How to set up a CIC, step by step

Setting up a Community Interest Company is two applications wearing one form. You are incorporating a company at Companies House, and at the same time asking the Regulator of Community Interest Companies to accept that your purpose benefits a community. Both have to succeed, and the second is the one people underprepare for.

This is the whole process with the current fees, the decisions that are hard to reverse, and a dated worked timeline of what falls due in the first 21 months.

First, the honest test

A CIC gives you speed, founder control, and the ability to pay yourself and your directors for the work you do. What it does not give you is charity tax treatment. A CIC pays corporation tax like any company — 19% on profits up to £50,000 and 25% above £250,000, with marginal relief between — it cannot claim Gift Aid, and it does not get the 80% mandatory business rates relief a charity gets. A great many grant programmes are also restricted to registered charities.

So the test is blunt. If your model is grant- and donation-funded for a purpose that is exclusively charitable in law, a charitable incorporated organisation is probably the better vehicle and registration with the Charity Commission is free. If you intend to trade, want to pay the founders, and value being able to move quickly, a CIC fits. Our structure guide and the charity vs CIC comparison set the two side by side. Do CICs pay corporation tax? covers the tax consequence in detail.

Shares or guarantee — decide this before anything else

This choice shapes your articles, your ability to raise investment, and whether money can ever leave the company as a return to investors. It is awkward and expensive to change afterwards.

• Limited by guarantee has no shares and no shareholders — members guarantee a nominal amount, typically £1. It pays no dividends at all, so the only routes out are reasonable director remuneration and spending on the mission. This is the common form for community projects and the one most funders expect.
• Limited by shares has shareholders and can pay dividends within the asset lock, which makes it the form to choose if you may want equity investment. It is also the form that requires you to understand the dividend cap below.

The asset lock and the 35% dividend cap

The asset lock is the thing that makes a CIC a CIC. Assets and profits are locked to the community purpose: they cannot be extracted for private benefit, transfers out must be at full market value or to another asset-locked body, and on dissolution any residual assets pass to an asset-locked body named in your articles. It is permanent — it cannot be removed later, and a CIC cannot convert into an ordinary company. Commit deliberately.

For a CIC limited by shares, the asset lock allows a capped return. The maximum aggregate dividend is 35% of distributable profits, so at least 65% stays in the company or goes to the community. The older caps that limited the dividend on each individual share were removed on 1 October 2014 by the Community Interest Company (Amendment) Regulations 2014, leaving the 35% aggregate cap as the operative limit. Dividends paid to another CIC or to a charity named in the articles fall outside the cap altogether. And note the order of operations: distributable profits are what remain after corporation tax, so tax comes first and the 35% applies to the remainder.

The community interest statement, and how it fails

Form CIC36 carries your community interest statement, and it is assessed against the community interest test: a reasonable person must consider that your activities are carried on for the benefit of the community. Two things sink applications.

The first is defining the community too narrowly — a group so small or so closely connected to the founders that the benefit looks private rather than public. The second is describing activities in aspiration rather than in specifics. “Improving wellbeing in our area” says nothing the regulator can assess. “Running four weekly supervised exercise sessions for adults over 60 in the wards of Padiham and Hapton, referred by local GP practices” says exactly who benefits and how. Write the second kind. You must also name the asset-locked body that would receive residual assets on dissolution.

What it costs to register

• CIC registration: £115 online, or £139 by post. That single fee covers both the incorporation and the CIC36 application. It is more than a standard company, which is £100 online and £124 on paper, because the regulator's assessment is built in.
• Converting an existing limited company into a CIC: £45, and that route is paper only.
• Every year afterwards: a £15 fee to file the CIC34 community interest report with your accounts, and £50 for the confirmation statement online (£110 on paper).

You now have to verify your identity

Since 18 November 2025, under the Economic Crime and Corporate Transparency Act 2023, identity verification at Companies House is mandatory. Every new director must supply a Companies House personal code when the company is registered — without it you cannot incorporate at all. New people with significant control must provide theirs within 14 days of being added to the register. Existing directors and PSCs are being brought in over a twelve-month phase-in, tied to their company's next confirmation statement.

The practical consequence for a founder: get each director verified before you sit down to file, not on the day. Attempting the incorporation without personal codes to hand simply stops the process.

CIC formation, step by step

1. Choose shares or guarantee — as above, and write down why, because a funder will ask.
2. Verify every proposed director at Companies House and collect their personal codes. Nothing else can proceed without them.
3. Draft the community interest statement in specifics: what you do, which community benefits, and how. Name the asset-locked body for dissolution.
4. Adopt CIC-specific articles of association. These carry the asset lock and, for a share company, the dividend cap. Model articles exist for each form. Read them rather than accepting them, because they are hard to unpick later.
5. Pick a registered office — a real, appropriate UK address that can receive official post — and an accounting reference date.
6. File the incorporation and CIC36 together online for £115. Companies House checks the company documents and passes the application to the CIC Regulator for the community interest decision.
7. Open a bank account in the company name as soon as the certificate arrives. Do not run the first months through a personal account; untangling that later costs far more than the wait.
8. Register for corporation tax with HMRC within three months of starting to trade.
9. Set up fund-aware bookkeeping from transaction one, with restricted grant income tracked separately and director pay recorded distinctly, because the CIC34 asks about it directly.

What you file every year, and when

• Companies House, within nine months of your year-end once you are past the first period: accounts, plus the CIC34 explaining what you did for the community and what directors were paid, plus £15.
• Companies House, annually: a confirmation statement, £50 online.
• HMRC, within twelve months of the end of the accounting period: the CT600 company tax return with accounts and computations. The corporation tax itself is due three months earlier, nine months and one day after the period ends.

Late accounts at Companies House cost £150 up to a month late, £375 from one to three months, £750 from three to six and £1,500 beyond — doubled if you also filed late the year before. A missed CIC34 is a different order of problem, because it puts you in correspondence with the regulator rather than a penalty inbox. Our filing deadlines guide lays the whole calendar out.

What to do this week

1. Write your community interest statement in one paragraph, naming the specific activities and the specific community. If a stranger cannot tell who benefits, rewrite it.
2. Decide shares or guarantee, and be honest about whether you will ever want outside investment.
3. Get every proposed director verified at Companies House and note their personal codes. This is the step that stops incorporations dead.
4. Identify the asset-locked body you would name for dissolution, and check it exists and would accept.
5. Diarise three dates from your incorporation date: corporation tax registration at three months, confirmation statement at twelve months plus fourteen days, first accounts and CIC34 at 21 months.

Where we come in

We help social founders choose between a CIC and a charity, get the articles and the community interest statement right first time, handle the registration itself, and then run the CIC34, accounts and corporation tax afterwards so the first year-end is routine rather than a scramble — see our CIC accounting services, from £39 + VAT a month. Get started.