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Company director payments

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We have recently engaged a client who runs a limited company (A) where he is a sole shareholder and director but he is also a director but NOT shareholder in comapny (B). Where company (A) only income comes from company (B). Is it right for the client who has the role of a non-executive director to received money in that way or he has to be paid as self-employed?

 

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By David Ex
24th May 2022 19:20

I suspect a full examination of the facts would be required to be able to provide a professional opinion.

Then again, much depends on what you mean by "Is it right". Do you mean is it ethical, is it legal under company law, is it contractually correct, are there tax concerns, ...?

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By Emanuela Durzheva
24th May 2022 19:28

I believe I mean all of the ... "is it ethical, is it legal under company law, is it contractually correct, are there tax concerns, ...?"

Thank you in advance for your reply

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Replying to Emanuela Durzheva:
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By David Ex
24th May 2022 19:39

Emanuela Durzheva wrote:

I believe I mean all of the ... "is it ethical, is it legal under company law, is it contractually correct, are there tax concerns, ...?"

Thank you in advance for your reply

Can you post a copy of the contract? Bit difficult to comment without seeing it.

Might also be useful to have some details about the business of the two companies and any relationship between the parties.

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By DKB-Sheffield
25th May 2022 01:32

Not sure about ethical, legal or contractual as we're missing some important points.

As for...

Emanuela Durzheva wrote:

Is it right for the client who has the role of a non-executive director to received money in that way or he has to be paid as self-employed?

I don't know why your default alternative for the pay to this director would be S/E? Is OPW also a consideration? Is employment in point? Is he definitely an NED?

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By kiwilondon99
25th May 2022 09:40

thought independant[outside]DIR + NEDS, had, to be payrolled - rather than invoice as PSC/SE etc. where monies are for services as officers of the co

DIRS/NED of subs remumnerated generally by a Parent/HoldCo.

Big4 advise several years ago was to payroll regarding angel investor director shareholder although Co to Co 'advisory/management fees' allowed, Also a question raised on a due diligence implied payroll in that specific instance was the required methodology

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By Emanuela Durzheva
25th May 2022 09:29

My apologies. I am not sure how to put my questions right ....from a tax point of view can he be paid from company (B) where he is only a director into company (A) where he is sole director and shareholder? Does that meant that company (A) follows under IF35?
What is the most tax beneficial way ?

Many thanks

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By gillybean04
25th May 2022 11:08

The individual is director of B (company A is not the director of B).
The individual is entitled to a payment of earnings on account of his directorship of company B.
The individual wants this payment of earnings from company B to be paid to company A.

Is the above correct?

I'm guessing the question isn't whether the payment can be made to company A, but whether the payment can be taxable on A instead of individual?

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By Emanuela Durzheva
26th May 2022 18:37

This is what I have been trying to ask :)

I'm guessing the question isn't whether the payment can be made to company A, but whether the payment can be taxable on A instead of individual?

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Replying to Emanuela Durzheva:
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By DKB-Sheffield
26th May 2022 20:43

Which, no doubt brings you back to David Ex's original comments...

David Ex wrote:

I suspect a full examination of the facts would be required to be able to provide a professional opinion.

And

David Ex wrote:

Can you post a copy of the contract? Bit difficult to comment without seeing it.

Might also be useful to have some details about the business of the two companies and any relationship between the parties.

And to paraphrase parts of kiwilondon99' post... are the payments for the 'position of office' or for specific 'advisory services'?

In fact, I'm not certain you've stated what the payments are for at all (lots of assumptions being made)... making it very hard to give any bearing on whether the treatment is correct.

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