Accounting, charities

CIC in a nutshell

A community interest company (CIC) is a special type of limited company that exists to benefit a community or to pursue a social purpose.

Pros:

  1. Its social/community purpose commitment is clear. Its assets are locked and only available to be used for the company’s social objectives, and it is regulated by the CIC regulator. These give potential donors and others some confidence.
  2. Some organisations will only give to ‘charitable’ organisations and whilst a CIC isn’t a charity (in law), it may be preferred to an ordinary limited company or an incorporated association.
  3. It has limited liability – the directors/founders are not be liable for its debts. Conversely, its assets can’t be used to cover their debts.
  4. As a limited company, it is independent of its founders and can carry on until it is dissolved.
  5. Set up is usually straightforward – one joint application to Companies House and the CIC regulator. Note a payment of £35 (I think) is required for the CIC regulator’s review.
  6. Directors/founders can be paid whilst retaining control (unlike charities).

Cons:

  1. Annual accounts to HMRC (if trading) and Companies House + annual confirmation statement to Companies House.
  2. Annual community interest report to the CIC regulator (approx £15 fees).
  3. No tax benefits.

OTHER OPTIONS

Charitable Incorporated Organisation (CIO)

Incorporated charity but not registered with Companies House. Registration is with the Charity Commission and it’s easy to set up if able to show a clear public benefit, have charitable objectives, etc. Must submit annual returns and accounts to the Charity Commission regardless of income.

Unincorporated Association

Informal, loose structure. If not trading and with no taxable income, there’s nothing to report to HMRC. Still needs a constitution.

Limited Company – by shares or by guarantee

Standard incorporated company reporting to Companies House.

About Phoenix

Accountant | Tax Specialist | Mother | Entrepreneur | Blogger

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