UK Can a Director be a paid contractor for his own company?

[mcplums]

The reason is because my company has received equity funding. We receive it in multiple payments over time. I need to demonstrate in our reporting that we have used the majority of the funding to date or future funding will cease. At the moment we have spent very little of what we have recieved, so 'new expenses' are required.

I have not paid myself anything, so adding an expense to pay myself seems like the best route here- although if anyone can think of an alternative I would love to hear it.

Obviously, it is more tax efficient to be paid as a contractor than as an employee. So- can I invoice my own company and receive payment as a contractor?

Secondly- as a contractor, do I need to pay income tax on this if the company has not yet actually physically paid me? I ask because the intention is for me not to actually pay myself (although this is not confirmed) but perhaps one day 'write off' the expenses and use the cash more productively in other areas in the future.

 

[Fidget]

There must be some documentation from the provider of the funding which should set out what the money can, or more specifically, cannot be spent on, so you should look at that first as it may prohibit being used to pay individuals.

As for the company paying you as a contractor, if a director engages in some other form of services to the company outside of their role as director, then they can be paid as a contractor for those services. Whilst not illegal, such arrangements are most certainly on the radar of HMRC, so expect the taxman to be interested.

As a contractor, you are not an employee of the company and therefore the company will have no liability to HMRC on account of you. This is one of the reasons why HMRC will be interested as it means the company doesn't pay any ER NICs on you.

Also, you can expect to have to demonstrate what services you've performed for the payment and how they are separate and distinct from your role as a director and relative to whatever the funding is for. I expect the provider of the funding will be interested in that as well.

All in all, it comes across as if you're trying to find a method of moving money out of your company that you can get away with, so you can expect relevant authorities to be interested in it.

 

[Edward Cowling]

The reason is because my company has received equity funding. We receive it in multiple payments over time. I need to demonstrate in our reporting that we have used the majority of the funding to date or future funding will cease. At the moment we have spent very little of what we have recieved, so 'new expenses' are required.

I have not paid myself anything, so adding an expense to pay myself seems like the best route here- although if anyone can think of an alternative I would love to hear it.

Obviously, it is more tax efficient to be paid as a contractor than as an employee. So- can I invoice my own company and receive payment as a contractor?

Secondly- as a contractor, do I need to pay income tax on this if the company has not yet actually physically paid me? I ask because the intention is for me not to actually pay myself (although this is not confirmed) but perhaps one day 'write off' the expenses and use the cash more productively in other areas in the future.

I think any reputable firm of accountants would tell you not to. HMRC are very keen on everything paid to a director going through the PAYE system, They even spread out annual bonuses, so no plugging everything into one month to pay less NIC. Do you fancy a lot of attention from HMRC? If not, put everything through your PAYE system. Not regd for PAYE? Call them and get it done, all far easier than you might think.