CIC vs Charity: Which Structure is Right for You?
Written by Ben Ahern, Founder of CIC Tools and Co-founder of Homeless Aid UK CIC. Last updated 17 September 2026.
Community Interest Companies and charities both exist to benefit the community, but they are regulated, taxed and run very differently. This guide compares them side by side so you can pick the structure that fits your plans, not the one that sounds most impressive.
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Introduction
“Should I set up a CIC or a charity?” is the most common question people ask when starting a community organisation. Both structures exist to benefit the community, but they work very differently, and there is no universally right answer. The best structure depends on what you will actually do, where your money will come from and how much governance you can carry.
- CICs are quicker to set up, simpler to run and more flexible, but get no tax reliefs.
- Charities get significant tax reliefs and the highest public recognition, but come with heavier regulation, trustee rules and a slower, more demanding registration.
Quick summary: the key differences
| Factor | CIC | Charity (CIO) |
|---|---|---|
| Primary purpose | Community benefit through trading or activities | Exclusively charitable purposes with public benefit |
| Tax reliefs | None: pays Corporation Tax like any company | Corporation Tax exemption on charitable income, Gift Aid, up to 80% rates relief |
| Setup time | Usually a few working days online, longer if the Regulator has questions | No published timescale; expect weeks to months and follow-up questions |
| Registration fee | £115 online (£139 paper) | No Charity Commission fee |
| Regulator | Companies House and the CIC Regulator | Charity Commission (plus Companies House for a charitable company) |
| Paying the people running it | Directors can be paid a reasonable salary, disclosed in the CIC34 | Trusteeship is generally voluntary; payment needs specific authority |
| Annual reporting | Accounts, confirmation statement, CIC34 report | Annual return and accounts to the Commission; trustees' annual report |
| Public trust | Good, and growing | Very high |
| Flexibility | High | Lower |
Fees from the Companies House fees page; tax reliefs from gov.uk on Gift Aid and charitable rate relief; trustee pay from the Charity Commission's payments to trustees guidance. Checked 17 September 2026.
Choose a CIC for
Speed, simplicity, flexibility, paid founders and commercial activity.
Choose a charity for
Tax reliefs, maximum public trust and donation-heavy funding models.
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What is a CIC?
A Community Interest Company (CIC) is a special type of limited company designed for social enterprises. Introduced in 2005, it gives organisations that want to benefit the community a simpler alternative to charity status.
- Community purpose: you must pass the community interest test. The Regulator must be satisfied that a reasonable person would consider your activities to be for the benefit of the community.
- Asset lock: assets are permanently locked for community benefit. See our asset lock guide.
- Light-touch regulation: overseen by the CIC Regulator, with a short CIC34 report each year alongside your accounts.
- Commercial flexibility: you can trade, employ staff and pay directors a reasonable salary.
- No special tax status: a CIC pays Corporation Tax like any other company.
- Quick setup: online applications are usually processed within a few working days, longer if the Regulator has questions about your community interest statement.
There are over 34,000 CICs on the register. You can explore them in our CIC Directory, and read the full process in How to Set Up a CIC.
What is a charity?
A charity is an organisation established exclusively for charitable purposes for the public benefit. In England and Wales, charities are regulated by the Charity Commission. You must register once your income is over £5,000 a year, and a CIO must register whatever its income.
Main charity structures
Charitable Incorporated Organisation (CIO), the usual choice for new charities:
- A legal entity with limited liability for its trustees and members
- Registers only with the Charity Commission, not Companies House
- Two forms: Foundation CIO (trustees only) or Association CIO (wider membership)
Charitable company, an older structure still widely used:
- A company limited by guarantee that is also a registered charity
- Dual regulation: Companies House and the Charity Commission
- More admin, but an established legal framework
Key features of charities
- Exclusively charitable purposes: must fit the legal descriptions of charitable purposes
- Public benefit requirement: must demonstrate benefit to the public
- Significant tax reliefs: Corporation Tax exemption on charitable income, Gift Aid (an extra 25p for every £1 donated) and up to 80% off business rates
- Charity Commission oversight: annual return, accounts and trustee duties
- Restrictions on paying trustees: trusteeship is generally a voluntary role; paying a trustee needs authority in the governing document or from the Commission
- Very high public trust: “registered charity” is widely understood
Sources: How to register your charity (CC21b), Gift Aid, charitable rate relief.
The pros and cons
CIC
Advantages
- Speed: usually registered within a few working days, rather than an open-ended charity application
- Simplicity: less paperwork and a short annual CIC34 report
- Flexibility: pay directors, trade commercially, adapt as you grow
- Broader purposes: community benefit does not have to be “charitable” in law
- Commercial credibility: some partners and contracts prefer to deal with a company
Disadvantages
- No tax reliefs: pays Corporation Tax, no Gift Aid, no charitable rates relief
- Lower recognition: the public understands “charity” better than “CIC”
- Some funding excluded: a minority of funders only accept registered charities
Charity
Advantages
- Tax reliefs: Corporation Tax exemption on charitable income, Gift Aid (25p per £1), up to 80% rates relief
- Public trust: “registered charity” is widely understood and trusted
- Widest funding access: grant funders accept charities almost universally
- Permanence: strong legal protection for charitable assets
Disadvantages
- Slower setup: no published timescale, and the Commission can come back with questions
- Heavier regulation: Charity Commission oversight and trustee duties
- Payment restrictions: trustees generally cannot be paid without specific authority
- Less flexibility: harder to change purposes, more governance
- Must be exclusively charitable: purposes must fit the legal definitions
Decision guide: which is right for you?
Choose a CIC if
- CIC
You want to set up quickly
A CIC is usually registered within a few working days of applying online.
- CIC
You plan to trade commercially
Selling products or services is your main activity.
- CIC
You want to pay the founders properly
Planning to work full time and need a salary? CIC directors can be paid a reasonable amount.
- CIC
Your purpose is community benefit but not strictly charitable
Community pub, social enterprise cafe, local sports club: these may not meet the legal charity definitions.
- CIC
You value simplicity
You want to spend time on the mission, not the paperwork.
Choose a charity if
- Charity
Tax reliefs are significant for you
Receiving substantial donations? Gift Aid adds 25p per £1. Have premises? Rates relief of up to 80% can save thousands.
- Charity
Your purpose is clearly charitable
Relieving poverty, advancing education, promoting health: these fit the charitable purposes in law.
- Charity
Maximum public trust matters
Fundraising from the general public? Registered charity status increases donor confidence.
- Charity
Your target funders require it
Some grant-makers only fund registered charities. Check the funders you actually plan to apply to.
- Charity
You are not in a hurry
If you can wait for an unpredictable registration, the reliefs may be worth it.
Common scenarios
Real-world examples to help you see your own situation:
Youth mentoring programme
Could be either“We want to run mentoring for disadvantaged young people. We'll apply for grants and maybe get some donations.”
This is clearly charitable work. If you expect significant public donations, charity status gets you Gift Aid. If you want to start quickly and keep things simple, a CIC works, and most youth-focused funders accept CICs.
Community cafe and training social enterprise
Probably CIC“We want to run a cafe that employs people facing barriers to work. Revenue will mostly come from cafe sales.”
You are primarily trading, and the social benefit comes through employment. A CIC gives you commercial flexibility while signalling your social purpose.
Grant-giving foundation
Charity“We have money to give away and want to establish a foundation to distribute grants.”
Grant-giving is a classic charitable activity. You will want the tax reliefs, and both funders and the public expect charity status for a foundation.
Community sports club
Probably CIC“We run football sessions for local kids and adults, funded by memberships and some local sponsorship.”
Sports clubs often do not meet the charity definitions unless they focus on disadvantaged groups. A CIC gives you a recognised community structure without charity complexity.
Arts organisation seeking Arts Council funding
Either works“We're an arts company applying for Arts Council grants and public funding.”
Arts Council England funds both CICs and charities. Ask whether you will receive significant donations (charity is better for Gift Aid) or mainly grants and earned income (a CIC is simpler).
Homelessness support service
Probably charity“We provide food, clothing and support to people experiencing homelessness.”
This is clearly charitable (relief of poverty and hardship) and you will likely receive public donations where Gift Aid is valuable. Many organisations in this space still choose a CIC to start quickly and keep control, so it is a genuine judgement call.
Can you convert later?
You are not locked in forever, but the two directions are very different.
CIC to charity
The CIC Regulator's guidance lists converting a CIC to a charity or Charitable Incorporated Organisation (CIO) as a permitted route. In outline:
- Confirm your purposes are exclusively charitable and rewrite the governing document to match
- Apply to the Charity Commission and meet all the registration requirements
- Move the assets: because a charity is itself an asset-locked body, the CIC asset lock allows the transfer
Neither regulator publishes a timescale for this, so treat it as a project rather than a quick switch. Plenty of organisations do start as a CIC and convert once they are established and the tax reliefs matter.
Charity to CIC
Unusual and complex. Charitable assets must stay charitable, so a charity cannot simply become a CIC and take its money with it. In practice this needs Charity Commission involvement and is rarely done, because you would be giving up significant reliefs.
Source: CIC Regulator, Community interest companies: guidance chapters (asset lock and conversion routes).
Quick decision checklist
Answer these honestly:
- CIC
Do you need to start operating within the next month?
Yes = CIC. No = either.
- Charity
Will you receive significant donations from the public?
Yes = charity (Gift Aid adds 25p per £1). No = either.
- Charity
Do you have premises you will pay business rates on?
Yes = charity (up to 80% relief). No = either.
- CIC
Do you need to pay the founders for their work?
Yes = CIC. No = either.
- Either
Is your purpose clearly charitable in law?
Yes = either. Unsure = CIC is the safer bet.
- Charity
Do your target funders require charity status?
Yes = charity. No = either.
Scoring
- Mostly CIC: set up a CIC.
- Mostly charity: look at charity registration.
- Mixed: a CIC is usually the simpler starting point, and you can convert later.
Frequently asked questions
Is a CIC a charity?
No. A CIC is a company with a community purpose, but it is not a registered charity. It does not get charity tax reliefs and it is not regulated by the Charity Commission. They are separate legal structures, and a company cannot be both at once.
Can a CIC receive donations?
Yes, anyone can donate to a CIC. However, donors cannot claim Gift Aid on donations to CICs. Gift Aid only applies to registered charities and community amateur sports clubs.
Can a CIC apply for grants?
Yes. Many grant funders accept CICs alongside charities, and social enterprise funders often prefer them. Some trusts only fund registered charities, so always check the eligibility page of each funder you are targeting. See our CIC funding and grants guide.
Which has more public trust?
“Registered charity” is a widely understood status and generally carries more public recognition. CIC awareness is growing, especially among councils, social enterprise funders and partners who know what the asset lock means.
Can I set up as a CIC now and become a charity later?
Yes. The CIC Regulator's guidance lists converting a CIC to a charity or Charitable Incorporated Organisation (CIO) as a permitted route. Your purposes must be exclusively charitable and you apply to the Charity Commission. Neither regulator publishes a timescale, so plan for it rather than rushing it.
Do CICs pay tax?
Yes. CICs pay Corporation Tax on profits like any other limited company: 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between. Charities can claim exemption on income used for charitable purposes. See Do CICs pay tax?
Which is easier to run?
A CIC has lighter ongoing compliance: company accounts, a confirmation statement and the short CIC34 report each year. A charity answers to the Charity Commission as well, with trustee duties, annual returns and rules on paying trustees. If admin burden is a concern, the CIC is the simpler structure.
What's the difference between a CIC and a CIO?
A CIC (Community Interest Company) is a company registered at Companies House and regulated by the CIC Regulator. A CIO (Charitable Incorporated Organisation) is a charity that registers only with the Charity Commission, whatever its income. Different structures, different regulators, different tax treatment.
Next steps
Decided on a CIC?
Either follow our complete setup guide and prepare your CIC36 and articles yourself, or let CIC Tools draft them from a set of guided questions. You submit to Companies House and pay the £115 fee.
Start your CICChoosing a charity instead?
- Decide on the charity type: a CIO is usually best for new charities.
- Prepare your governing document; the Charity Commission publishes model documents.
- Apply online to the Charity Commission and be ready for follow-up questions.
Charity Commission guidance · Register your charity
CIC Tools is built for CICs only, but we wish you well with your mission whichever structure you choose.
Quick question before you read on
Interested in an online guided CIC setup course?
Ben (who runs CIC Tools and his own CIC) is thinking about turning his experience into a step-by-step video course: setting up, staying compliant, and finding your first funding. He'll only build it if enough founders want it - your answer is the vote.
About the author
Ben Ahern is the founder of CIC Tools and co-founder of Homeless Aid UK CIC, which feeds around 1,000 people a week. He registered his own CIC, has run community organisations in the North West of England for over a decade, and built CIC Tools so other founders could skip the paperwork headaches he had first-hand.
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