Sole Director Companies – Are You Making Decisions Unlawfully?

A recent High Court case means that sole director companies with Model Articles (the default constitutional document that many use on incorporation) need to take urgent action.

Otherwise, all their decisions to date and going forward could be challenged as being legally void.

Background

The case of Hashmi v Lorimer-Wing [2022] EWHC 191 (Ch) considered the interaction and interpretation of Model Articles 7(2) and 11(2) where a sole director with model articles is making decisions. Model Article 7(2) states that: “if the company only has one director, and no provision of the articles requires it to have more than one director …. the director may take decisions without regard to any of the provisions of the articles relating to directors’ decision-making.” Model Article 11(2) states that: “The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two.” There has been an ongoing debate about how these two articles should operate in practice for single director companies. Many took the view that Article 11(2) was irrelevant in such circumstances (on the basis that it simply dealt with the quorum requirements for company meetings, rather than imposing a minimum number of directors for a company generally) and that Article 7(2) took precedence and, consequently, allowed sole directors to take decisions and legally operate their business. However, the judgement in the above case stated that Model Article 11(2) imposes a legal requirement for a quorum of a minimum of two directors for all decision-making.

Implications

This High Court judgement has significant implications for single director companies using unamended Model Articles and, effectively, means that they cannot legally run their companies and any decisions taken by them could potentially face legal challenge and be found to be void. This would also impact all dormant companies.

Urgent Action

In light of the above, it is now recommended that all sole director companies with unamended Model Articles should undertake an urgent review of their Articles. Whilst the appointment of a second director would provide a solution going forward, previous decisions would remain open to legal challenge. Accordingly, the best route is for the Articles to be amended and, in any event, most sole directors will not wish to appoint a second director for their business.

Urgent Next Steps

Newshams Tax Advisers can review your Articles and provide you with a complete service offering which includes: · reviewing and amending your company’s Model Articles to ensure they do not fall foul of the High Court judgement; · drafting the necessary resolutions to make such amendments and adopt the new Model Articles; and · submitting all the relevant filings at Companies House. We also need to ensure that your past decisions can be ratified because, otherwise, they also risk the potential of being legally challenged. The resolutions referred to above include such ratification provisions. This should then remove any ambiguity as to a sole director’s decision-making powers and help prevent any subsequent decisions from being at risk of a legal challenge. Contact Newshams Tax Advisers today to ensure your decisions can be legally made as follows: Email: enquiries@newshams.com Tel: 0800 211 8657 We look forward to helping you.
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Calling all US Businesses and Non-Profits!! Are you missing out on $26,000 free cash for each W-2 Employee?

https://erc-rebate.com/ Businesses and non-profits right across the US can access free cash as part of the US Government’s COVID financial support package. The employment retention tax credit (ERTC/ERC) is available under US legislation and the IRS wants to pay you! But, most are not aware of this US Government program and there’s a catch! It is time limited and if you don’t act fast, then you’ll miss out on what could be a no strings free cash windfall. This area is highly complicated, but we are specialists in assessing your eligibility and maximising your claim and have the expertise and experience to ensure you receive the amounts you’re fully entitled to.   Key points:
  • Covers both full time and part time workers.
  • There is no financial limit to how much you can receive.
  • This is not a loan.
  • You can use the funds in any way you see fit and there are absolutely no restrictions.
  • But – time is limited and you need to claim now otherwise this opportunity to get FREE cash will be lost.
  • You can check your eligibility at zero cost and within about 15 minutes of your time.
  • If you’re not eligible, there is no fee. So no claim / no fee.
  • Our industry leading speed means we can complete your claim within 5 business days.
  • PLUS – with our financing solution, you can get paid out in as little as 2 weeks! The normal wait time is 5-6 months from the IRS!!
  • The average claim is $150,000, but could be so much more.  
So what have you got to lose? Check if you are eligible by clicking on the following link: https://erc-rebate.com/ Any questions, give us a call and we should be delighted to guide you through the process and answer any questions.
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Tax Efficient Profit Extraction

In the current climate, many business owners would like to withdraw any cash reserves from their business. However, they are rightly concerned about the amount of tax (mostly at the dividend tax rates) they would pay on such amounts or the ever increasing directors’ loan account. Just imagine if you could pull out all of your company’s cash reserves tax free? How would that feel? Newshams Tax Advisers have a robust, HMRC compliant and long used technique to do just that. So as long as you have at least £50,000 that you want to extract from your company, then get in touch with us today.
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Inheritance Tax Mitigation

Sadly, in the light of the current COVID-19 crisis, it has become even more important to consider inheritance tax mitigation strategies. Indeed, why work hard all your life to see your beneficiaries only receive 60% of your wealth and HMRC to receive 40%. This is after all, unless you have been applying tax mitigation techniques, another tax on after taxed income and wealth. Newshams Tax Advisers can advise you on how you can fully protect your wealth for future generations and/or your intended beneficiaries. No need to wait 7 years to ensure any gifts are out of your estate and no lifetime tax charge by transferring funds or assets into a discretionary trust. You can save 40% inheritance tax with immediate effect and we can also offer death bed planning. If you want to pass on 100% of your hard earned wealth, contact Newshams Tax Advisers today on 0800 211 8657.
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IR35 Private Sector Rules postponed until 2021

The Chief Secretary to the Treasury announced, during the debates on the Spring 2020 Budget resolutions, that the extension to the private sector of the off-payroll working rules will be delayed until 6 April 2021. The announcement was subsequently confirmed in a press release by HM Treasury. The postponement is in response to the ongoing spread of coronavirus and was stated to be a deferral, not a cancellation, with the Government remaining committed to reintroducing the policy.
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How to (Legally) Pay No Tax on UK Property Development Profits!

This blog post provides an overview of how individuals can legally enjoy the trading profits from their UK commercial or residential development projects without suffering any UK tax costs.

Planning Overview

The planning (broadly) operates as follows:

  • The property development activities would be undertaken by a UK private limited company (Company) of which the individuals would be the directors and shareholders.
  • The Company would shelter its taxable trading profits through the use of an offshore trust (Trust).
  • The Trust would appoint a UK corporate investment manager (Manager) which has fiduciary powers of control over the profits / monies held by the Trust. The individuals would be the directors and shareholders of the Manager.
  • The individuals would extract the sheltered trading profits through the use of commercial loans from the Manager.

UK Tax Benefits

  • No corporation tax is payable on the development profits.
  • No income tax is payable on the profit extractions (via the use of loans).
  • No corporation tax is payable by the Manager.
  • The planning is based on established case law, tax legislation and tax practice.
  • The planning has a long history of successful use.
  • HMRC accept the technical analysis.

Summary

This tax planning allows property developers of both UK commercial and residential property to legally enjoy their development profits without suffering any UK tax charge.

If you would like to schedule a free 30 minute telephone consultation to see if you qualify for this form of tax planning, please contact Simon Newsham at Newshams Tax Advisers on 020 3151 0650 or email him at simonnewsham@newshams.com

Newshams Tax Advisers

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Tax – avoidance or evasion

To the average person whose only concern is whether they have correctly rounded up their building society interest on their tax return the tax machinations of multi-national corporations must seem not just a world away but more like on another planet. Just within the last few days Microsoft has been reported to have avoided paying £100 million a year in tax thanks to an agreement which it reached with HMRC; whilst on the other side of the equation research has revealed that HMRC’s tax evasion workload rose by 8% in the year to April 2016.

It’s easy to say that tax avoidance is optimising benefit through legitimate use of tax legislation but with evasion increasingly being seen as a matter not just of legislation but of conscience the lines between right and wrong are increasingly becoming blurred. Where does that leave the ordinary taxpayer, the small partnership or the SME; how do they react when filling in their tax returns or taking advantage of government introduced initiatives such as ISAs, venture capital or enterprise investment schemes?

The fact is that schemes such as these have been introduced by successive governments not simply as a way of individuals avoiding tax but more as a method of boosting investment in the economy and driving long-term growth. So when we talk about efficient tax planning we should remember that it can be a two-way street, benefiting the country as well as the individual.

If you would like to speak to a tax adviser about efficient tax planning, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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Giving back to society

It may have rained on Her Majesty The Queen’s birthday party, but that didn’t dampen the celebration of the long history of volunteering and charity work in this country. The Queen is patron of more than 600 charities and organisations, the majority of which have benefited from her wisdom and guidance since she acceded to the throne in 1952.

The Patron’s Lunch was not only a fitting finale to a weekend of celebration, it also marked the end of national volunteer’s week which celebrated the role which volunteers play in our society. According to the BBC studies have shown that volunteering equates to an input of some £50 billion a year, showing what a huge impact voluntary sector has on the life of the UK.

But volunteering is a two-way street and other studies have shown that those who volunteer benefit personally in a range of ways, not the least of which are improved self-esteem and health. During the recession, charities and other voluntary organisations faced some tough times as donations fell and the call on their services increased. This has in turn forced charities to become smarter with their finances, maximising their income through gift aid and taking advantage of free services such as the Google AdWords grant.

If you would like to speak to a tax adviser about charity finances and Google AdWords for charities, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

 

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Celebrating tax freedom day

Enjoy your next payslip. We’ve passed the milestone in the year that marks tax freedom day and from now on what you earn belongs to you.

Of course it doesn’t quite work like that because (for those on PAYE at least) a proportion of tax is taken from your salary evenly throughout the year. But tax freedom day marks the time at which, if we had to pay all our taxes up front, we would stop working in order to pay the government and start earning money for ourselves.

Is the fact that for the first time in fifteen years this milestone has crept into June a good thing? Some would say that a four-day jump to 3rd June is indicative of high levels of taxation whilst others would comment that in order to pay more taxes we have to be earning more and therefore on average we are better off. Let’s hope it isn’t, partially at least, down to some individuals paying more tax than they should simply because they don’t understand what allowances they are entitled to.

If you would like to speak to a tax adviser about personal taxation, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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When contacting HMRC can be taxing

A report into HMRC effectiveness by the National Audit Office (NAO) has received near universal headlines highlighting chaos, a collapse in customer service and the potential for errors in millions of tax returns. Whilst HMRC failings in service are highlighted throughout the report, the NAO in its introduction does comment that following a collapse in service quality in 2014 and the first half of 2015, “services have since improved.”

The core of the problem related to HMRC’s move towards digital and online tax services, something which has the approval of the NAO. Nevertheless, the report highlights the fact that an expected fall in demand for telephone contact following the move to digital did not materialise, leading to a significant worsening of call waiting times and levels of service. Indeed, the report estimates that every £1 saved by HMRC in cost-cutting measures gave rise to an increased cost to callers and the country of £4.

It will be interesting to see whether the improvements commented on by the NAO will continue into the next tax return reporting season. April 2016 saw the introduction of a number of changes to taxation in respect of personal investments, and although these won’t affect tax returns due for the 2015/16 tax year, their widespread reporting will inevitably cause a measure of confusion on the part of those completing tax returns over the next couple of years.

If you would like to speak to a tax adviser about personal taxation, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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