Unpaid Director - Tax Implications

ligerdub

I am in the process of setting up a Ltd company and as such I am required to list 2 directors. It will effectively be a one-man show and the second director will effectively have no operating role outside of his listed directorship and he will receive no financial benefit from the role.

Does anyone know if there are any tax implications for him in signing up for this? (he is in PAYE employment elsewhere)

Many thanks.

antoinolachtnai

As I understand it, if he is not a proprietary director, i.e., has more than 15 percent share, then there are not. But you should consult your accountant.

ligerdub

Thank you.

That was also my understanding. I shall get it clarified though.

smeharg

There shouldn't be any tax implications for him.

However, as a director of the company he will have certain responsibilities and obligations under company law - regardless of what he is paid or what operational duties he has.

Firstly, I would consider whether you actually need to a limited company and whether you would be better operating as a sole-trader.

If you do need a company I would make sure your friend is fully aware of the commitment he is making and what his legal responsibilities will be. It could save you both a lot of hassle in future.

ligerdub

smeharg wrote: »

There shouldn't be any tax implications for him.

However, as a director of the company he will have certain responsibilities and obligations under company law - regardless of what he is paid or what operational duties he has.

Firstly, I would consider whether you actually need to a limited company and whether you would be better operating as a sole-trader.

If you do need a company I would make sure your friend is fully aware of the commitment he is making and what his legal responsibilities will be. It could save you both a lot of hassle in future.

The business would be centred around investment advice, and given the nature of potential legal issues in that area it's not something I want to leave to chance.

My brother would be the second director.

If possible I would rather go for a single director company but anything I have seen has suggested I have to have two.

searay

ligerdub wrote: »

smeharg wrote: »

There shouldn't be any tax implications for him.

However, as a director of the company he will have certain responsibilities and obligations under company law - regardless of what he is paid or what operational duties he has.

Firstly, I would consider whether you actually need to a limited company and whether you would be better operating as a sole-trader.

If you do need a company I would make sure your friend is fully aware of the commitment he is making and what his legal responsibilities will be. It could save you both a lot of hassle in future.

The business would be centred around investment advice, and given the nature of potential legal issues in that area it's not something I want to leave to chance.

My brother would be the second director.

If possible I would rather go for a single director company but anything I have seen has suggested I have to have two.

If it is a private company you must have 2 directors. You should both read the guide to directors responsibilities from the CRO website.

If you are giving investment advice, you should also consider what regulatory requirements you will have. I.e central bank or other professional body. Your brother may have to register as an affiliate which is an additional business cost.

ligerdub

ligerdub wrote: »

smeharg wrote: »

There shouldn't be any tax implications for him.

However, as a director of the company he will have certain responsibilities and obligations under company law - regardless of what he is paid or what operational duties he has.

Firstly, I would consider whether you actually need to a limited company and whether you would be better operating as a sole-trader.

If you do need a company I would make sure your friend is fully aware of the commitment he is making and what his legal responsibilities will be. It could save you both a lot of hassle in future.

The business would be centred around investment advice, and given the nature of potential legal issues in that area it's not something I want to leave to chance.

My brother would be the second director.

If possible I would rather go for a single director company but anything I have seen has suggested I have to have two.

I should point out that the company is being setup as I've been offered a position as a contractor to a financial institution, and I'm required to do so for that purpose.

With that in mind there will be no overheads to speak of so my only real concern is any potential knock-on effects it will have on my brother.

smeharg

ligerdub wrote: »

I should point out that the company is being setup as I've been offered a position as a contractor to a financial institution, and I'm required to do so for that purpose.

With that in mind there will be no overheads to speak of so my only real concern is any potential knock-on effects it will have on my brother.

You never know what the future holds and as a director your brother will be responsible for running the company and complying with all the various laws and regulations.

There has been some high profile court cases recently where so called silent directors have been hauled before the courts.

Just make sure your brother knows exactly what he's getting himself into. Perhaps even suggest he gets his own independent advice.

ligerdub

smeharg wrote: »

ligerdub wrote: »

I should point out that the company is being setup as I've been offered a position as a contractor to a financial institution, and I'm required to do so for that purpose.

With that in mind there will be no overheads to speak of so my only real concern is any potential knock-on effects it will have on my brother.

You never know what the future holds and as a director your brother will be responsible for running the company and complying with all the various laws and regulations.

There has been some high profile court cases recently where so called silent directors have been hauled before the courts.

Just make sure your brother knows exactly what he's getting himself into. Perhaps even suggest he gets his own independent advice.

Thanks for the advice, it's helpful in terms of the decision I'll make. Will re-consider all options at this point.