Setting Up a Director

Directors

APPOINTING NEW DIRECTORS

Every limited company must have at least one director. If a limited company has only one director, that director must be an actual person - as opposed to another company. A public limited company (or plc) must have at least two directors.

In general, it's up to shareholders to appoint whom they want as director. But there are restrictions on candidates, namely:

• they must not have been disqualified by a court from being a director - if they have, court permission is needed
• they must not be an undischarged bankrupt - if they are, court permission is needed
• they must not be under the age of 16

The appointment of directors must also comply with the company's Articles of Association. These set out rules for how the company is to be run. They may include:

• how many directors there should be
• how long they can serve
• what happens at the end of their term

For example, in many companies directors are required to retire after a set term - eg three years. They can offer themselves for re-election at the shareholders' annual general meeting.

A director may be involved in day-to-day management, but doesn't have to be. These non-executive directors still have the same legal responsibilities as other directors.

You must tell Companies House within 14 days when:

• you appoint a new director - using either form AP01 or AP02
• someone stops being a director - using form TM01
• there's a change in a director's details - name or address, for instance - using form CH01 or CH02

Director's NIC

By default, the payroll system will automatically apply the Annual Basis for NIC calculation for Directors, as this is the preferred method of collection by HMRC. The pro-rata version is only recommended when a Director's periodic salary will consistently exceed the equivalent periodic UEL in each pay period AND ONLY where the Director will be paid for the entire tax year as a Director.

This means the Director will not start to pay NIC until they reach the PT (primary threshold) of £7,755. For more information on Directors' NICs and the alternate way to calculate NICs for directors, please see the help section on Directors' NIC.

Setting Up A Director in BrightPay

To set up an employee as a director, click Employee:

1) Select the Employee from the employee listing

2) Within the employee record, Select the Tax/ NICs heading

3) Tick to indicate that the employee is a director

4) Start / End of Directorship - If the director starts/ ends their directorship during the tax year, click the Choose button to select the start / end date of the directorship.

5) Should you wish to apply the Pro-Rata basis for calculation of the Director's NIC as opposed to Annual Basis, tick 'Use alternate method for calculating director's NICs'

6) Click Save Changes