Registering a Community Interest Company (CIC) in Scotland

Setting up a Community Interest Company (CIC) in Scotland involves registering with Companies House and obtaining approval from the Office of the regulator of community interest companies. Here’s a step-by-step outline of the application process:

Choose the Right CIC Structure

• Company Limited by Guarantee (CLG)] – Best for social enterprises that do not need shareholders and want profits fully reinvested. Can be single tier (small schedule) or two tier (large schedule)

• Company Limited by Shares (CLS) – Best for CICs that need investment, with shareholders receiving capped dividends.

• Public Limited Company (PLC) CIC – Suitable for large-scale social enterprises looking to raise capital through public shares.

Note: In Scotland a CIC (CLS) that provides dividends to Directors would not be considered a social enterprise as it won’t meet the criteria set out in The Voluntary Code of Practice for Social Enterprise in Scotland. CICs (CLS) are more likely to be described as ‘mission led’ businesses.

Prepare Your CIC Documents

In order to register your chosen form of CIC, you’ll need to submit the following:

Form IN01 – Standard company incorporation form for Companies House

You will be asked to provide the following details:

• Company name (must include "CIC" or "Community Interest Company")

• Registered office address (must be in Scotland)

• Director(s) and, if applicable, shareholder details

• Statement of compliance

Articles of Association

These must:

• Include an asset lock ensuring profits are reinvested in the community.
• Define how directors are appointed and decisions are made.
• Outline directors' remuneration or dividend prohibition (if applicable).

CIC’s Community Interest Test – CIC36

To be eligible to be a CIC, an enterprise or business must pass the Community Interest Test, make a Community Interest Statement and comply with the relevant legislation.

Proving Community Interest

As part of the application process to become a CIC, your group will need to pass the Community Interest Test. The definition of community interest (benefit) that applies to CICs is fairly wide (and certainly much broader than the definition of community benefit for charities) but it does exclude some groups (such as those with political aims or whose activities involve political campaigning).

A CIC offers the flexibility of a wide range of activities such as:-

• running trading activities to support deprived communities here and abroad

• running a business (for example, a retail or manufacturing operation) as a trading arm to generate profits to support activities which directly benefit the community

• running community services more directly, for example by running day centres, or providing transport or other services in the community

The assets and profits (surplus income) of a CIC must remain with the community specified. This prevents disposal of assets to anyone other than the community and is referred to as the Asset Lock.

The Community Interest Test paperwork is in the format of a what’s called a CIC 36. Form CIC36 – Community Interest Statement.

This form is used to explain the following elements:

• What your company will do.
• How it will benefit the community.
• Why a CIC is the right structure.

The CIC 36 form also asks you to outline:

• Declaration that the company will on carry on it’s activities for community benefit.
• Who the intended beneficiaries are?
• What the community benefit activities will be and how they will benefit beneficiaries.
• How you intend to spend any profit/surplus
• Who will be Directors’?

The CIC 36 is assessed by the CIC Regulator based within Companies House

Submit the Application

• File the documents online via Companies House or by post.

• Fee: £65 (online) or £86 (paper form).

• The CIC Regulator reviews the application alongside Companies House.

Receive Approval & Certificate of Incorporation

If approved, you will receive:

• A Certificate of Incorporation confirming the company is legally registered.

• A CIC registration number from Companies House.

Register for Corporation Tax & VAT with HMRC

Consideration should be given to the tax status of your CIC including thinking about how much VATable income you will receive.

• Within 3 months of trading, you must register with HMRC for corporation tax.

• If expecting revenue over £90,000, you must register for VAT.

Key Considerations for Scottish CICs

• CICs in Scotland cannot achieve charitable status, so they won’t receive tax exemptions like charities.

• You cannot simply convert a CIC into a legal form that can be a charity - company re-application is necessary or a new non-company structure is chosen (e.g. a SCIO)

• Annual reporting is required, including a CIC34 form to confirm ongoing community benefit.

• Governance must align with the CIC Regulator’s rules, ensuring profits are used for social good.

Further resources and links

Comprehensive guidance is available here.

Office of the Regulator of Community Interest Companies - FAQ Leaflet