Adding One More Director

[Brussels Slumdog]

Company control

Hello all,

i want to add an one more director to my company (ideally, my wife) but, she is employed (full time) so, my accountant is telling me that could be an issue with HMRC

Is it TRUE?

or, is there any workaround for that?

Thanks

Why do you want Mrs Wasiter to become your co-director?

This only makes sense if either you are both self employed and you both use the company to make a living. Even if your wife does have a permanent you could use the company as an IT contractor and your wife could use the company to sell her art work or provide B&B in the spare room.
Is Mrs Wasiter putting pressure on you to control your company?

[expat]

Perhaps it's just me but there seems to be a bit of vagueness about roles. In a few words:

A shareholder owns (part of) the company.
A Director controls the company.
An employee works for the company for wages.
A company secretary performs certain administrative functions for the company.

Each of these four roles is quite distinct. A person can fill any number of these roles, they are independent.

Now to the OP. If you make someone a director, they have a degree of control over the company. That's what a director is.

They don't own it, shareholders do that. Shareholders may be paid dividends; nobody else may be.

They don't get paid wages for working for the company, employees do that. However any money they are paid by virtue of other roles that they hold, may be subject to special conditions because of the fact that they are a director (for example, the NICs calculation is different for the salary of an employee who is also a director).

They don't have to fill in accounts and returns, the company secretary does that.

So what issue would HMRC have? Unless of course you don't mean add a director, but mean add a shareholder, or add an employee, or somehow pay out money to someone else. But that is nothing to do with being a director.

[ASB]

But....Mrs Wasiter would need to do a tax return if she were not merely an employee of Mr Wasiters company, but a company director. ie. that she jointly controls the company rather than just works for it.

http://www.hmrc.gov.uk/sa/need-tax-return.htm

Who needs to complete a tax return?

- self-employed people (including members of a partnership)
- company directors (except not for profit organisations)
etc
etc.

At least that's what HMRC say, and who am I to argue?

Sorry, I think I might have misunderstood what you were saying. If by "self cert" you meant "full in an SA100" then you are quire right. I think - now - that is what you did mean. When I read it I thought you meant ensure it is declared on as SE1 - which depending upon exactly the arrangments is not likely, but not impossible.

[oraclesmith]

But....Mrs Wasiter would need to do a tax return if she were not merely an employee of Mr Wasiters company, but a company director. ie. that she jointly controls the company rather than just works for it.

http://www.hmrc.gov.uk/sa/need-tax-return.htm

Who needs to complete a tax return?

- self-employed people (including members of a partnership)
- company directors (except not for profit organisations)
etc
etc.

At least that's what HMRC say, and who am I to argue?

[ASB]

Yes, but the purpose of a Director is to control the company. If they're just doing book-keeping tasks, then that's more like an temp employee. In any case, they would have to do a self-cert and would be required to pay tax on their total income regardless of where it came from. It would be more work for your accountant too, as they'd need to get the NI etc correct, taking into account their other PAYE job.

There are also legal implications, because as joint directors they become equally liable for the success/failure of the company, so if either the marriage or the company goes **ts up this put both contractor and wife in a tricky situation.

They shouldn't need to do self cert. They are an employee in the legal sense and as they have another job would (or at least should) be issued with a BR tax code for the salary on the 2nd job. Mrs wasiter can ask the tax office nicely to allocate their coding differently to make maximum use of allowances against the earned income at the point it is earned - though is the other job pays over the tax code allowance this becomes irrelevant (in any event worst case is it's resolved at end of year with the tax return). The NI position is less complex than you beleive. NI is NOT cumulative it is per employment (if memory serves correctly if you did have two jobs both paying a salary of the "maximum" NI able amount then you would pay twice the maximum NI of any other employee - though I beleive as an employee there is a fairly tortuous way to reclaim the excess - I don't think an employer can).

So to the original question there aren't really issues with HMRC - but it may impact the overall taxation position of Mrs wasiter (though she shouldn't end up paying any more (or less) than if the overall remuneration was paid by one job.

There are potential benefits depending on related salary levels and IR35 etc if income shifting is carefully used (can still do this of course).

Mrs wasiter may of course be prohibited from doing any of this through her contract of employment with her current employers, but that is yet another different problem.

[Gonzo]

Hello all,

i want to add an one more director to my company (ideally, my wife) but, she is employed (full time) so, my accountant is telling me that could be an issue with HMRC

Is it TRUE?

or, is there any workaround for that?

Thanks

We might be a bit more helpful if you could let us know what it is that you are hoping to achieve?

[oraclesmith]

Yes, but the purpose of a Director is to control the company. If they're just doing book-keeping tasks, then that's more like an temp employee. In any case, they would have to do a self-cert and would be required to pay tax on their total income regardless of where it came from. It would be more work for your accountant too, as they'd need to get the NI etc correct, taking into account their other PAYE job.

There are also legal implications, because as joint directors they become equally liable for the success/failure of the company, so if either the marriage or the company goes **ts up this put both contractor and wife in a tricky situation.

[GardenGirl]

Hello all,

i want to add an one more director to my company (ideally, my wife) but, she is employed (full time) so, my accountant is telling me that could be an issue with HMRC

Is it TRUE?

or, is there any workaround for that?

Thanks

If you are doing this to avoid hitting a higher tax bracket then HMRC would have a problem, that is I think what your accountant is getting at. If you have a real reason like your wife does all your book keeping for example then they really wouldn't be able to do anything about it.

[oraclesmith]

Remember you can be a Director without being a shareholder and vice-versa.

[oraclesmith]

It depends why exactly you need her to be a Director.

- If you're paying her a Directors salary, then obviously there is tax to pay, and her allowance would only be used once.

- As a Director she would need to do a self cert, whereas otherwise she may be only PAYE.

- If she is to be a shareholder, then that is an entirely seperate issue.

[expat]

Hello all,

i want to add an one more director to my company (ideally, my wife) but, she is employed (full time) so, my accountant is telling me that could be an issue with HMRC

Is it TRUE?

or, is there any workaround for that?

Thanks

Obvious question: what issue is your accountant telling you that you could have with HMRC?

There is no reason in itself why someone should not be a shareholder of a company and an employee of that or any other company at the same time. This would be normal, in fact.

[tino]

Hello all,

i want to add an one more director to my company (ideally, my wife) but, she is employed (full time) so, my accountant is telling me that could be an issue with HMRC

Is it TRUE?

or, is there any workaround for that?

Thanks

It would have tax implications if she was to earn above the threshold.

Honestly though, I'd rather ask the advice of faceless bods on a forum than trust that of my accountant

[wasiter]

Hello all,

i want to add an one more director to my company (ideally, my wife) but, she is employed (full time) so, my accountant is telling me that could be an issue with HMRC

Is it TRUE?

or, is there any workaround for that?

Thanks