How do directors get paid (UK)?
Being a director of a Community Interest Company (CIC) in the UK can be an incredibly rewarding experience. But if you’re going to be paid for your services, it’s important to know how the payment process works.
Here are the key steps that explain how do directors get paid in the UK.
First, you will need to decide what type of remuneration package you would like and if that includes salary and/or dividends. There are also possible options for bonuses and expenses when running a CIC. See the second section below for more information on the different types of remuneration.
Second, with your board’s approval, you must make a formal resolution to add yourself into the employment roll of your company as either an employee or an office holder. This is important because it helps define your relationship with the CIC and ensures that all payments are recorded properly.
Third, ensure that all costs associated with paying yourself are included in your budget plan; this covers things such as employer’s national insurance contributions and tax deductions which may need to be taken into account when settling on a remuneration rate. You will also want to make sure you have appropriate directors & officers’ insurance coverage in place before taking any payments from the company.
Fourth, ensure appropriate accounting records are kept for any money paid out – these should include details of date and value of payment plus national insurance contributions made, if relevant, along with any taxes deducted where applicable. If there is more than one director, clear instructions should be given as to who is responsible for signing off payments each month and keeping accurate records up-to-date at all times.
Finally, remind yourselves regularly about permissible payments from profits; these include amounts due under directors’ services agreements or other contractual obligations, but cannot include distributions made purely out of profits without prior arrangement or agreement by shareholders.
As a director of a Community Interest Company (CIC) in the UK, there are four ways in which you can withdraw money from your company’s account into your own. So, how do directors pay themselves?
Firstly, taking a salary is the most typical way to receive remuneration for services provided. It is important to note that all costs associated with taking a salary, including taxes and national insurance contributions must be taken into account when settling on an appropriate amount.
Secondly, dividend payments are typically made after profits have been generated and declared during meetings with shareholders. These payments are often decided on a case-by-case basis based on individual performance.
Thirdly, directors can also draw out loans from their CICs, if permission is granted by shareholders. This type of payment should always be documented in writing and made subject to the repayment of interest and/or capital at an agreed rate over an agreed timeline.
Finally, expenses can be reimbursed provided they were incurred by the director carrying out duties related to their role within the organisation. The directors should ensure that proof of these expenses is kept and a paper trail is created whenever any reimbursements are made.
So that’s our quick guide on how to pay yourself as the director of a Community Interest Company in the UK – just remember that whatever decisions you make must always be in accordance with best practice governance guidelines and good corporate conduct policies.
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