Do you manage a Community Interest Company (CIC) and wonder how to pay yourself while making a positive impact on society? As a CIC director, you play a crucial role in driving social change, and it’s only fair that you receive reasonable compensation for your hard work. In this guide, we’ll explore the ins and outs of paying yourself as a CIC director, along with the tax implications to keep in mind.
Understanding Your Role as CIC director.
First things first, let’s clarify your role as a CIC director. Whether you’re a founder or a hired manager, your primary focus is to advance the social objectives of your CIC. This entails making decisions that benefit your community or a specific group of people, rather than solely aiming for financial profit. Your dedication to social impact is what sets CICs apart from traditional companies.
Can CIC directors be paid? .
Paying Yourself as a CIC director.
While the primary goal of a CIC is not to generate profits for shareholders, it’s important to ensure that you, as a director, are fairly compensated for your efforts. When determining your pay, it’s essential to consider the following factors:
1. Market Rates: Research the typical salaries for similar roles in your industry and region. This will provide a benchmark for what constitutes fair compensation.
2. Financial Sustainability: Assess your CIC’s financial health to ensure that paying yourself is viable without jeopardizing the company’s ability to fulfill its social mission.
3. Transparency: Be open and transparent about your compensation with your CIC’s stakeholders, including members, employees, and the public. Clear communication helps build trust and confidence in your organization.
Tax Implications
Now, let’s delve into the tax implications of paying yourself as a CIC director. Since CICs are a unique type of company, it’s important to understand how your remuneration may be taxed:
1. Income Tax: Any salary you receive as a CIC director is subject to income tax. Ensure that you comply with HM Revenue & Customs (HMRC) regulations and report your income accurately.
2. National Insurance Contributions (NICs): As a director, you may need to pay Class 1 NICs on your earnings. Make sure you understand your NICs obligations to avoid any surprises come tax time.
2. **Dividends**: CICs can issue shares and pay dividends, but there are restrictions. The maximum dividend per share is currently capped at 20% of the paid-up value of a share, and the total dividend amount is capped at 35% of distributable profits. The exact limits can vary, so check with the CIC Regulator for current figures.
3. **Performance-related Pay**: Any performance-related pay should be set at a reasonable level and in line with the CIC’s objects and the interests of the community.
Seek Professional Advice
Navigating the intricacies of paying yourself as a CIC director, along with the associated tax implications, can be complex.
It’s highly advisable to seek the guidance of a qualified accountant or tax advisor with experience in working with social enterprises and CICs.
They can help you structure your remuneration in a tax-efficient manner while ensuring compliance with relevant laws and regulations.
Conclusion
In conclusion, paying yourself as a CIC director requires a careful balance between fair compensation and the overarching social mission of your organization. By understanding the market rates, maintaining financial sustainability, and staying transparent with stakeholders, you can effectively compensate yourself for your valuable contributions.
Moreover, staying ahead of the tax implications and seeking professional advice will help you navigate this process with confidence.
Contact us
Remember, as a CIC director, you’re driving positive change, and it’s only fitting that you receive fair compensation for your dedication to making the world a better place.
KG Accountants offers a variety of payroll services to our clients, Including Weekly, Monthly and Annual payrolls, setting up and managing staff pensions.
Hiring payroll providers can not only save big money but optimize your operations as well. Spend less time bean counting and more time focusing on growing your business!
Call us today on 0207 953 8913 or complete our enquiry form in order to book a FREE initial consultation.
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Categories: CIC Directors, Community Interest Companies, Director, Director Pay, Director Wage, Employment and related matters, Payroll
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