A non-executive director directive sets out how a non-executive director's fees are taxed. A non-executive director (NED) sits on a board without being employed in the running of the company, and that distinction changes the payroll treatment.
What it means
Because a NED is not an employee in the ordinary sense, their fees can fall outside standard employee treatment - historically treated differently for PAYE and not subject to the employee UIF and SDL in the same way. A directive can fix the percentage or basis of any PAYE that does apply, giving certainty on fees that are often paid in irregular amounts.
Where it fits in
This treatment ties to the non-executive director classification and stands apart from the executive director directive. Getting the classification right matters, because it determines whether PAYE, UIF and SDL apply at all to the fees.
Key rules
- Governs the tax on a non-executive director's fees.
- A NED is a board member, not an employee in the management sense.
- PAYE, UIF and SDL treatment differs from an executive director's.
- A directive can fix the percentage or basis of the PAYE that applies.
