Consultant acting as Chief Executive

[susancurrie]

We have a new Chief Executive who has also been appointed as director. He is to work three days a week and to invoice us for his time as per consultancy agreement. However, as he is a director and the majority of his work is for us should we be paying ni and tax?

[Sherlock]

The duties as a director must be taxed as employment income, and the Chief Executive should have a contract of service setting out the details and the payment for this office.

It is possible, but unusual, for a director to provide technical services to the company on a self-employed basis under a consultancy agreement, and if both parties want this to happen, then it should be evidenced by a separate consultancy agreement which will be a contract for services. However it is difficult to see how the role of Chief Executive could come under this heading and it is quite clear that the duties of the office of a director are always as an officer of the company and must be part of a contract of service, the remuneration from which will be subject to PAYE and Class 1 NIC. It will also be necessary to prepare a form P11D annually for the Chief Executive.