Company Director and Tax Credits

Company Director and Tax Credits

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Is it the case that a director of a limited company may be eligible for tax credits based on the salary that they take and then as long as they inform the TCO immediately when they take dividends they are covered, I have read conflicting things and want to double check.

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By Novakova
11th Aug 2013 21:26

tax credits
To start with, the director should telephone TCO for an application form. In the current difficult economic environment, best to lodge a 'protective' claim even if income for 2012/13 is over the limit for his particular circumstances.

Directors are treated like everybody else; to avoid running up an overpayment best to report income increases to the TCO immediately, rather than wait until their Annual Review income declaration arrives.

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By Minnie136
11th Aug 2013 22:44

Minimum wage

If they are also claiming working tax credits then they need to have an employment contract and be paid at least the minimum wage so watch out for this (as generally Directors are paid a salary lower than this and do not normally have a contract).  There is also anti-avoidance to prevent the Director manipulating the salary/dividends to reduce their income - see the section on Notional Income in the Tax Credits manual.

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Replying to iosman:
By Novakova
14th Aug 2013 08:26

Working tax credit and directors

Minnie136 wrote:

If they are also claiming working tax credits then they need to have an employment contract and be paid at least the minimum wage so watch out for this (as generally Directors are paid a salary lower than this and do not normally have a contract).  There is also anti-avoidance to prevent the Director manipulating the salary/dividends to reduce their income - see the section on Notional Income in the Tax Credits manual.

Not 100% correct, see previous coverage on this site, eg: https://www.accountingweb.co.uk/anyanswers/question/working-tax-credit-a... Presumably when faced with Tax Credits application for a family of a director paid under NMW, Minnie would leave his wages out??

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