Two Directors of Limited Company
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  1. #1

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    Default Two Directors of Limited Company

    Hello everyone,

    I've recently opened my Limited company and added my partner as a second director. As we just started contracting and keep it just as a part time thing the income isn't very high yet (around 13 -15 thousand a year). The issue that I would like to find out about is whether its allowed to pay the salary just for one of the company directors (in this case to the second director - my partner). As I already have another job where I am an employee and want to keep the earnings at the minimum for the moment (trying to save on taxes). I do not want to resign from the company as I have some active contract on my name which I work on from time to time. So my question is what would be the best way of action to take in this situation? Would director that doesn't receive a salary from its company has to do Self Assessment? I would really appreciate your advise for this issue.

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    It's your company so you can, within the rules of course, do whatever you like.
    As for SA - yes, even if it's NIL it has to be done.

    YMMV - ask your accountant.

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    You need some proper advice. Far too little information for a bunch of strangers to advise on so do it properly and get an accountant involved. You could be making a rod for your own back if you end up working it inefficiently and also a target for yourself by changing share holdings too often. You can probably do what are asking you need expert advise as to how close to the tax avoidance/evasion line you are.
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    Quote Originally Posted by LucidDementia View Post
    As for SA - yes, even if it's NIL it has to be done.
    Not true. HMRC guidance says self assessment is required for company directors, but legislation does not. Has been discussed extensively on AccountingWeb. It depends on other factors.

    OP should take accountant's advice on this and other questions. It may be things can be structured in a way to avoid self-assessment, and that may be worthwhile doing given the relatively small amounts in the company.

    It is certainly permissible to pay either, both, or neither directors a salary, though the amount of salary could come under scrutiny if it is paid to a barely-participating director and the amount seems out of proportion to the company's income.

    If one person isn't bringing funds in or doing anything much in the company, and is paid a salary in excess of 50% of the revenue, I'd think HMRC would look dimly on that. But the whole thing should be run by an accountant who has full understanding of when SA is required and when it isn't -- many accountants will just say, yes, if you are a director you have to file SA. Find one who knows what they are about.

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    SA is dead simple. If you're an employee it's little more than copying 2 numbers from your P60 into an online form. I can't believe people are suggesting you need to spend 1K per year on accountant to tell you whether you need to do it or not.
    Will work inside IR35. Or for food.

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    Quote Originally Posted by VectraMan View Post
    SA is dead simple. If you're an employee it's little more than copying 2 numbers from your P60 into an online form. I can't believe people are suggesting you need to spend 1K per year on accountant to tell you whether you need to do it or not.
    Freeagent does it for you with some guided input. Quite cool actually.
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    Quote Originally Posted by northernladuk View Post
    Freeagent does it for you with some guided input. Quite cool actually.
    I remember the days when you ridiculed the likes of FreeAgent, as your spreadsheet was perfectly adequate. Every other post of yours is raving about FreeAgent now!

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    Quote Originally Posted by Maslins View Post
    I remember the days when you ridiculed the likes of FreeAgent, as your spreadsheet was perfectly adequate. Every other post of yours is raving about FreeAgent now!
    Ouch

    but very good point indeed.

    To be fair I don't remember ridiculing Freeagent, just pointed out the spreadsheet was a nice solution that I was happy with at the time and probably still would have been had my trust in my accountant not gone. I even went as far as to say I need to try it...

    http://forums.contractoruk.com/accou...ml#post1845600
    http://forums.contractoruk.com/accou...ml#post1773234

    The SA was created and the like without any problems so worked fine. Just rather cool that you can see it in Freeagent rather than it being hidden functionality in the spreadsheet. You could argue the fact it's cool but I have to do it now where as I didn't before but it does cost less to offset that which does make me a very happy Yorkshire chappie all day long.

    To sum it up I think the appropriate professional response is something along the lines of....... Nerrrrrrrrrrrr
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