Where contracts involve company directors, it is important to
establish whether the transaction is similar to one of those
described in the examples provided at NIM02194 or whether it is one
of those occasions when the company discharges a personal debt on
behalf of the director and subsequently debits the director’s
loan account. Such cases are different to the scenarios outlined in
the examples and need different treatment. See
NIM12016 et seq.
It may prove difficult to establish exactly what transpires in many cases, but it must be stressed that the onus to provide evidence which shows that the agency conditions are satisfied lies with the employer – and with the employee where appropriate.
When dealing with such cases, you should expect to be shown some form of evidence which shows that:
This list is not exhaustive and evidence may only come to light
by talking to the parties involved. If no such evidence is
forthcoming, liability for Class 1 NICs will arise.
Although such occasions are likely to be rare, some employers may wish to confirm that certain directors/employees are authorised to act as agents by sending a letter to a supplier/provider – for example to a shop or garage. Any such letter must be sent to the appropriate branch/office of the supplier. It must specify which directors/employees are authorised to enter into contracts on the employer’s behalf and confirm that those directors/employees will identify themselves to the supplier. The letter should also be updated at regular intervals. It is important also to establish that the supplier agrees to the employer’s proposals.