Crowded IT company

11 March 2014

Issue: 4443 / Categories: Forum & Feedback , Income Tax

An IT contractor operates via a limited company as the director and shareholder, paying himself a low wage and dividends. His brother is also an IT contractor, but is a disqualified director and has been using the limited company as a conduit for his income

My new client is an IT contractor who operates via a limited company as the director and sole shareholder. He pays himself a low wage and draws the rest of his income as dividends. He also has a brother (an IT contractor as well) who is a disqualified director.

Because the brother cannot operate under his own company my client lets him use the company as a conduit for his income. At the moment the disqualified brother is simply taking money out of the company; however there is nothing in writing so I can only assume that the brother is an employee of the company.

No tax planning at all has been taken into consideration and the brother is neither a shareholder nor is there any formal contract of employment or terms and conditions. Ideally I think it would be better for each to be separate...

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