Jennifer Adams outlines some methods of remunerating directors in an owner-managed business.
HMRC defines remuneration as ‘the compensation an individual receives in exchange for the work or services they provide, sometimes called reward’.
By comparison, dividends are a return on capital employed. 'Remuneration' for a director is usually in the form of a salary or bonus, but there are other methods by which a director may receive their 'reward'.
Although directors are treated in the same way as employees for tax and National Insurance contributions (NICs) purposes, control over their company gives them additional powers to determine how and when they receive their remuneration. As such, there are special rules to ensure that they do not have a financial advantage just because they are a director.