately brought into force. So the broader, older exemption has continued by a transitional saving ever since.

A live Law Commission review is looking at closing this. Treat the current England and Wales position as correct today rather than as a permanent feature. No principal regulator has ever been appointed to oversee these exempt charities’ compliance with charity law day to day. The Charity Commission’s own powers over them are also limited.

Scotland and Northern Ireland are the opposite of England and Wales, not a variation on it. Neither nation has an “exempt charity” concept at all.

Every body that wants to call itself a charity in Scotland must go through OSCR’s own registration and charity test. A Northern Ireland community benefit society that is charitable must register with the Charity Commission for Northern Ireland. That is on top of its FCA registration. England and Wales is the outlier here, not the norm.

One more myth is worth clearing up. A charitable BenCom cannot use the standard statutory asset lock that a non-charitable community benefit society can adopt. The regulations that create it expressly exclude any society that is a charity.

A charitable BenCom’s assets are instead protected by ordinary charity law. That means the general duty to apply charity property only for the charity’s purposes. It also means the specific rules the FCA requires a charitable society’s own governing rules to contain.

In every nation, a BenCom keeps one special feature. It can raise capital from many small investors through withdrawable, non-transferable “community shares”. That is sector terminology, not a defined legal term. 'Community shares' is not a defined legal term — it is sector terminology for the withdrawable, generally non-transferable share capital that co-operative and community benefit societies (uniquely among mainstream UK legal vehicles) can issue to raise capital from potentially many small investors, without those shares being 'transferable securities' regulated the way company shares are. The enabling mechanism is that a society's own rules may, and commonly do, provide that shares are withdrawable (2014 Act s.14, required rule content, cross-referenced by s.2(2)(c)); a statutory cap limits any one member's interest in withdrawable shares to £100,000 (s.24(1)).

Northern Ireland societies register under their own, separately numbered statute. Its old name was the Industrial and Provident Societies Act (Northern Ireland) 1969. In 2018 it was renamed the Co-operative and Community Benefit Societies Act (Northern Ireland) 1969.

The FCA has been the registrar for both Great Britain and Northern Ireland since 6 April 2018. Do not cite the old name. The regulator’s own current guidance uses the new one.

Joining an existing charity, an informal club or fiscal hosting

Joining forces with a body that already exists, rather than founding a new one, has its own step. Check for similar charities to see whether the work is already being done. Sometimes it ends a project honestly and early. That is a good outcome, not a failure.

Two other routes are real and widely used. One is an informal unincorporated club that never registers as a charity. The other is fiscal hosting. That means running your project through an existing charity’s bank account and governance, rather than setting up your own body. This research pass did not settle the detailed comparison a founder would want:

• running costs
• the governance overhead each one carries
• how liability falls on the people involved

Do not assume either is simpler than a charity only because it sounds less formal. Get that comparison properly checked, or take advice, before ruling a charity out on those grounds alone.

You now have the reasons for or against a charity. If a charity is still right, check for similar charities next, then write your purposes.

Common mistake: assuming a CIC is a kind of charity

Both are regulated, both carry an asset lock of some kind, and both are often described as not-for-profit. The words overlap almost completely. They are wholly different legal forms. They have different regulators, tax treatment and grant eligibility. Choosing one when you needed the other is costly to unwind.

Common mistake: setting up a new charity when an existing one already does the work

Founders spot a need and assume a new body is the answer to it. Duplicating existing services is a live concern at registration. A new charity competing for the same funders may serve beneficiaries worse than partnering would. First check whether there is already a charity doing this.

Common mistake: thinking a CASC can also be a charity

Sports clubs are often told about CASC and charity status in the same breath, as tax-saving routes. That hides the fact that they are mutually exclusive statuses, not a menu a club can combine or upgrade between at will.

A club that later wants charitable status cannot convert directly. It must set up an entirely new charity, register it, get it recognised as a charity for tax, and only then wind up the CASC. Winding up the CASC itself triggers the deemed-disposal exit charge on any club property that has grown in value.

Common mistake: registering a charitable BenCom with the Charity Commission

One general rule appears so often elsewhere in this hub that founders apply it to every legal form. That includes a community benefit society. The rule is that any charity above the registration threshold must register with the Charity Commission.

A non-housing charitable community benefit society is currently an exempt charity in England and Wales. It cannot register with the Commission. Any attempt wastes time going to the wrong regulator. It files instead with the FCA.

The position is the opposite in Scotland and Northern Ireland. There, the same body must register with the local regulator. Neither nation has an exempt-charity concept at all. Assuming a single UK-wide answer is itself the trap.

Worked example

A group wants to run a community food project. The work is plainly worthwhile, so that is not the question. The question is whether the purposes are exclusively charitable, and whether an organisation nearby already does this work. The record’s own scenario is kept as written rather than forced onto Wrenfield, Tollgate or Saltmarsh.

All three are established organisations used elsewhere on this site. This step is about the decision founders take before any of the three would exist. The outcome is a minuted decision, with the alternatives named and rejected for stated reasons. It is not a gut feeling nobody can later reconstruct.