Do CICs Pay Tax? CIC Tax Explained in the UK

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

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 normal Corporation Tax rates apply. Since 1 April 2023, taxable profits up to £50,000 are taxed at the small profits rate of 19%. Profits above £250,000 are taxed at the main rate of 25%. Between those figures, marginal relief tapers the rate.

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. On business rates, a CIC can only ask its council for discretionary relief, which some councils give to not-for-profit organisations and some do not.

Normally no. Gift Aid lets charities and Community Amateur Sports Clubs (CASCs) recognised by HMRC 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, they are still welcome and still count as income, but you cannot add 25p in the pound from HMRC. Organisations that want Gift Aid on donations usually set up a separate registered charity alongside the CIC.

Sometimes. A CIC must register for VAT if its taxable turnover exceeds £90,000 in the last 12 months, or if it expects to go over that figure in the next 30 days. Below the threshold, registration is voluntary.

Some services a CIC provides may be VAT-exempt (for example certain education, health or welfare services), but that depends on the nature of the supply, not on the CIC structure itself. If you are near the threshold, get advice.

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 each time you pay staff.

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

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

You register through your HMRC business tax account online. Once registered, your CIC must file a Company Tax Return (CT600) every year HMRC asks for one, even if it made no profit. The return is due 12 months after the end of the accounting period, and any tax is due 9 months and 1 day after the period ends. This is separate from the annual accounts and CIC34 report filed at Companies House.

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

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, read our CIC vs charity comparison, and see how a CIC makes and uses profit.

• "A CIC is basically tax-free." Wrong. A CIC pays Corporation Tax like any other limited company. There are no CIC-specific tax exemptions.
• "A CIC gets the same tax reliefs as a charity." Wrong. Charity tax reliefs are for organisations HMRC recognises as charitable. A CIC is not a charity.
• "A CIC can claim Gift Aid on donations." Wrong. Gift Aid is for charities and CASCs. A standard CIC cannot claim Gift Aid on donations it receives.
• "A CIC never has to worry about VAT." Wrong if taxable turnover exceeds £90,000. VAT registration is mandatory above the threshold regardless of legal structure.
• "We made no profit so we don't need to file." Wrong. Once HMRC has issued a notice to deliver a return, you file it even if the answer is nil.