Hi Can you tell me if a director of a limited company (the only director) who is also an employee also self-employed??? I am filling in tax credit forms for the director of a limited company - no accounts yet so it's just payroll info and they have not made a profit BUT I wasn't sure if they would also be self-employed. I know they have to file tax returns because of dividends (which there will be none) so does this mean self-employment?
He Rachel
A shareholder is an employee of their own limited company. As a director will be (either of their own limited company or working for someone else). I am assuming in your case you are talking about a shareholder director. They can of course also be self employed. But they are not self employed if they are just a shareholder of a limited.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
As an aside, they don't have to file tax returns because of dividends, they have to file tax returns because they are directors (who are employee's who control their own remuneration).
As Joanne states a director can be both an employee of their company(s) and self employed in a different non incorporated business (or businesses).
If this is a service busness remember to consider IR35 implications.
If you are claiming tax credits HMRC will expect for there to be a valid contract of employment in place showing minimum working hours. They will also want to see monthly payslips and may require that your client proves the number of hours that they are working.
I've recently had a few investigations prompted by letters from the American firm that HMRC has tasked with chasing directors for overpaid tax credits with the directors needing to prove every pound going into their personal bank accounts.
Its worth noting that the company chasing overpaid tax credits is paid by results only.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
