Non-resident director on split contracts OK?

Discussion in 'Askaboutbusiness' started by John Dewey, Dec 19, 2016.

  1. John Dewey

    John Dewey New Member

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    Last edited: Dec 19, 2016
    Planning to set up an Irish business as follows:
    • Two non-resident (but EU resident in two countries) directors
    • Director A: mostly dealing with finance, systems, procedures
    • Director B: jack-of-all-trades
    I understand that directors' pay has to go through Irish PAYE no matter what, even if directorship is provided through a personal services company, and even if abroad.

    Director B wants to provide non-directorship services (mostly internet marketing) to the Irish business through a wholly-owned pre-existing company registered in his EU country of residence. He is the sole employee of his company.

    The plan is:
    • Set up both directors on a directorship contract (say for €6K a year), paid via PAYE
    • Set up a consultancy agreement with Director B's company (say for €40K a year), paid gross
    Will this satisfy the Revenue? Or does the consultancy agreement still get caught in PAYE?
     
    Last edited: Dec 19, 2016
  2. Setanta12

    Setanta12 Frequent Poster

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    Sounds dodge to me. Does 'B' have other non-related customers ?
     
  3. Setanta12

    Setanta12 Frequent Poster

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    You're aware both are likely to be caught for BIK on trips to Ireland and Irish hotel stays?
     
  4. John Dewey

    John Dewey New Member

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    @Setanta12
    1. Yes, B does have other non-related customers, to whom he offers similar services.
    2. If flights cost us out of pocket - it's not the end of the world.
    The more salient issue is: can B wear two hats, each of which is treated differently: directorship taxed via PAYE, and consultancy taxed through his local business?
     
  5. Setanta12

    Setanta12 Frequent Poster

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    Dual contracts are perhaps more common than thought, but there are complex issues here. Where will the Irish business, in fact, be controlled from? How will you ensure it is controlled from Ireland?
     
  6. Setanta12

    Setanta12 Frequent Poster

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    If the employment contract is drawn up with an eye for the issues arising, I see no problem. On the company side, there may be corporate tax issues.
     
  7. John Dewey

    John Dewey New Member

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    This is being addressed by various means, to give substance to the company's control from Ireland.

    But I'd rather keep the discussion centred on the issue of the consultancy contract's susceptibility to Irish PAYE. Is there a concern here?

    What does it mean to "draw[ the employment contract] up with an eye for the issues arising"?
     
  8. Setanta12

    Setanta12 Frequent Poster

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    I know you're saying you don't need advice re substance in Ireland etc ... tread carefully here.

    Re the employment contract, those travel expenses into Ireland - air costs, hotel cost, taxi costs are all part of normal travel to work (same as if my company paid for a taxi for me to go to work) and as such if paid by the company are taxable in Ireland. Of course though, if the Directors are UK-tax-resident; they won't care if they are deemed to receive extra Irish income this way.

    The fact that Director B's foreign activity is coming into the Irish company via a foreign-owned company - it may not be obvious to even an Irish auditor that there is a relationship here, although the Irish auditor (if you have one) should spot this - is helpful.

    If Dr. B activity was via a sole-trader, you could have 'issues'. But in the main I think you're in the clear.

    Re the expenses, remember that the recent concessions re expenses etc won't apply to your directors - the old rules still apply, although as stated above, if they are UK resident they won't care.
     
  9. Jon Stark

    Jon Stark Frequent Poster

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    Why won't they care, if they're UK resident? Is it UK specifically, or foreign resident in general?
     
  10. John Dewey

    John Dewey New Member

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    I'd like to gently shepherd the conversation back to the main issue.

    I note with thanks that there are issues related to the following, but would for now like to avoid their discussion:
    • Establishment of nexus for management & control in Ireland
    • Arising of benefits-in-kind from company payments for travel & stay
    About this:
    There is no intention to hide from anyone the fact that the company providing consultancy is wholly-owned by a co-owner of the Irish company.

    Why is this? What is the difference in principle between him offering non-directorship consultancy through a company or as a sole trader?

    The question again is: Are there precedents in law or in practice by which the Revenue ignores the split between directorship tasks and contract and consultancy tasks and contract, bundling them together as directorship charge and whacking PAYE charges on the combined value?
     
  11. Setanta12

    Setanta12 Frequent Poster

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    None, that I'm aware. However that is not to say you're not running a risk. Am unsure why you think Revenue would publicise this when most decisions here happen as a result of revenue audit. You sound like a professional - then you know you need advice where all matters here would be considered 'in the round'. To try and demarcate issues here is a fool's errand.