If you run a Community Interest Company, you may be wondering how to pay yourself properly.
Let’s clear up one common misunderstanding: being a CIC director does not automatically mean you can treat yourself as self-employed and simply invoice your own company.
A director is an office holder for tax and National Insurance purposes. Pay for director duties is treated as employment income for tax purposes, with PAYE applied as required. Genuinely separate services need their own employment-status assessment.
Getting this wrong can leave the CIC responsible for unpaid tax, National Insurance, interest and possible penalties.
The good news is that CIC directors do not have to work for free.
CIC directors can generally receive reasonable payment for the work they perform—provided it is properly authorised, transparent and consistent with the CIC’s community purpose.
For many CICs, the clearest route is a salary through PAYE.
Before paying a director, check these three areas
1. Proper approval
A director should not set their own pay without appropriate authority. The arrangement should comply with the company’s articles, be approved correctly and be recorded in the board minutes. Any conflicts of interest must also be managed.
2. Reasonable remuneration
There is no universal salary cap, but the amount should be reasonable and proportionate to the director’s role, the CIC’s finances and its community activities. Check any funding restrictions and the relevant accounts and CIC34 disclosure requirements too.
3. Payroll compliance
Once the CIC operates PAYE, it must calculate deductions correctly, submit Real Time Information to HMRC on time and meet its payment and workplace pension responsibilities where applicable.
Payroll should support your mission—not distract from it
Running payroll involves more than producing a payslip.
At KG Accountants, we understand the particular responsibilities CICs face. Our specialist payroll service can support you with:
PAYE registration and payroll setup
Weekly, monthly or annual payroll
Director and employee payslips
RTI submissions to HMRC
PAYE and National Insurance calculations
Workplace pension administration
Clear payroll records for your accounts and CIC reporting
You receive a fixed fee agreed in advance and support from a team experienced in Community Interest Companies.
Ready to pay yourself or your team properly?
You can also call us on 020 7078 7477 or send us an enquiry.
Warm regards,
KG Accountants
CIC & Charity Accountants