EM8503 - Close Companies: Directors: Review

Your review of the directors should cover, among others

• the amount of remuneration within PAYE
• the amount of benefits or expense payments
• NICs
• distributions received
• use of company assets, or assets transferred to and from company
• loans made to the director, and potential ITEPA03/S175 charge, and charge on any loans written off
• whether the director’s lifestyle is commensurate with the earnings etc received from the company and capital injected into the company.

These aspects could be present in the returns of all directors of the close company, including minority shareholder/non-active directors, and their family members. Your review should therefore include non-executive directors and minor shareholders, especially if they appear to be related to the active directors. They may be, knowingly or unknowingly, channels for evaded profits.

As part of a full enquiry involves consideration of the directors’ financial and tax affairs you should take action to obtain any outstanding director and employer returns, including P11Ds. You may need to lay information to obtain P11Ds while appropriate Debt Management Office action should be taken to secure submission of the directors SA returns. If the completed returns are not obtained the directors or their accountant could claim that any apparent discrepancies would be reflected in an SA return yet to be submitted. Ideally the outstanding returns should be obtained before the enquiry is opened but if that is not practical their submission should be pursued as soon as the enquiry is opened.