CISR46050 - Register and maintain subcontractor: compliance test: shadow directors
| CISR46600 | Action guide contents | |—————————————————————————————————–|———————–|
FA04/S64(7), provides that the word director shall have the same meaning as in ITA03/S67 that is
- a member of the board of directors or similar body managing the company’s affairs
- a single director or similar person who manages the company’s affairs
- a member of the company where the company’s affairs are managed by its members
- any person in accordance with whose direction the directors (as previously defined) are accustomed to act.
You should take particular care when examining applications from new companies, to ensure that those named on the application form as directors, are actually involved in running the company themselves rather than acting under the direction of others, who would themselves be unable to satisfy the gross payment qualifying conditions at FA04/SCH11/PART1/PARA4.
You should be on the look out for those directors who apparently have little or no previous experience in the Construction Industry. For example, it is not uncommon to find wives, partners and relatives of individuals known to be operating within the industry to be put forward as directors in this way. These and others may well be continuing to work full time in another capacity.
If you suspect that someone else is in fact running the company then you should write to the named directors to establish their knowledge of the trade, their responsibilities generally and in particular in relation to the operation of the Scheme, their responsibility in negotiating with contractors and their knowledge of contracts generally.
If you identify others who are running the company’s affairs, and gross payment status would be refused if they applied in their own right, then they should be regarded as directors of the company within the extended definition at ITEPA03/S67(1). A decision taken under Section 67(1) can be defended at any appeal hearing of the refusal of gross payment status (see CISR46090 for more details on Section 64(5) directions).
Shareholders who are not directors
Section 64(5) also applies to shareholders if the company is close. Compliance failures by holders of negligible interests in the company who are not directors may normally be overlooked.