What is a community interest company (CIC)?

A community interest company is an ordinary limited company that has passed the community interest test and is regulated by the Office of the Regulator of Community Interest Companies as well as Companies House.

It can be limited by guarantee or by shares, it can trade commercially, and it can pay its directors reasonable salaries. What it cannot do is distribute its assets or profits beyond the limits set by the asset lock.

The test asks whether a reasonable person would consider the company's activities to benefit the community. The Regulator applies it on formation and continuously afterwards.

The asset lock permanently dedicates assets to the community purpose. On a solvent winding up, residual assets must transfer to another asset-locked body, not to members. For a CIC limited by shares, dividends are capped at 35% of distributable profits.

Every CIC files a community interest report, form CIC 34, alongside its annual accounts, with a £34 fee. It must describe the community benefit delivered in the year, how stakeholders were consulted, directors' remuneration, and any dividends or asset transfers.

Companies House rejects accounts filed without it, and a thin report is the most common reason a CIC hears from the Regulator.

There are no charitable tax exemptions. Trading profits are chargeable to corporation tax at 19% to 25%, and there is no gift aid on donations received.

Genuine grants that are not consideration for a supply are often outside the charge to tax and outside the scope of VAT, but grant agreements have to be read rather than assumed. Restricted funding also needs tracking separately so funder reports reconcile to the statutory accounts.