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Can a shareholder or director get commission

If a shareholder is a director and majority shareholder of a company's holding company can they be paid a commission by the subsidiary company for introducing new business? They are not a salaried employee of either company and live overseas. If they can receive commission payments, would the payments be a tax allowable expense for Corporation Tax and what personal tax if any would the shareholder pay in the UK on the commission payments?  


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06th Jan 2013 09:33

In essence, yes they can.

The amounts paid would be claimable against the profits of the company trade.

In terms of UK taxation, where is the work being carried out? If it is the UK then it may well be subject to PAYE and NI in this country,if deemed to arise from the employment or office as director and no doubt some double tax treaty would enable him to reclaim any tax in his home country.


If he is doing this on an self employed basis, then note that he may have to declare his UK self employed income in the UK, again, with the double tax treaty giving relief in his home country.

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By parlow
07th Jan 2013 13:48

Not in the UK

They are not living in the UK and not carrying out the work in the UK. From the UK company they receive dividends from the UK holding company (of which they are sole shareholder) and pay additional tax due on this in their country of residence according to the Double Taxation Treaty. 

They live and work in the EU on a self employed basis, trading and paying tax on a self-employed basis in their country of residence. In their self-employed capacity they get paid commission from other (unrelated) UK companies in the UK for referring new business. Essentially they wish to do the same for the UK company of which they are the ultimate controlling party. 


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By parlow
08th Jan 2013 18:07

Does this change anything

Does the information in my reply change anything from the original answer?

Also can the shareholder (or indeed technically, should they) charge on the same terms that they charge other companies, which is broadly a 50/50 revenue share for all sales including repeat orders?

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08th Jan 2013 19:04

In answer to your question, is the referals are not from the ?UK, but abroad, and your clinet does not come to UK, then I would say the income is not taxable in the UK!

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By parlow
08th Jan 2013 21:52

Thank you for confirming this.

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