Proprietary director

If you own 100% of a limited company but you are also the director and secretary of this company do revenue look on this as a sole trader business if it fails or if tax implications?

No. The company is a separate legal entity to its directors so the Revenue cannot chase a director for the debts of the company

BUT ...

If a company gets into trouble and deducts PAYE/PRSI etc from its employees (incl directors) but then cannot pay those PAYE/PRSI/USC obligations to Revenue, the director will not get credit for the PAYE deducted in their personal tax return so that portion of the company debt has effectively been transferred to the director

eg - Directors Salary = €40,000
PAYE deducted = say €5,000

If that €5K doesn't get paid to the Revenue, when the director does their personal income tax return for that tax year, they will have a shortfall of €5K in PAYE and will owe this to Revenue personally

To get around this, make sure that you keep the PAYE/PRSI up-to-date ahead of other Revenue liabilities such as VAT, CT etc

NB - this is not the case for normal employees, if an employer deducts PAYE etc from an employee and doesn't pay it to Revenue, the employee still gets credit for that deduction

If you are 100% owner of a company but not a director or secretary, no involvement in the running of the company do you have any liability to revenue if the company fails to return PAYE/PRSI, vat etc.

No but that would be a fairly unusual setup

If you were anyway involved in the company, on the books as a normal employee for example, I suppose Revenue could potentially make a determination that you are a de-facto director and apply the same rules re PAYE above.

It's unlikely that this would happen though

EDIT: Just to clarify, I have never actually seen this scenario nor can I find anything on it but something in the back of my head is warning me about it. Revenue are in a very powerful position with the vast vast majority of taxpayers. If they decide something, even if they are in the wrong, it can cost quite a lot of time & effort & money to fight them so it is best to avoid situations which Revenue might regard as you "trying one on" so to speak.

The reason I ask these questions is that I am 100% owner of a company where my brother and his wife are directors. The reason I am full owner is because he was a sole trader and in the down turn things did not go too well for him banks, revenue owed a few pound.

If things went south for the company in relation to revenue etc am I liable in any way being the 100% shareholder. I have no involvement in the running of the company. If the company had an issue with revenue would it affect my personal tax clearance certificate?
Thanks for replies

Strictly speaking, no. Nothing that happens in that company should affect your own personal circumstances or tax clearance status. Directors are responsible for the way a company is run, not the shareholders. The shareholders appoint the directors but then have no say in the day-to-day running of the company after that

I frankly wouldn't be getting involved in something like this without proper legal and tax advice from the outset.

I agree with T McGibney

This should be a cautionary tale on the danger of passive directorships.

“An important judgement was given by Mr. Justice Gilligan in a restriction case involving Glenda Gilson in determining the role a second “passive director” plays in a company.

The judge in a 32 page judgement, addressed the role a second director plays in a company, stating "that they have a duty and a responsibility toward their creditors to act responsibly and carry out their duties in accordance with common law and their obligations under the Companies Acts."

Sophrosyne said:

I agree with T McGibney

This should be a cautionary tale on the danger of passive directorships.

“An important judgement was given by Mr. Justice Gilligan in a restriction case involving Glenda Gilson in determining the role a second “passive director” plays in a company.

The judge in a 32 page judgement, addressed the role a second director plays in a company, stating "that they have a duty and a responsibility toward their creditors to act responsibly and carry out their duties in accordance with common law and their obligations under the Companies Acts."

Click to expand...

The OP isn't actually going to be a director, passive or otherwise

I'm not saying I think the set-up is a great idea or anything but there is a big step up from being a shareholder and being a director, passive or otherwise

A shareholder doesn't sign anything or have any say in the running of the company whatsoever apart from appointing the directors