Freelance fees for Directors....

Freelance fees for Directors....

Didn't find your answer?

I have a slightly quirky scenario in that I have a company that has 4 directors each with a 25% shareholding. Aside from their directors duties they all do bits of freelance work for the company as well as freelance work elsewhere. The company also pays other freelancers to do work. They are currently being paid gross off an invoice by the company and are not paid through payroll.

It is my understanding that as long as the fees charged to the company are at an arms length fair market rate and as long as they are not trapped under any employment status issues it should be ok - obviously they will need to disclose their self-employment profits on their own tax return.

Am I missing anything here? Is it too risky a setup?

They used to run a partnership and went and setup a Limited company before I came on board. I have suggested it might be better for them setup an LLP instead but they are adamant they want to stick to the Limited company...

thanks

RM

Replies (3)

Please login or register to join the discussion.

Euan's picture
By Euan MacLennan
10th Jun 2013 15:02

Not the ideal arrangement

... but you already know that!

Provided that the individuals genuinely have self-employed businesses with other customers for the same type of work that they are doing for their company, there is a reasonable case for paying them as self-employed.  The problem is the connection between the work done by the directors for the company and the work done for the company's customers.  If the customers never see the directors, it might be OK, but if the nature of the work is that the directors are effectively working personally with the customers, it would be difficult to pretend that they are not acting as employees of the company.

Thanks (1)
avatar
By carnmores
10th Jun 2013 15:41

i agree with Euan but dont most sane people

It may be necessary to have to separate contracts one as officer and one for other services.

Thanks (1)
By redman7
11th Jun 2013 10:02

thanks both

Yes I know not ideal, but the client wants to stick with it so I just want to make sure they know how to manage this setup and I cover my back....

Thanks (0)