Making an adult son or daughter a director?

[PeejeUK]

Hey guys, just wondering how acceptable it is for an adult son (or daughter) to be a director of a mostly one person contractor limited company?

I've been helping my Dad for many years now in a mainly organisational and advisory role but haven't had any official role in the company so far. He's mostly a one man band with a little help from my Mum. But increasingly he's trying to move from day rate work to potentially a writing and speaking career. It's going to need a functional and managed website, social media presence and a lot of editing, guidance and support to get there.

I understand he could pay a salary or even an hourly wage, but it sounds complicated to work out hourly rates and keep records for every minute worked. For this much work, would it be better to be appointed a director and/or receive a small amount of shares instead? I am a director of my own company already so i'm aware of the responsibilities.

There's a lot of posts on the forum about making the spouse a director. Does the same apply for adult children who genuinely assist the business? Thanks.

[northernladuk]

Not really. Spouses are allowed due to the Arctic case. Anything else isn't really a good idea.

Your accountant should be able to advise the best way to remunerate you after looking at the details of your situation.

[WordIsBond]

NLUK is talking a load of tosh.

If you are doing it simply as a tax wheeze, very bad idea, if HMRC comes inspecting they'll be after you for income splitting and perhaps inheritance tax evasion.

But if you are doing it because you are involved in the business and it makes business sense, then go for it. There's nothing wrong with parents and adult kids being partners / shareholders in a family business.

You do have to be aware of taxation issues re: employment-related shares, especially if he has significant retained funds in his company. In that case, the shares you receive would have substantive value at the time you receive them.

[Craig@Clarity]

WWIBS. Nothing wrong with becoming a director of a family business. Sounds like you'd be doing it for commercial reasons. As far as shares go, you may want to look at evaluating the company and purchasing them at a fair value (again, on a commercial basis).

Alternatively, you could simply become a director and get paid a salary. At that point, ignore timesheets etc. With a family business, you could probably just have a conversation and decide among yourselves what salary to pay you and just do it. If you want to be more formal, then draw up contracts but there's no requirement to bog yourself down with timesheets and admin.

Another solution could be you simply invoice from your company to your dad's company for the consultancy work you provide for you. He settles your invoice, you then deal with the income in your company etc.

[malvolio]

Craig's last point makes good commercial sense, in that it may lead to other work. If someone asks Dad where he got his website, "From a media design company owned by PeejeUK " is a lot better answer than "Oh, we knocked it up between ourselves". Especially if he is selling his own profile and achievements.

[WordIsBond]

Also, doesn't the new CEST ask if you have concurrent contracts, or something like that? If so, this would let you answer yes.