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Tax implications of director invoicing company?

A sole director is selling a script he is writing to his company. What are the tax implications??

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I know that in the majority of cases it is a big no no for a director to invoice his own company. However, I have a sole director/shareholder who has written a screenplay (prior to the company forming) and is writing a new one which he would like to sell to the company. I am thinking that this is essentially a director selling an asset to the company which is allowed. And writing a screenplay is not something you would expect a director to do as part of his normal director duties so it will be ok ongoing if he writes more. So there are no PAYE tax implications. There is a contract in place between the director and company for the sale. Any thoughts??

And from the director's point of view, will he be liable for CGT for this??

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By Accountant A
11th Dec 2019 12:23

You need to take professional advice. I'm assuming your the director in question as your post suggests, to me at least, that you are not an accountant.

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By Starstruck
11th Dec 2019 13:40

Nope, I am a fully qualified accountant. But always happy to admit there are things I'm still learning!

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By carnmores
11th Dec 2019 12:42

yes i's fine for the screenplay written before directorship commencement if appropriate(see below). Has the company been set up to exploit the play and how has it or will it generate funds to pay for it, is there a record of earnings from previous plays? is there a royalty agreement in place and what is the intention re assignment of copyright. You also need to look into a contract of employment particularly with reference to what are and what aren't directors duties
the other thing worth considering is whether the authors income spreading would be of more help as as self employed individual. we don't have enough info to date and i suggest that you establish these answers before deciding on who you should take further advice from.

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By WhichTyler
11th Dec 2019 13:17

carnmores wrote:

is there a royalty agreement in place and what is the intention re assignment of copyright.

This...

The phrase 'sell a script' is very vague and there are lots of good reasons to licence it to a ltd co rather than assign the copyright

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By carnmores
11th Dec 2019 13:58

I absolutely accept that. I have worked with many household names in music and book publishing industries. Was just trying to point starstruck in the right direction with some signing.

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By WhichTyler
11th Dec 2019 14:38

Understood, I was supporting your approach

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By carnmores
11th Dec 2019 14:52

its always a pleasure to converse with people trying to help. thank you.

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By SWAccountant
11th Dec 2019 13:15

Sounds like somebody looking to get some cash out of a company without paying income tax.

Directors must always act in the best interests of the company. Why would the company buy the director's (or indeed any) screenplay?

I'm taking a leap to assume so, but you can't just fabricate an asset to sell to your own company to utilize CGT annual exemptions.

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By carnmores
11th Dec 2019 13:59

Doesnt sound like that to me at all

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By SWAccountant
11th Dec 2019 14:19

Opinions and ars*holes, eh?

I did say it was a bit of a stretch, but it was possible given the facts we were... given.

It's also not unlike a "great" idea that clients would try to come up with.

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By carnmores
11th Dec 2019 14:35

Its really not necessary to be offensive. I think subsequent replies have clarified the situation.

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By SWAccountant
11th Dec 2019 15:42

Being offensive? Sorry, I must have missed that. Are you not familiar with the saying?

Subsequent replies didn't exist at the time... I'm no mind reader.

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By carnmores
11th Dec 2019 18:19

damn i've got you all wrong

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By Starstruck
11th Dec 2019 13:39

Thanks for those constructive responses. I should have explained the company is a TV/film production company so will need to buy a variety of scripts to develop and produce.
The director certainly isn't looking to avoid income tax. But doesn't want to be disadvantaged selling the script to his own company compared to another.
I wasn't expecting a straightforward answer but those answers have confirmed I need to take more specialist advice given the complexities and different legal agreements and stakeholders involved!!

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Replying to Starstruck:
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By The Dullard
11th Dec 2019 15:19

Whatever the actual consideration, it will be deemed to have been sold at market value for all tax purposes (CTA 2009, s 845) and the director will be liable to income tax (as a self-employed person), not capital gains tax, on the outright transfer of the right to exploit the script.

If he sold it to a third party, they would (presumably) pay market value and the director would be liable to income tax on the same amount.

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Replying to The Dullard:
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By nick farrow
11th Dec 2019 15:34

I was just about to say that Dullard!

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By carnmores
11th Dec 2019 18:23

one other thing if the new play is written in an employment it is probable that the copyright would be with the company so clear that up pronto so that he gets someting

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