UK Need a professional advice

[Mike Bern]

The UK registered company has 2 directors and 2 shareholders (same people) 50%-50%
One of them provided a service for this company but as a sole trader. Can he invoice the company where he has 50% shares.
Additional information: as I mentioned above he has UK company but physically based in Czech Republic and he has registration as a sole trader there. Thank you in advance)))

 

[Becky]

In certain circumstances he can, but tread carefully. Any remuneration for work he does in carrying out his director duties MUST be treated as employment income - the company must process it through payroll etc. Even if the consultancy work is not related to director duties, HMRC may contest the treatment as a payment to a self-employed contractor if they believe the nature of the engagement is more like employment.

Employment status is a tricky issue, and if the person in question is a director then HMRC is more likely to think any work is done as an employee.

https://www.gov.uk/employment-status

If the company treats the payments as made to a contractor instead of an employee, and HMRC later contests the treatment, they can go after the company for historic PAYE/NIC on a grossed up basis plus penalties, so this is why I say tread carefully.