I am the director and sole shareholder of a limited company. I operate this way because of the idiosyncrasy of my clients. I design software. At the moment, my only income are dividends from the company and, possibly, for this year I will commence as an employee with a very low salary and the rest of my income will be dividend.
I am reading for a PhD in Mathematics which is directly related to the activity of my company. I am enrolled as a part time student. The algorithms and knowledge developed are directly used by the company.
I am trying to find the best way to reflect the connection between company/studies/director and my doubts are:
If the company pays for the fees:
- For the company would be an expense and not taxable in corporate taxes but;
- Is it considered training and development of the director on the benefit of the company? As per http://www.legislation.gov.uk/ukpga/1988/1/section/588/enacted. and not be considered benefit in kind...
- could it be considered a benefit in kind for me as director? Although the research directly improves the position of the company in the market and makes it more competitive with better technology and offer.
- If so; would I have to pay tax and NIC over the amount of the fees? and, I understand this tax would be differently treated from the dividends obtained.
- If I pay the fees.
- The fees will not deducted the taxable amount for the company
- I, as director and getting the fees as dividend, pay the corresponding taxes on the fees but no NIC
I believe the best way is the company to pay the fees and that there is reasonable doubt as per transferring the taxation into the director in the founds of benefit in kind, being finally a company expense and not flowing any further but I am not expert.
I have been trying to find information regarding this but not very successfully. I don't think is a scholarship case and the information at http://www.hmrc.gov.uk/manuals/eimanual/eim30001.htm does not apply. (I cannot find the EIM06203 anywhere anyway)
Please, could someone advise?
Many thanks in advance.