Tax Implications of becoming a company director as well as an employee?

angelfire

Hi, my other half has been gifted shares in the company he works for and offered the option of becoming a company director.

He has been advised to seek advice on the implications in relation to tax. This is because, as well as receiving the salary (with commission), that he gets now, he will also receive dividends on the company net profit each year.

My questions are as follows:

1) What are the implications of him registering at companies house as a director? Is it wise to do this?
2) What are the implications in relation to tax/HMRC?
3) Is it time to employ an accountant/financial advisor to ensure that he is both abiding by the law and getting the best financial gain from his situation?

He has been given the option to become a director, simply in title, or to register as a director with companies house. We don't know the difference and figured someone on here might be able to point us in the direction of/give us some initial advice?

Many thanks in advance!

A x

agrinnall

1) See 3
2) See 3
3) Yes.

bap98189

!!!!!!!!! wrote: »

1) What are the implications of him registering at companies house as a director? Is it wise to do this?

He will have some legal responsibilities as a director of the company. These mostly relate to acting in accordance with the law and ensuring accounts are filed. The government has some advice here.

The other implication will be that he has to complete a self-assessment tax return at the end of each year, but he will probably have to do that anyway if he is receiving dividends.

2) What are the implications in relation to tax/HMRC?

If he receives any dividend then it will be taxable. He will probably also have to complete an annual self-assessment form. These can be time-consuming the first couple of times, but can be done without the assistance of an accountant.

3) Is it time to employ an accountant/financial advisor to ensure that he is both abiding by the law and getting the best financial gain from his situation?

Probably not. All that will change is that he may receive some additional income whenever the company decides to pay out a dividend. As a guide he should be able to see form the company accounts how much it has paid out in the past few years per share, and roughly calculate how much this is likely to be. Unless this works out to be a large amount it is probably not worth paying an accountant.

angelfire

bap98189 wrote: »

He will have some legal responsibilities as a director of the company. These mostly relate to acting in accordance with the law and ensuring accounts are filed. The government has some advice here.

The other implication will be that he has to complete a self-assessment tax return at the end of each year, but he will probably have to do that anyway if he is receiving dividends.



If he receives any dividend then it will be taxable. He will probably also have to complete an annual self-assessment form. These can be time-consuming the first couple of times, but can be done without the assistance of an accountant.



Probably not. All that will change is that he may receive some additional income whenever the company decides to pay out a dividend. As a guide he should be able to see form the company accounts how much it has paid out in the past few years per share, and roughly calculate how much this is likely to be. Unless this works out to be a large amount it is probably not worth paying an accountant.

Thanks, this is very helpful x

Tiglath

He's probably already aware of it, but he'll have to ensure that if he buys/sells his company shares, he mustn't fall foul of insider trading ie. acting on non-public information that would affect the share price. The company may have some kind of personal dealing policy/share dealing window to manage this.

antrobus

Tiglath wrote: »

He's probably already aware of it, but he'll have to ensure that if he buys/sells his company shares, he mustn't fall foul of insider trading ie. acting on non-public information that would affect the share price. The company may have some kind of personal dealing policy/share dealing window to manage this.

Would only apply if the shares of the company concerned were being traded on a market somewhere.

!!!!!!!!! wrote: »

Hi, my other half has been gifted shares in the company he works for...

Who gifted him the shares? As a general rule, if a company gives an employee something, such as money, or something that is worth some money, the employee has to pay tax on it.

bap98189 wrote: »

....The other implication will be that he has to complete a self-assessment tax return at the end of each year, but he will probably have to do that anyway if he is receiving dividends...

The receipt of dividends would not, of itself, trigger a requirement to complete a SA return. Being a director of a company 100% does.

Company directors are also subject to a slightly different NI regime. Which can make a difference, but usually does not.

!!!!!!!!! wrote: »

....3) Is it time to employ an accountant/financial advisor to ensure that he is both abiding by the law and getting the best financial gain from his situation?....

I'd certainly be inclined to seek advice regarding the grant of the shares unless you are already 100% sure of the position.

Tiglath

Yes, I assumed it was a listed company. Would he be liable for tax if the terms meant the shares had to be held for a period of time before being able to be sold?

colino

It seems a strange option to be offered, (I think living founders and operators are daft to pare away their hard earned enterprises) is it a case of putting on golden hand-cuffs so he doesn't move on?
Either way, becoming a share-holding company director of something that he can really make a difference in can instantly bring about improved income and if your husband isn't sure, get a recommended accountant if the owners aren't sharing the benefits.