Director taking salary, dividends and consultancy fees?

Director taking salary, dividends and...

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The senior director / sole shareholder in our company has more or less retired in practical terms, but continues to draw a salary (sub- NIC thresholds) plus dividends which is fine and his prerogative. However, he also invoices the company from his "personal" company and "personal" sole-tradership for various costs: notionally for consulting (no actual work is ever done) and travel costs (his once-a-week commute, surely disallowable in the first instance but downright cheeky once scaled up massively).

Given that those personal entities receive no other income other than from the main company, surely they cannot be allowable against CT? My understanding is that this is remuneration which should go through the payroll. The personal entities just scrub a bunch of personal costs to declare a minimal profit.

I don't hugely care about his personal declarations to the Revenue, but am I compromised as a director by allowing accounts to be filed and / or not taking this to the board' - his family?

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By andy.partridge
18th Dec 2014 09:52

More than one issue

I think you have two issues - firstly technical, can he do what he does? Secondly ethical, assuming he can't, what should you do about it.

From  technical angle, all fees for work done as part of his normal role in the organisation should be subject to PAYE. That's not to say there can not be matters termed as consultancy that could be invoiced but all parties should be upfront as to what they are.

The ethical one . . well of course you have legal responsibilities as a director and assuming you are a qualified accountant a code of ethics to adhere to. Turning a blind eye is not an option. How you broach the subject is going to be dependent upon your relationship with the senior director and others in the organisation.

We know nothing about the size of your organisation or the culture so any advice is going to be of limited value. I think you need to be confident about the technical side of the issue before making waves.

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