Quick summary
Possibly, but three separate things have to line up. The company's articles must permit directors to be paid, the money has to come from somewhere the lease actually allows, and any payment is taxable, which usually means PAYE. Many residential management company articles expressly prohibit remuneration, so that is the first thing to check, not the last.
It comes up in every building eventually, usually about four years in, usually raised by someone other than the person doing all the work. One director has become the de facto managing agent, and the fair-minded response is that they should be getting something for it.
The instinct is sound. The execution is where it gets complicated.
First: what do the articles say?
This is not a formality. Model articles for private companies permit the directors to determine directors' remuneration for their services, but many residential management and share of freehold companies use bespoke articles that expressly say directors serve without remuneration, sometimes allowing only reimbursement of properly incurred expenses.
If your articles prohibit it, the board cannot vote itself around that. Changing the articles requires a special resolution of the members, which in a small building means a real conversation with everyone, not a decision at a board meeting.
There is also the obvious conflict of interest in a director voting on their own pay. Whatever the articles allow, the person being paid should not be part of the decision, and the minute should record how that was handled.
Second: where does the money come from?
This is the part that is usually missed. In a share of freehold building the obvious source is the service charge, and the service charge can only be spent on what the lease permits.
Management costs are often recoverable. But whether that extends to paying a director personally, as opposed to paying an external managing agent, depends on the wording. And any service charge cost has to be reasonably incurred, which means the amount needs to be defensible against what a third party would charge for the same work.
If the lease does not cover it, the alternative is a voluntary contribution agreed by the leaseholders outside the service charge, which is cleaner but requires everyone to actually agree. Our piece on what your lease says about service charges is the place to start.
Third: it is taxable
A payment to a director for their services is employment income. In practice that means the company needs a PAYE scheme, has to operate deductions, and may have National Insurance obligations. It also makes the company an employer, with the reporting that follows.
For a payment of a few hundred pounds a year, the administrative cost of doing this correctly can exceed the payment itself. That is a legitimate reason to choose a different route, but not a reason to make the payment and ignore the tax.
Genuine out-of-pocket expenses are a different matter and are generally reimbursable without any of this, provided they are properly evidenced.
The alternative most buildings land on
Not paying anyone, and removing the work instead.
The reason one person ends up doing everything is rarely that the job is enormous. It is that the job is undocumented, sits in one inbox, and has no obvious handover. Buildings that fix that find the pressure to pay someone falls away on its own. We wrote about the shape of this in when one director does everything, and about the risk it creates in running your company with just one or two of you.
Frequently asked questions
Do our articles have to allow director remuneration?
Yes. If the articles prohibit payment to directors for their services, the company cannot pay them without changing the articles by special resolution of the members. Check the actual articles filed at Companies House rather than assuming the model articles apply.
Can a director's payment come out of the service charge?
Only if the lease permits that cost to be recovered, and only to the extent it is reasonably incurred. Recovering a payment the lease does not authorise is not made lawful by the leaseholders having been told about it. If in doubt, take advice before the first payment rather than after.
Can we just reimburse expenses instead?
Usually yes, and it is far simpler. Genuine expenses properly incurred on the company's behalf, with receipts, are generally reimbursable and are not remuneration. The distinction matters, so keep the evidence and keep the two things separate in the accounts.