Guides
CIC vs Charity: How They Differ and Which to Choose
Updated 11 Jun 2026
A CIC is a limited company with a community purpose; a charity is a different legal animal regulated by the Charity Commission. The choice decides who regulates you, whether you pay corporation tax, whether you can claim Gift Aid, and how much commercial freedom you keep. A CIC trades like a business and pays tax like one, but sets up fast and stays flexible. A charity gets tax reliefs and donor trust, but answers to a stricter regime and can't be run for profit. They are not two versions of the same thing, and one organisation can't be both at once.
The core difference
A CIC is a company. It's registered at Companies House, run by directors, and taxed like any company — with a community purpose and an "asset lock" written into law so its assets stay working for that purpose. A charity is defined by charity law: it must exist for purposes the law recognises as charitable, for the public benefit, and it's regulated by the Charity Commission. That single distinction — company versus charity — drives everything else below.
CIC vs charity, side by side
| Community Interest Company (CIC) | Charity | |
|---|---|---|
| What it is | A limited company with a community purpose | A body established for exclusively charitable purposes |
| Regulator | Companies House + the Regulator of Community Interest Companies | The Charity Commission |
| Purpose test | The community interest test — "a reasonable person might consider its activities benefit the community". Wider and easier to meet | Must be exclusively charitable and for the public benefit. Narrower |
| Set-up | Quick — incorporate as a company | Slower — Charity Commission registration and approval |
| Corporation tax | Pays it, like any company | Charity tax reliefs available — but only once HMRC recognises it for tax (a separate step from registration) |
| Gift Aid | Not available | Available (once HMRC-recognised) |
| Profit distribution | A share CIC can pay limited dividends (capped at 35% of distributable profits); a guarantee CIC pays none | None — profits must go to the charitable purpose |
| Asset lock | Yes — statutory; assets are locked to community benefit | Yes — assets locked to charitable purposes |
| Run by | Directors (company law duties) | Trustees (charity law duties) |
| Annual filing | Accounts + CIC report (CIC34) at Companies House; CT600 at HMRC | Trustees' annual report and accounts to the Charity Commission, with fund accounting |
When a CIC is the better fit
A CIC tends to suit you if:
- You want to get going quickly and keep things simple to run.
- You'll trade — earn most of your income from selling goods or services — and want commercial freedom.
- Your aims are socially useful but not strictly charitable in the legal sense (the community interest test is wider than charity law).
- You might want to reward investors modestly through capped dividends, while keeping the asset lock.
- Charity tax reliefs and Gift Aid aren't central to your funding model.
When a charity is the better fit
A charity tends to suit you if:
- Your purposes are exclusively charitable and you can show public benefit.
- You'll rely on donations, grants and Gift Aid — many funders give only to registered charities, and Gift Aid lets a charity reclaim tax on eligible donations.
- Donor and public trust in the charity brand matters to your fundraising.
- You're comfortable with tighter regulation and with profits never being distributed.
The short version: a CIC buys speed, flexibility and the ability to trade, at the cost of tax reliefs. A charity buys tax efficiency and funding access, at the cost of freedom and a heavier compliance load. Many founders start as a CIC to get moving and move to charitable status later when grant funding becomes the priority — that route is covered on converting a CIC to a charity.
Can you be both?
No. In law a CIC can't be a charity, and a charity can't be a CIC — you choose one. A charity can own a CIC as a subsidiary (for example to run a trading arm), and you can convert from one to the other, but a single organisation can't hold both statuses at the same time.
Frequently asked questions
Is a CIC a charity? No. A CIC is a limited company with a community purpose. It's regulated by Companies House and the CIC Regulator, not the Charity Commission, and it doesn't get charity tax reliefs.
Which is easier to set up, a CIC or a charity? A CIC. You incorporate it as a company, which is quicker than the Charity Commission's registration and approval process.
Can a CIC get Gift Aid? No — Gift Aid is only for charities (and CASCs) recognised by HMRC. See CIC corporation tax for the tax side.
Can a charity become a CIC, or a CIC become a charity? Yes, both directions are possible. A CIC converting to a charitable incorporated organisation (CIO) is a defined process — see converting a CIC to a charity.
Do CICs and charities both have an asset lock? Yes, in effect — a CIC's assets are locked to community benefit by statute, and a charity's are locked to its charitable purposes. Neither lets owners extract the assets freely.
Can one organisation be both a CIC and a charity? No. You hold one status or the other. A charity can own a CIC subsidiary, but they remain two separate bodies.
Not sure which structure fits what you're building? Talk it through with us before you commit →