Do CICs Pay Tax? CIC Tax Explained in the UK

The Simple Answer

A CIC is not a charity for tax purposes just because it has a social purpose. Having a community interest statement or an asset lock does not give your CIC any special tax treatment from HMRC.

The core taxes a CIC may need to deal with are:

• Corporation Tax — on trading profits, investment income, and chargeable gains
• VAT — if taxable turnover exceeds the registration threshold
• PAYE and National Insurance — if the CIC employs people or pays directors a salary

Do CICs Pay Corporation Tax?

Yes. A CIC is taxed on its trading profits, investment income, and chargeable gains in the same way as any other limited company. There are no special exemptions for CICs.

The current Corporation Tax rates apply. If your CIC's taxable profits are below £50,000, the small profits rate of 19% applies. Above £250,000, the main rate of 25% applies. Between those figures, marginal relief tapers the rate.

Do CICs Get Charity Tax Relief?

Usually no. This is the single biggest point of confusion for new CIC founders. People assume that because a CIC exists for the community, it must get the same tax treatment as a charity. It does not.

Charities recognised by HMRC can claim reliefs including exemption from Corporation Tax on most income, 80% mandatory business rates relief, and Gift Aid on donations. A CIC does not automatically qualify for any of these.

Can a CIC Claim Gift Aid?

Normally no. Gift Aid is a scheme that allows charities and Community Amateur Sports Clubs (CASCs) recognised by HMRC to reclaim basic rate tax on donations. A standard CIC is neither a charity nor a CASC, so it cannot claim Gift Aid.

If your CIC receives donations, those donations are not eligible for Gift Aid unless the CIC also holds charitable status — which is uncommon. Most CICs that want to accept Gift Aid donations set up a linked charity or charitable trust instead.

Do CICs Pay VAT?

Sometimes. A CIC must register for VAT if its taxable turnover exceeds £90,000 in the last 12 months. Below that threshold, registration is voluntary.

Some CIC services may be VAT-exempt (for example, certain education or health services), but this depends on the nature of the supply, not on the CIC structure itself.

Do CICs Need PAYE?

Yes, if they employ people or pay directors through payroll. HMRC requires employer registration even if the only employee is a director taking a salary.

If your CIC pays anyone a salary — including directors — you must register as an employer with HMRC, operate PAYE, deduct income tax and National Insurance, and submit Real Time Information (RTI) reports.

For a detailed breakdown of how CIC directors can be paid, see our guide to CIC director pay.

Does a CIC Need to Register for Corporation Tax?

Yes, once it becomes active. Your CIC must tell HMRC within 3 months of starting its first tax accounting period. "Active" includes trading, providing services, employing people, receiving income, or earning interest on a bank account.

You register by completing the HMRC CT41G form online. Once registered, your CIC must file a Company Tax Return (CT600) every year, even if it made no profit. This is separate from the annual accounts and CIC34 report filed at Companies House.

Why People Get Confused

The confusion is understandable. People assume a CIC must be tax-free because:

• It exists for community benefit
• It has an asset lock that prevents private enrichment
• It is "not for private profit"
• It sounds like a charity

But none of those things give a CIC charity tax treatment. A CIC is still a company — regulated by the CIC Regulator and Companies House, not the Charity Commission. Tax status follows legal structure, not social purpose. If you need charity tax reliefs, you may want to consider a CIC vs charity comparison or look at whether a CIC can make a profit and how that is treated.

Example

Common Mistakes