CIC vs Charity: Which Structure is Right for You?

Introduction

"Should I set up a CIC or a charity?"

This is the most common question people ask when starting a community organisation. And it's completely understandable — both structures exist to benefit the community, but they work very differently.

Here's the honest answer: there's no universally "right" choice. The best structure depends entirely on your specific situation, goals, and priorities.

The quick version:

• CICs are simpler, faster to set up, and more flexible — but don't get tax benefits
• Charities have significant tax advantages and higher public trust — but come with more regulation and slower setup

This guide will help you understand both options and make the right decision for YOUR organisation.

Quick Summary: The Key Differences

For those short on time, here's the essential comparison:

What is a CIC?

A Community Interest Company (CIC) is a special type of limited company designed for social enterprises. Introduced in 2005, it provides a simpler alternative to charity status for organisations that want to benefit the community.

Key Features of CICs:

• Community purpose — Must pass a "community interest test" showing the company benefits the community
• Asset lock — Company assets are permanently locked for community benefit
• Light regulation — Overseen by the CIC Regulator with minimal bureaucracy
• Commercial flexibility — Can trade, pay directors, and operate like a business
• No special tax status — Pays corporation tax like any ordinary company
• Quick setup — Typically registered within 2-5 working days

There are now over 34,000 active CICs across the UK. You can explore them in our CIC Directory.

Want the full picture? Read our complete guide: How to Set Up a CIC: Complete UK Guide 2026

What is a Charity?

A charity is an organisation established exclusively for charitable purposes. In the UK, charities are regulated by the Charity Commission and must meet strict legal requirements.

Main Charity Structures:

Charitable Incorporated Organisation (CIO) — The most common for new charities

• Legal entity with limited liability
• Only registers with Charity Commission (not Companies House)
• Two types: Foundation CIO (trustees only) or Association CIO (wider membership)

Charitable Company — Older structure, still widely used

• Company limited by guarantee registered as a charity
• Dual regulation: Companies House AND Charity Commission
• More admin but established legal framework

Key Features of Charities:

• Exclusively charitable purposes — Must fit specific legal categories
• Public benefit test — Must demonstrate benefit to the public
• Significant tax advantages — Corporation tax exempt, Gift Aid, rates relief
• Heavy regulation — Extensive reporting and Charity Commission oversight
• Restrictions on payments — Trustees generally cannot be paid
• Very high public trust — "Registered charity" is widely respected

Decision Guide: Which is Right for You?

Choose a CIC if:

Choose a Charity if:

Can You Convert Later?

Good news: you're not locked in forever.

CIC to Charity

Yes, you can convert a CIC to a Charitable Incorporated Organisation (CIO). The process involves:

1. Applying to the Charity Commission
2. Demonstrating your purposes are exclusively charitable
3. Meeting all charity registration requirements
4. Transferring assets (the CIC asset lock makes this straightforward)

It takes time (typically 3-6 months) but is definitely possible. Many organisations start as a CIC for speed, then convert to charity later once they're established.

Charity to CIC

Technically possible but unusual and complex. Requires Charity Commission consent to give up charitable status. Rarely done because you'd be giving up significant benefits.

Choosing Charity Instead?

If you've decided a charity is the right structure, here are your next steps:

1. Decide on charity type — CIO is usually best for new charities
2. Prepare your governing document — Charity Commission has model documents
3. Apply to Charity Commission — Online application, expect 8-12 weeks minimum

Resources:

• Charity Commission guidance
• Setting up a CIO

We don't help with charity formation (CIC Tools is specifically for CICs), but we genuinely wish you well with your community mission regardless of which structure you choose.

Conclusion

Both CICs and charities exist to benefit the community. Neither is inherently "better" — the right choice depends entirely on your specific situation.

In summary:

• Choose CIC for speed, simplicity, flexibility, and commercial activity
• Choose Charity for tax benefits, maximum public trust, and donation-heavy models

If you're still unsure, CIC is usually the safer starting point. It's faster to set up, simpler to run, and you can always convert to charity later if the benefits become worthwhile.

Whatever you choose, the most important thing is to get started. Your community needs you.