[UKSBD]

Most accountants say pay yourself up to the tax limit (about £5,400) in
wages and then pay the rest as a dividend.

Does HMCE every query if a company director is also a worker for the
company too though?

[Peter W]

If the director does not have a separate employment contract with the company, then he is not an employee and issues like the National Minimum Wage do not apply. The person is just occupying the position of company director, for a small salary.

HMRC might not like it, but there is not much they can do about it.

You need to make sure that dividends are processed properly, or HMRC can try to argue that they are payments on account of a salary. This means ensuring that dividends are only paid out of post-tax profits (there should be evidence of this), and that dividend minutes and vouchers are prepared each time a dividend is paid. Regularly drawing small amounts from the company and then clearing it all by declaring a dividend at the end of the quarter is a risky strategy.

[UKSBD]

Originally Posted by Peter W

If the director does not have a separate employment contract with the company, then he is not an employee and issues like the National Minimum Wage do not apply. The person is just occupying the position of company director, for a small salary.

That all sounds good in theory, but in reality I would think 90% of
directors work for the company too.
Yet, I've never seen an accountant mention this, they always say just
take the £5,400

[boxby]

It's having a proper employment contract, If it's your own business you don't tend to write a contract governing your own tasks and duties. If you've got to the point where you've got a contract then it must be becuase there are other shareholders and directors, and interests in the company. In which case you really are an employee same as the other employees, so NMW kicks in.

[Kent Tiger]

Originally Posted by UKSBD

That all sounds good in theory, but in reality I would think 90% of directors work for the company too.

I don't think the law offers any definition of what is entailed in being an 'office holder', which is what a director is when not employed. Certain responsibilities are defined - eg making sure the company is solvent, for instance.

Beyond that, you are free to choose what you do in holding that office.

[James Smith]

I can confirm that NMW doesn't apply to company directors so long as you don't have an employment contract. Moreover long as you do your dividends properly there isn't much HMRC can do about this strategy. Of course if you don't bother and just take money out willy nilly all year you will inevitably hit problems as some of my clients find out rather painfully!

[Jeewhizz]

Interesting reading.

What happens in regards to the Company Secretary, if they are paid? Are they deemed an employee if there is no employment contract?

[James Smith]

Re co. sec they are again an "office holder"