If your creative group is thinking about becoming a Community Interest Company (CIC), there are a number of benefits – but also a lot of things to think about!

Below, you'll find some basic information about becoming a CIC, plus links to a number of helpful resources.

Then, for some lived experience, read our Q&A with Dadesley Crafting, a craft group in Doncaster that made the transition from constituted group to CIC.

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What is a Community Interest Company?

A Community Interest Company (CIC) is a UK limited company set up to benefit the community it serves, rather than for private profit. It’s a form of social enterprise, and the term ‘community’ can mean residents of a particular geographic area, or a group of people experiencing the same particular disadvantage.  

CICs are allowed to make a profit but any surplus left over, after you’ve covered your costs, has to be ploughed back into the company.

As of January 2026, there are over 34,000 CICs registered in the UK, including a large number of arts organisations. You can read about some of the creative groups who have set up as CICs here.

How does a CIC operate?

A CIC operates in the same way as any other company, and can enter into contracts, own assets, borrow and raise funds, and employ staff. CICs have a separate legal identity, which means it will continue to exist, even if the people running it leave.

It’s important to note that CICs cannot be a charity. And one big difference between a charity and a CIC, is that directors of the company can be paid. Generally speaking, CICs are regulated more lightly than charities, and there are fewer reporting requirements, but there are still annual tasks you need to complete. 

What is the Community Interest Test?

This is something you must pass in order to register as a Community Interest Company. It’s not an exam, just a section of the application form where you define how your activities will benefit your particular community.

The community interest test is referred to in the Companies (Audit, Investigations and Community Enterprise) Act 2004 and states that ‘a reasonable person might consider that the carrying on of activities by the company in furtherance of the object is for the benefit of the community.’ In short, it means that most people would look at your activities and agree that they benefit your community, rather than private interests.

A section in ‘Form CIC36’ (the application form you need to fill out to incorporate a community interest company), is dedicated to this ‘test’. Your CIC has to continually satisfy this test throughout its life, and confirm it annually via a Community Interest Report, which directors must file along with your annual accounts. 

What is an ‘Asset Lock’?

An ‘Asset Lock’ is a fundamental feature of a Community Interest Company – it’s compulsory and cannot be removed. 

This ensures that all the assets of a CIC (including profits or other surpluses generated by the company’s activities) are used solely for the benefit of the community it was set up to serve. 

None of your assets can be transferred from your CIC to a limited company, and any assets that belong to, or are donated to, your CIC form part of your assets. Assets can be loaned to a CIC, providing a documented agreement is made between both parties. 

Assets may be transferred out or sold, as long as it is to another CIC, or providing the transfer still benefits your community in some way (e.g. the money you receive is full market value, and is spent on your community).

Limited by Shares or Guarantees?

A CIC must either be a company limited by guarantee, or a company limited by shares. Choose carefully, because once you’ve chosen one, you cannot switch to the other.

If you want to be able to pay dividends to your investors, then a company limited by shares may be your best option.

But a more traditional route, chosen by most companies looking to serve their community rather than make a profit, is a company limited by guarantee. This means your members guarantee to meet the debts of the company in the event of its failure - but only up to a specified limit (which could be as little as £1 – which means that your members’ financial liability is limited to this amount). 

Where to look for advice

• The UK Government’s Guide to Community Interest Companies (including setting up, registering, filing accounts and more).
  
  
• CIC Tools’ handy guide to setting up a CIC.
  
  
• Companies House delivered a webinar in January 2025, looking at how the CIC model operates and offering helpful tips on completing a successful CIC application. You can watch the webinar here.
  
  
• You could also check out this useful guide on the Charity Excellence website, to help you decide whether to set your group up as a CIC or a UK charity: Community Interest Company CIC vs CIO Charity

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"The benefits far outweigh the problems"

We speak to Michelle Dunn of Dadesley Crafting in Doncaster, about their transition to a Community Interest Company

Did you become a charity first before becoming a CIC?

“No, we actually started as an unconstituted group, because that felt the safer option for us – and initially we only wanted to do craft fairs. But then we wanted to run craft sessions and we knew we’d need money from somewhere to do that. So we very quickly needed to change to a CIC, because of a Lottery grant for £1,000 we applied for.”

Did you consult anyone when you were deciding whether to become a CIC, and to help with the application? 

“Yes, Nicky Birkinshaw from a company called Aspiring 2, which helps people set up businesses and CICs.”

Would becoming a CIC have been quite challenging for you without assistance and advice?

“Yes, very much so. Because even just filling out the initial form to become a CIC, and understanding the wording, is quite daunting. We completed it with some assistance from Nicky, and our form passed first time, which apparently doesn't happen very often.”

What kind of information did you have to pull together for your application?

“You need a constitution, which sets out your aims as a CIC. And with those, you have to be very, very clear about what you’re going to do for your community. You need a minimum of three directors, who can't be blood relations, and you need ID information for all of them. You also need a bank account.”

What proved difficult for you?

“Simple things like trying to find a bank account, because a lot of banks won't take CICs – or there can be a long waiting list to actually get a bank account for a CIC. Because we used to be an unconstituted group, and then became a CIC, we had to have ‘CIC’ at the end of our name, which meant changing our bank account name. That caused lots of problems!”

There are a few different roads you could have gone down – what made you choose a CIC?

“The opportunity to apply for the various grants that are available to CICs, and also the status it gives you with funders – it felt more secure. That said, there are lots of funders that will only work with registered charities, so you have to think carefully about who you want to apply to.”

How did it affect the public’s perception of your group?

“Members of the public have no idea what it means! When we introduce ourselves and say we’re a CIC, they say ‘what's that?’ and think you’re a charity. So we have to be very clear that we're not a registered charity, but that we can still accept financial donations. It's a real challenge to help people understand what we can and can't do.”

How do you maintain your status as a CIC?

“We have to be registered with Companies House, the Information Commissioner’s Office, and HMRC. We have an accountant, and submit our accounts annually. Any money you make as a CIC has to be put back into the company, and if you do have money left over after covering your costs, you have to pay tax on it. 

We run a shop, where we sell new items, things which have been donated, and work made by local artists and crafters. It’s one of the ways we’re trying to be sustainable in case we can’t raise money through grants in the future. We made a profit at the end of our first year as a CIC, and because we weren’t yet up to speed with everything, we were taxed on it. 

So part of the process of becoming a CIC is understanding what you can and can’t do. For example, somebody wanted to donate £100 to us, and we were unsure whether we’d have to pay tax on that. So we sought advice and the answer was ‘no’, unless it’s profit at the end of the year. We now have a bookkeeper to help us with all that.”

Other than the ability to pay your directors, what are the benefits of being a CIC rather than a charity?

“People are very supportive. They love what we do, what we stand for. Once we’ve explained what a CIC is, and that we're funded by grants and donations, they want to help us more and give us more.

For us, the benefits far outweigh the problems. So my advice to anyone thinking of setting up as a CIC would be to find somebody that can help. Go and get the support of another CIC. And if there's something we can do to help someone else get started, we’d gladly help them.”

To find out more about Dadesley Crafting, visit their website or contact them at [email protected]