Community Interest Companies

I want to start a new business which benefits the schools in my local community, and recently read an article regarding Community Interest Companies. Can you provide further information?

1st July 2010

Community Interest Companies (CIC’s) are a new type of company set up for the benefit of the community, not to make profit and therefore recognised as Social Enterprises. They’re regulated by the Community Interest Company Regulations 2005 and are different to most limited companies which are set up to make a profit for the shareholders.

Despite being particularly attractive to those who wish to establish their business as a benefit to the community there may be a significant tax disadvantage in operating a CIC. CIC’s cannot pay dividends in the same way as a normal limited company because the director’s salary and shareholder dividends are restricted by legislation thus ensuring the assets and profits are retained for community purposes.

Also, CICs do not have any special tax status, and are generally in the same position as any other organisation in obtaining any tax concessions and are required to submit tax returns and make accounts available for public record.

In summary Community Interest Companies are a good concept but those setting them up should be aware of the tax consequences and ensure seek advice from a local TaxAssist Accountant before proceeding.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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