CTM02140 - Corporation Tax: computation of income: directors fees received by companies

ESCA37

Nominee directors

Where a company (the first company) has the right to appoint a director to the board of another company (the second company) because of its shareholdings in, or a formal agreement with the second company, the director appointed in this way is a nominee director.

If a nominee director is obliged to hand over to the first company any fees or other emoluments he or she receives from the nominee directorship, and does in fact do so, if the first company accepts liability, you can treat the fees and other emoluments as income of the first company.

Directors other than nominee directors

You can extend the practice to cases where the first company has no formal right to appoint a director to the board of the second company provided:

• the director appointed has to hand over, and does hand over, his or her fees to the first company,

and

• the first company:
• • is resident in the UK and is liable to CT,

or

and

In this context 'control' has the meaning given to it by ICTA88/S840. But when you apply ICTA88/S840 in this context take into account the rights and powers of the director's:

• spouse or civil partner,
• children,
• children's spouses or civil partners, and
• parents.

Where a claim is received that code NT or BR should be applied to a director's fees etc, in accordance with the above, the Inspector dealing with the accounts should deal with the matter as below.

For cases involving nominee directors

• obtain details of all directors holding directorships with companies as nominees of the first company,
• obtain evidence of the first company's right and power to appoint directors to the board of the second company (or companies).

For cases involving other directors

• obtain confirmation that the directors' fees which are the subject of the claim are included in the income of the first company liable to CT.
• obtain confirmation that the first company is not under the control of any director concerned.

For all cases

• obtain confirmation that the directors concerned are obliged to hand over to the first company any fees etc, received from the second company,
• request the first company's agreement that it will accept CT liability (or IT liability for a case where the first company is not within the charge to CT) in respect of the directors' fees which are handed over to it,
• request the first company and the directors concerned to notify the Inspector of any change in the arrangements which may affect the concessionary practice.

When you receive the relevant information, file it in the permanent notes. Send copies to the accounts District(s) of the second company (or companies) and to the office dealing with the director concerned.

Submit the director's file, with a statement of the relevant facts, to PAYE & NIC Group Technical:

• in any case of doubt or difficulty, or
• if you have a case where, although the strict requirements of the above are not satisfied, it is claimed that a director's remuneration should be treated as income of a company to which it is handed over.