No PAYE Tax credit for Proprietary Directors

I reiterate the point that a prorietary director is effectively a self employed person, and that is why they quite rightly don't get a PAYE tax credit.
Click to expand...
No. The logic doesn't follow.

What difference does it make if the director is self employed?
(Forget about pensions for the moment, there are a huge number of directors who can't afford any kind of pension)
 
umop3p!sdn said:
No. The logic doesn't follow.

What difference does it make if the director is self employed?
(Forget about pensions for the moment, there are a huge number of directors who can't afford any kind of pension)
Click to expand...

The difference is that the PAYE tax credit is for employees! i.e. People who don't sign their own wages cheques, who don't decide how much those wages are, who don't decide when, where, and how they work... there is a huge distinction there. Proprietary directors, by and large are such because they were already self employed and chose to incorporate the business. So, I believe yes, the logic does follow.

Just to clarify, are you saying you believe that all proprietary directors should get a PAYE tax credit? (or are you just trolling me?!)
 
Of course directors should get this tax credit!
How about even restricting it to those on less than the average industrial wage?

You make it sound like directors have complete carte blanch on how much they get paid. Well I get paid the same amount every month, just like every other PAYE worker.

I suppose this might not even matter after 7 December. Maybe no one will be getting the PAYE tax credit.
 
@mandelbrot:

A director is considered "properietary" and denied the PAYE credit if he owns 15% or more of the shares in the company.

At that level of shareholding, he could still be Class A PRSI and treated as an employee for those purposes.

Under company law, he would have little power in the ultimate control of the company with only 15% of the shares.

So I don't believe it is accurate to describe a director who is denied the PAYE credit as "effectively self-employed".
 
McGrath said:
@mandelbrot:

A director is considered "properietary" and denied the PAYE credit if he owns 15% or more of the shares in the company.

At that level of shareholding, he could still be Class A PRSI and treated as an employee for those purposes.

Under company law, he would have little power in the ultimate control of the company with only 15% of the shares.

So I don't believe it is accurate to describe a director who is denied the PAYE credit as "effectively self-employed".
Click to expand...

I can only talk about my personal experience with proprietary directors. I spent 7 years in accountancy practice, during which time I dealt with well in excess of 100 client companies. I cannot remember a single instance where I encountered a proprietary director who owned over 15% of the share capital, but did not exercise any control.

I now have a different job, and it regularly involves looking at company directors and their relationships with their companies, and again I'm genuinely struggling to recall a situation such as you describe (at a conservative estimate, I've looked at another maybe couple of hundred companies).

I reckon that the number of people who fall into this category (not actually exercising control, but denied a PAYE credit) is miniscule. But I do take your point, 15% is a bit of an arbitrary figure, and the treatment should probably be consistent with the social insurance treatment. - i.e. Class A (& PAYE credit) for any director who has no control, and who can be shown to be No Different than any other employee, and Class S (& no PAYE credit) for any director, regardless of level of shareholding, who can be shown to be effectively self-employed. I think that'd be fair.
 
mandelbrot said:
I can only talk about my personal experience with proprietary directors. I spent 7 years in accountancy practice, during which time I dealt with well in excess of 100 client companies. I cannot remember a single instance where I encountered a proprietary director who owned over 15% of the share capital, but did not exercise any control.

I now have a different job, and it regularly involves looking at company directors and their relationships with their companies, and again I'm genuinely struggling to recall a situation such as you describe (at a conservative estimate, I've looked at another maybe couple of hundred companies).

I reckon that the number of people who fall into this category (not actually exercising control, but denied a PAYE credit) is miniscule.
Click to expand...

Sorry, I'm totally stumped by this argument. A person has no business being a company director if they are not in a position to exercise some level of control over the company and its affairs. This applies regardless of whatever status they may have as a shareholder. On the other hand, there are executives out there whose personality dominates their company yet they mightn't necessarily own 15% of their employer company. Did Sean Fitzpatrick own 15% of Anglo?
 
T McGibney said:
Sorry, I'm totally stumped by this argument. A person has no business being a company director if they are not in a position to exercise some level of control over the company and its affairs. This applies regardless of whatever status they may have as a shareholder. On the other hand, there are executives out there whose personality dominates their company yet they mightn't necessarily own 15% of their employer company. Did Sean Fitzpatrick own 15% of Anglo?
Click to expand...

I'm not sure whether you're agreeing or disagreeing with me Tommy! plc's are a different kettle of fish in the context of what I'm talking about here, which is the couple of hundred thousand private Ltd's. All I'm trying to say is that to the extent that a company director, regardless of their actual shareholding, is in control of the company and able to dictate the terms of their relationship, then they should clearly be considered self employed. A consequence of which is no PAYE credit.

Are you saying you think that no directors at all should be allowed the PAYE credit, or am I misunderstanding what you said? (This could be unfair in some instances where for example, the 100% owner of the company appoints an employee to be the 2nd director, merely to comply with the legal requirements, and in such a case the employee would exercise no real power...)
 
I have my own opinions on the PAYE credit, which are neither here nor there in the context of the current discussion.

The point I am making here is that the '15% shareholding rule' is arbitrary and pointless in the context of determining an individual's entitlement or otherwise to tax credits. It is simply impossible to measure the extent of control that an individual director or manager may have on a company by reference to their shareholding in the company. Why this intangible needs to be measured in the first instance is beyond me.

To be frank, the 15% rule sounds like something that was dreamed up at some stage by a Sir Humphrey, who knew lots about keeping his political contacts and masters happy, but precious little about the complexities of business in the real world.
 
You must log in or register to reply here.
Back
Top