Director of a small limited company has been sent to prison, leaving his soon to be wife in charge. Can he still remain a director when in prison? Is there any legislation that states you can't be a director when in jail? How does this effect his salary he is given every month? Can this still be claimed as a deductible expense for corporation tax?
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How do you propose to justify the salary? What work is he doing for the company whilst being in prison?
Presumably he is entitled to be paid...
How do you propose to justify the salary? What work is he doing for the company whilst being in prison?
Presumably he is entitled to be paid for shouldering the responsibility of being a company director, even if he is behind bars.
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How do you propose to justify the salary? What work is he doing for the company whilst being in prison?
Presumably he is entitled to be paid for shouldering the responsibility of being a company director, even if he is behind bars.
If dividends are declared, he benefits from being a director/shareholder.
I can't see how you can justify a salary whilst the director is getting cosy with big Dave in HMP showers.
Salary
Perhaps he's working remotely and giving direction during his evening phone calls?
A word of caution
He is entitled to remain a director whilst in prison (unless the court has made a director's disqualification order or he has gone bankrupt).
But of course he cannot be sent any (non-trivial) amounts of cash in prison.
Do check what he is in prison for and whether it impacts on the company or on his tax affairs. Also check whether further court proceedings are in train following his committal to prison. For example he could be subject to confiscation proceedings if his conviction relates to a crime from which he obtained (or is deemed to have obtained) a benefit (i.e. obtained money or assets or evaded a liability).
If he is subject to confiscation then paying money to him (e.g. as dividend) might be throwing money away.
If the sentence was 18 months then he will probably be allowed home before too long (initially on short visits). The soon to be wife should know the likely timetable.
David
I've got a feeling (from the depths of my research somewhere!) that you can pay a director while in prison but it is not tax deductible for CT because it is not paid out for business purposes.
I would imagine then it would be beneficial to pay a salary that just maintains his NIC record for state pension.
Not 100% but there's my two pence worth.
Full tax year?
If he was sentenced to 18 months he will probably spend no more than 9 months actually inside - so not a full tax year.
David
Tag
If he was sentenced to 18 months he will probably spend no more than 9 months actually inside - so not a full tax year.
David
4.5 more likely with the other 4.5 on electronic tag.
Release on a tag (home detention curfew)
If he was sentenced to 18 months he will probably spend no more than 9 months actually inside - so not a full tax year.
David
4.5 more likely with the other 4.5 on electronic tag.
In most cases, yes.
David
Free
In most cases, yes. DavidIf he was sentenced to 18 months he will probably spend no more than 9 months actually inside - so not a full tax year.
David
4.5 more likely with the other 4.5 on electronic tag.
Come to think of it, there's a good chance he'll be out before this thread even helps the OP reach a decision!
Is he a major shareholder as well? If not, the company may want to remove him as a director given the prison sentence.
Prison regulations & company Directors
I believe that prison regulations do not allow any prisoner to run a business whilst he is detained at Her Majesty's Pleasure.
Giving instructions over the telephone or in letters sent out could cause him to be subject to disciplinary procedures that is why a Power Of Attorney should be signed. A client of mine had this exact issue with his prison governor.
Of course certain prisoners do run business empires from behind bars but they may be the kind of business that readers of this site should not be advising!
Found it
Yep, it is in para 2.25 of PSI 01/2012
Convicted prisoners are not permitted to carry out transaction listed below; however the list is not exhaustive:
any transaction to run a business
any stock or share purchase or unauthorised sale
entering into any loan or credit agreements
gambling or the making of payments for other games of chance
Prisoners must not enter competitions which will enable them to profit either monetarily or by any other significant inappropriate prize unless the competition is run by the Prison Service or by a body or organisation sanctioned by the Prison Service
So this applies to all convicted prisoners in England & Wales.
David
@ David
How does that link actually stand up though?
It's been know for prisoners to win the lottery, which is prohibited according to the above.
OMG
Not allowed to run a business - sounds like a case for the Human Rights brigade and the EU - they'll soon have it sorted and we can all sleep safe at night knowing that the incarcerated can carry on living a normal life albeit from hotel 'prison'.
When in prison . . .
A prisoner is subject to prison rules - and prison discipline if he breaks the rules. When in prison one is (quite literally) not free to do as one would like!
There is a whole branch of law known as prison law - but for me that document means that a convicted prisoner is not allowed to run a (legitimate) business from prison.
David