At Wiltshire Digital Drive we introduce ourselves as a CIC on our website, in our documentation and on social media, however, what may not be immediately clear is ”What are CICs, and how are they different from Charities?”
This question is usually asked as a result of the two being very similar in some respects, but there are distinctions that are important to know about when looking at either option, which is the subject of today’s blog, so to find out more, read on below!
What is a CIC?
CIC stands for Community Interest Company, a special type of company designed for social enterprises specifically looking to use their assets and profits to benefit the public, rather than for personal gain.
As the full title implies, enterprises that are set up as a CIC are formed to relieve or resolve a problem experienced by a group or community by providing a product or service. CICs could work to support everyone in a local area, or a specific group of people, with common examples including women’s groups, LGBT+ societies, support groups for people of colour, or people living with illnesses, health conditions, or disabilities, to name a few.
It is possible for a charity to convert into a CIC, and for the opposite as well, but a company cannot be both a charity AND a CIC at the same time.
What is a Charity?
To put it simply, a charity is an organisation working exclusively towards goals known as charitable purposes. These purposes benefit the public, and they are subject to the High Court’s charity law jurisdiction, which can limit what they can and cannot do. If an organisation does a mix of charitable and non-charitable work, they wouldn’t meet the definition of a charity, and would therefore need to register as a CIC or other form of enterprise.
There is a list of charitable purposes that the UK government has laid out, which includes the following:
- Preventing or relieving poverty,
- Contributing to or advancing the following:
- Equality & diversity
- Animal welfare
- Environmental protection or improvement
- Promoting the efficiency of police, fire & rescue or ambulance services,
The full list can be found on the government’s website here if you’re interested in learning what other charitable purposes are outlined.
What are the differences between charities and CICs?
As a company, CICs will register with the Companies House, whilst charities will instead be registered through The Charity Commission.
CICs have greater flexibility in terms of the work they can do, as they aren’t restricted by the charitable purposes definitions earlier mentioned, and in a CIC, there aren’t any trustees that can exert control over what is done with the companies assets, instead opting to have a board of directors to act as the decision-makers for the direction the company will take. Directors of a CIC can be paid, but to ensure transparency, this amount is regulated and included in the annual reporting of the company, which is publicly available.
A significant benefit when registering as a charity over a CIC is that they are eligible for tax exemptions, so they don’t need to pay tax on income from donations, which is what many charities rely on to fund their work. There are also more stringent reporting and administration requirements for a charity, as opposed to a CIC which are designed to be easier to set up and run.
So, whilst charities and CICs are in many respects similar and overlap in many places, we hope the above helps to clarify what each organisation is, as well as in highlighting the main differences between the two.
Neither organisation structure is explicitly better than the other, as each option comes with its own benefits and drawbacks which are worth considering when deciding the direction your enterprise will take, but at WDD, we operate as a Not-For-Profit CIC, with both Natalie and Kieran – from Naturally Social & Priority IT respectively – both being on the board of directors who decide our direction & focus, which has enabled us to achieve great things, from receiving over seven thousand devices from the public and local businesses at the time of writing, to being able to prevent tonnes of e-waste from entering landfill, contributing to the UK circular economy through our recycling pathway, or working with Wiltshire’s many schools, charities, other CICs, town councils and other organisations to bridge the digital divide by matching refurbished devices with individuals in need.