Running a Business as a Community Interest Company (CIC) in the UK: Complete Guide

Running a Business as a Community Interest Company – Not every entrepreneur sets out with profit as their only goal. For some, the driving purpose is social impact — improving communities, supporting vulnerable groups, or advancing a charitable cause while running a viable business.

In the UK, the Community Interest Company (CIC) is a special type of business structure designed for exactly this. It blends the flexibility of a company with a legal requirement to use profits and assets for community benefit.

In this guide, we’ll explore how CICs work, how to set one up, their pros and cons, and what to consider if you’re planning to launch a social enterprise.

What is a CIC?

A Community Interest Company (CIC) is a type of limited company created in 2005 to support social enterprises — businesses that want to trade commercially but with a commitment to reinvest most profits into community benefit.

Key features include:

• Must pass a “community interest test” to prove it benefits society.

• Regulated by the CIC Regulator as well as Companies House.

• Must submit an annual community interest report showing how it delivers public benefit.

• Can be either limited by shares or limited by guarantee.

Types of CIC

• CIC Limited by Shares

  • Can issue shares and pay dividends.

  • Dividends are capped (to ensure most profits are reinvested).

  • Suitable if you want to attract some private investment.

• CIC Limited by Guarantee

  • Has members who guarantee a nominal sum (e.g., £1) if the company winds up.

  • No shares or dividends.

  • Profits must all be reinvested into the CIC’s activities.

  • Common for community projects, charities, and non-profits.

Setting up a Community Interests Company

Step 1: Choose a name

• Must be unique and approved by Companies House.

• Should reflect the community purpose.

Step 2: Decide structure

• Limited by shares or by guarantee.

Step 3: Apply to Companies House

• Submit Form IN01 with the CIC declaration form (CIC36).

• Provide a business plan and community interest statement.

Step 4: CIC Regulator approval

• The CIC Regulator reviews whether the company’s purpose benefits the community.

Step 5: Register with HMRC

• Like other companies, CICs must register for Corporation Tax.

Responsibilities of a CIC

Directors of a CIC have responsibilities similar to those of any limited company director:

• File annual accounts with Companies House.

• Submit a confirmation statement.

• Pay Corporation Tax on profits.

• Keep company records and comply with directors’ duties.

Additional CIC obligations include:

• Filing a community interest report each year, outlining activities and benefits delivered.

• Abiding by the asset lock — company assets must be used for community benefit and cannot be sold for private gain.

Advantages of an CIC

• Clear social mission
  A CIC signals to funders, partners, and customers that you are committed to social good.

• Limited liability
  Like other companies, directors and members have personal asset protection.

• Access to funding
  Many grants, loans, and impact investors are open to CICs but not private companies.

• Credibility
  CIC status is regulated, giving reassurance to the public.

• Flexibility
  Can trade commercially while being mission-driven.

Disadvantages of an CIC

• Profit restrictions
  Dividends are capped and profits must largely be reinvested.

• Extra regulation
  More oversight than a standard company (CIC Regulator + Companies House).

• Investor limitations
  Some investors avoid CICs due to restrictions on profit distribution.

• Public scrutiny
  Annual reports detail community benefit — reputational risk if impact isn’t clear.

• Costs
  Setup and admin costs are slightly higher than for a standard limited company.

Taxes for CICs

CICs are taxed like limited companies:

• Pay Corporation Tax on profits.

• Can register for VAT if turnover exceeds £90,000.

• Can pay salaries and expenses to directors/employees.

Unlike charities, CICs do not automatically get tax exemptions. However, some grants are targeted specifically at CICs.

CIC vs Charity vs Limited Company

Insurance for Community Interest Company

Like other companies, CICs may need:

• Employers’ liability insurance (if hiring staff).

• Public liability insurance (for public activities).

• Trustee/Director liability insurance (to protect against personal claims).

Common Mistakes in CIC’s

• • Not being clear on mission → Without a strong community purpose, applications may be rejected.

  • Assuming tax benefits → CICs don’t have the same exemptions as charities.

  • Ignoring investor limits → CICs are less attractive to traditional equity investors.

  • Weak reporting → The community interest report must demonstrate measurable impact.

  • Confusing with Charity → CICs can trade freely but don’t receive charitable tax reliefs

Growing a CIC

CICs can scale successfully if they:

• Build strong community partnerships.

• Access grant funding and social investment.

• Maintain clear impact reporting to attract funders.

• Expand services that deliver both revenue and benefit.

• Collaborate with charities, councils, and private companies.

Who Should Consider a CIC

A CIC is ideal for:

• Social enterprises.

• Community projects.

• Businesses prioritising social good over profit.

• Entrepreneurs who want a mission-driven structure but flexibility to trade commercially.

It may not suit:

• Entrepreneurs seeking high investor returns.

• Businesses with no community focus.

• Projects that could qualify as charities for greater tax advantages.

Pros and Cons of Running a CIC

Running a Business as an Community Interests Company Final Thoughts

Running a business as a CIC is a powerful way to combine entrepreneurship with community benefit. It offers limited liability, access to grants and impact funding, and credibility with the public.

But CICs are not for everyone. The restrictions on profit distribution and the extra regulatory requirements mean they work best for those who place mission above money.

At GrowMyAcorn, we believe CICs are an excellent choice for purpose-driven entrepreneurs who want to make a difference while building a sustainable business.

👉 Explore our Limited Company Guide for a profit-focused alternative.
👉 Read our Choosing the Right Business Structure overview for the full series.