Skip to main content

Overview Of Director Duty To Minimise Company Tax

Do Directors have a duty to minimise company tax? Well, Directors have a duty to promote the success of their company. This is an obligation that arises under Section 172 of the Companies Act 2006.

Seeking to make a company successful inevitably suggests it should aim to be profitable but a notable factor aligned with paying tax is that it is an activity that directly sprouts from profitability. 

Director Fiduciary Duty

Directors have fiduciary duties to safeguard the company’s property and ensure that it is not frittered away on expenditure that does not benefit the company. That means Directors appear under an obligation not to volunteer or donate money to HMRC. A concept largely unheard of given HMRC does not appear to be viewed as an organisation with charitable status in any event.

Companies can make charitable donations but there is no suggestion doing so via HMRC would meet the relevant criteria. Ordinarily, if a company gives to charity it pays less corporation tax. However, imagine overpaying HMRC tax and claiming the extra as a tax deduction. This does not appear to work because a company would not appear to get tax relief from overpaying HMRC.

Tax Avoidance Duty?

There is no evidence of any tax avoidance duty of a company Director. A company Director has a duty to comply with tax legislation in good faith and not to seek to avoid it.

Indeed the evidence is the other way in that attempting to avoid tax is an action contrary to Directorial duty. For example only, a common route for a Director to be disqualified or subject to disqualification proceedings is having engaged in conduct that involves Unfair Treatment Of The Crown as confirmed by Commentary – Insolvency Service Enforcement Outcomes 2021/22 (Updated 22 April 2022).

The most common allegation was in relation to Unfair treatment of the Crown (which usually refers to HM Revenue and Customs (HMRC)), which was associated with 37% of director disqualifications in 2021/22. Unfair treatment of the Crown can range from cases where a director had made a conscious decision to pay other creditors and not HMRC, to cases where a director has defrauded or attempted to defraud HMRC. This has been by far the most common allegation made since comparable records began in 2011/12.

Further, Schedule 1 of the Company Directors Disqualfiication Act 1986 incorporates details of types of conduct contrary to Director Duties and deemed unfit when a Court considers disqualfication. One such relevant category is:

The extent to which the person was responsible for the causes of any material contravention of regulations.

It appears entirely appropriate for a company Director to seek to minimise their taxes but not necessarily do so through involving tax avoidance schemes that introduce transactions with no other purpose or function other than the avoidance of tax. Such schemes may well not be in the best interests of a company.

Tax avoidance may not necessarily be wholly consistent with attempting to organise one’s tax affairs to minimise tax but might be looking to ‘avoid’ it altogether. Tax reliefs exist to incentivise certain conduct but generally not to enable companies to pay £0 in tax when they make profits and gains.

Are you a UK company Director?

If you are a Director of an insolvent company or a bankruptcy, Oliver Elliot can help you. We Know Insolvency Inside Out.

We Know Insolvency Inside Out
Contact us for help

Share This Page!

What Next?

Expert Advice Is Just A Click Away

If you have any questions in relation to Do Directors Have A Duty To Minimise Company Tax? then contact us as soon as possible for advice. Oliver Elliot offers a fresh approach to insolvency and the liquidation of a company by offering specialist advice and services across a wide range of insolvency procedures.

Our expertise is at your fingertips.

Please enable JavaScript in your browser to complete this form.
Name

By submitting this form you agree with the storage and handling of your data by Oliver Elliot. For more details, please read our Privacy Policy.

Opt in

Disclaimer: Do Directors Have A Duty To Minimise Company Tax?

This page is not legal advice and should not be relied upon as such. This article Do Directors Have A Duty To Minimise Company Tax? is provided for information purposes only. You can contact us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

Recent Posts / View All Posts

Directors Are Entitled To Accounting Records At All Times

Directors Are Entitled To Accounting Records At All Times

| Director Duties | No Comments
Directors are entitled to accounting records at all times. That is what Section 388(1)(b) of the Companies Act 2006 says and to prove the point is the case of Suzui…
Limits Of Directors’ Powers To Grant Inter-Company Loans

Limits Of Directors’ Powers To Grant Inter-Company Loans

| Director Duties | No Comments
The limits of Directors’ powers to grant inter-company loans were highlighted in the case of Northern Powerhouse Developments Ltd & Ors v Woodhouse EWHC 3124 (Ch). This was a case…
Should Directors Be Required To Sit A Test To Form Their First Company

Should Directors Be Required To Sit A Test To Form Their First Company?

| Director Duties | No Comments
Should Directors Be Required To Sit A Test To Form Their First Company Overview Should Directors Be Required To Sit A Test To Form Their First Company? The answer is…
The Creditor Duty And Its Effect On An Overdrawn Director’s Loan Account

The Creditor Duty And Its Effect On An Overdrawn Director’s Loan Account

| Director Duties | No Comments
Overview Of The Creditor Duty And Its Effect On An Overdrawn Director’s Loan Account The matter of the Creditor Duty and its effect on an Overdrawn Director’s Loan Account highlights…