CIC vs Charity,
What's the Difference?
We get a lot of questions on what the difference is between a CIC and a charity, so we wanted to take a moment and explain the difference, broadly speaking, and how that relates to Sunflowers CIC
An Overview
A CIC will typically not be dependent on donations and fundraising as it will have a mix of income including contracts, trading income and grants. Whereas a charity is more likely to be dependent on grants, donations and fundraising for a larger proportion of its income. This means charities tend to deliver time limited projects that are funded by trusts and foundations, whereas CICs will have products and services they trade continuously regardless of the funding or grants they receive.
The excerpt above, from makeanimpact.co.uk starts to draw a comparison between a charity and a CIC. While the difference seems perhaps a little confusing, it means that a CIC can and does operate as a standalone business in its own right. It supports the community through projects but can also trade projects and services too, generating a source of income.
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Salaries
CICs are able to pay Directors and employees where a Charity has strict rules that say that a Director cannot be an employee and they are expected to fulfil their roles in an entirely voluntary capacity.
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The rules on Directors being employees comes into play quite strongly when you consider that in a Charity, the founder will step-down from the board in order to be paid for their work in the charity, thus losing any control and involvement in decision making.
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However, a CIC must define the community it will benefit. This can be a group of people/things, a geographical area etc.. Depending on the community benefit, a CIC may also be charitable, but this is not always the case.
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Minimum trustees/Directors
A Charity must have a minimum of three trustees, often five and if you wish to apply for funding, there are usually specifications that a minimum of three unrelated directors or trustees are nominated. However, a CIC can have just a single Director.
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Taxation
CICs are not exempt from corporation tax, as charities are. Charities are eligible for a rate relief of up to 100%, whereas CICs are not automatically entitled to this and it is up to the discretion of the local authority whether they should get any rate relief or not.
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Donations
Charities can claim 25% Gift Aid on donations they receive, increasing the value of the donation. CICs don't receive this, but there are some exceptions where crowdfunding and donation sites allow CICs to receive Gift Aid. CICs also must declare any donations as Income and are subject to Income Tax (corporation tax).
What this means for us
What all this brief comparison means is that we:
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Can generate an income beyond donations/trusts/foundations and grants. This means that our services, like the information hub, well-being calls etc. could all be charged for to businesses or cross-charged to another entity (the council for example), for providing that service, generating income and revenue for the business, while we choose to offer similar services to the community for free. We can also bring out product lines or sell products the funds from which can all be fed back into the community projects and business.
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Our founder, Charlotte, can also be in the thick of it with the volunteers, getting stuck in at every opportunity and leading from the healm, while also making business decisions, such as expansion, offices etc.
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Donations are subject to corporation tax (essentially, taxing a companies profit/loss). We appreciate every donation given to Sunflowers Mental Health & Well-being CIC, but we want you to know that we wont see every penny you donate unlike a Charity.
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We will, one day... be able to pay a salary/wage. This is quite some way away though and all funds that are being raised are going straight back into the community projects and more recently, sorting out the new office!