Community Interest Companies (CIC) provide a legal structure for businesses that trade with a social purpose. They are suited to social entrepreneurs who wish to control the organisation as well as receive a salary. CIC's are a type of social enterprise.
Whilst CIC's are free of the red tape which surrounds a registered charity, they do not receive the same tax incentives which are available to registered charities.
To become a CIC you need to demonstrate that you can pass the benefit to the 'community interest test'. In essence, would a member of the public consider the activities of the organisation are for the community benefit.
Register as CIC 'limited by shares'
If your CIC is more like a business. The owners will each hold shares, just as they would in a normal profit-making business. They can each have any number of shares, thereby defining the degree of control or ownership that each of them holds. Each shareholder has as many votes as they have shares. They may also receive dividends.
Register as a CIC 'limited by guarantee'
If your CIC looks more like a charity. The directors can also be called trustees and will each commit to a cash guarantee to be paid if the company were to fail. The guarantee is normally set at just £1 each. Each trustee has one vote. Decisions by the committee of trustees/directors are made on a one-person-one-vote basis. No dividend can be paid. This format is more acceptable to most funding bodies.
Does a community interest company (CIC) Pay Tax?
A community interest company (Or CIC) is liable to Corporation tax as a company. This applies to all its Trading profits, Investment Income and any gains. It’s an asset locked body that must ensure any profits/assets are used for the benefit of the community. Unlike a charity, a CIC is not entitled to any specific corporation tax exemption.
Are donations to a CIC tax deductible ?
· A community interest company (Or CIC) Is not a charity and therefore cannot claim gift aid. This also means an individual cannot claim Gift aid on the Payment. A CIC cannot apply to HMRC for Gift Aid Status. However, if a CIC donates surpluses to a charity, it will be able to deduct the amount of any such donations as a “charge” when working out its profits for corporation tax purposes.
· You can register your community interest company (CIC) via the Companies House website.
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