Running a Community Interest Company often starts with a simple goal — to help a community, deliver a social project, or solve a local problem.
But once the organisation begins operating, most directors eventually face the same question:
“Can I actually pay myself from the CIC?”
It’s a completely reasonable question.
Running a CIC takes time, effort, and responsibility. Directors are often managing funding applications, organising projects, overseeing staff, and ensuring the organisation meets its legal obligations.
Yet many CIC directors worry that paying themselves could break the rules or cause problems with the CIC Regulator or Companies House.
Some directors avoid paying themselves entirely. Others take payments without being fully aware of the legal requirements.
Both situations can create difficulties.
The good news is that CIC directors can be paid, but there are important rules about how those payments must be structured and recorded.
Understanding these rules will help ensure your CIC remains compliant while allowing directors to be fairly compensated for the work they do.
Can Directors of a CIC Pay Themselves?
Yes, directors of a Community Interest Company can be paid.
A CIC is still a limited company, which means it can pay salaries to directors and employees in the same way as any other business.
However, unlike a typical private company, a CIC exists primarily to benefit the community. Because of this, there are safeguards in place to ensure that profits and resources are not diverted away from the organisation’s social purpose.
This is where the concept of the asset lock becomes important.
The asset lock ensures that the CIC’s assets and profits are used mainly for the benefit of the community rather than private individuals.
Paying directors is allowed, but the payments must be reasonable, transparent, and properly authorised.
The Rules Around Paying CIC Directors
Before a CIC director receives any payment, several key rules must be followed.
The Articles of Association Must Allow It
The first thing to check is the company’s Articles of Association.
Most CICs adopt standard articles which allow directors to be paid for their work. However, this permission must be clearly stated within the company’s governing documents.
If the articles do not allow director remuneration, the directors may need to amend them before payments can be made.
Payments Must Be Properly Approved
Payments to directors should always be formally approved.
This typically happens through a board decision, where the directors agree on the level of remuneration and record it in the meeting minutes.
If a director is being paid, they should normally declare their interest and avoid voting on their own remuneration to ensure transparency and good governance.
Proper approval helps demonstrate that payments are legitimate and reasonable.
Payments Must Be Reasonable
Director payments must also be reasonable and proportionate to the work being carried out.
Factors that may influence what is considered reasonable include:
- the time commitment involved
- the director’s responsibilities
- the organisation’s financial position
- typical pay levels for similar roles
Excessive or unjustified payments could raise concerns with regulators and may undermine the CIC’s community purpose.
How CIC Directors Usually Pay Themselves
There are several ways directors may receive payments from a Community Interest Company.
Understanding these options can help directors structure payments correctly.
Director Salary Through PAYE
The most common way for CIC directors to pay themselves is through PAYE payroll.
This means the director receives a salary like any other employee, with income tax and National Insurance contributions deducted through the payroll system.
Operating payroll ensures that payments are reported correctly to HMRC and helps maintain proper financial records.
For many CICs, this is the simplest and most compliant way for directors to receive compensation.
Reimbursement of Legitimate Expenses
Directors are also allowed to claim back reasonable business expenses incurred while carrying out their duties.
Examples might include:
- travel costs
- equipment purchased for the organisation
- accommodation for project work
- small operational expenses
These expenses must be genuine, properly recorded, and supported by receipts.
Payment for Additional Services
In some cases, a director may provide services to the CIC beyond their normal responsibilities as a director.
For example, a director might:
- deliver training programmes
- provide specialist consultancy
- manage a funded project
Payments for these services may be allowed, but they must be handled carefully to avoid conflicts of interest. Transparency and proper approval are essential.
Can CIC Directors Take Dividends?
Some Community Interest Companies are limited by shares, which means dividends may be possible.
However, dividends in CICs are strictly restricted.
The CIC regulations impose a dividend cap to ensure that the majority of profits are used for the organisation’s community purpose rather than being distributed to shareholders.
Because of these limits, many CIC directors choose to receive compensation through salary rather than dividends.
This approach is usually simpler and easier to manage from a compliance and tax perspective.
Common Mistakes CIC Directors Make
Many compliance problems arise simply because directors are not fully aware of the rules around remuneration.
Some of the most common mistakes include:
Paying themselves without proper approval
Director remuneration should always be documented and approved by the board.
Not operating PAYE payroll
If a director receives a regular salary, payroll obligations with HMRC must usually be met.
Taking payments that appear excessive
Payments that seem disproportionate to the organisation’s size or activities may raise concerns.
Poor record keeping
Lack of documentation can make it difficult to demonstrate that payments were legitimate and properly authorised.
Avoiding these mistakes helps protect the organisation and ensures the CIC continues to operate in the community interest.
How We Can Help
Running payroll correctly is essential for Community Interest Companies.
If your CIC is paying directors or staff, it’s important to ensure that payroll is set up correctly, compliant with HMRC rules, and reported properly each month.
Our team has worked with Community Interest Companies across the UK for more than 10 years, supporting directors with the practical challenges of payroll, compliance and financial reporting.
Need Help with CIC Payroll?
Our specialist payroll team understands the unique requirements of CICs, including director payments, PAYE obligations and reporting requirements.
We can help ensure your payroll runs smoothly while you focus on running your organisation and delivering impact in the community.
Call us today on Tel: 0207 078 7477
or complete our enquiry form to book a FREE initial consultation.
Require More Information About Our CIC Payroll Service?
If you’re looking for payroll services for your CIC, our payroll team are here to support you.
More than just payroll, we’ve worked with Community Interest Companies for over 15 years, and understand the nuances and issues that can impact you and your staff.
If you would like more information or would like to ask us a question about payroll then call us on 0207 078 7477.
To ask us a question online CLICK HERE.
Categories: CIC Directors, Director, Director Pay, Director Wage, Employment and related matters, Payroll
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