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bigduckontax, Accountant
Category: Tax
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I started a limited company with a partner earlier this year

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I started a limited company with a partner earlier this year we both have 50% shares and we both invested 10K to start the business - sadly the partnership has not worked and I have no earnt any money at all from the business - so I decided to try to find a job (I was made redundant from my job that's how I had the investment money). the other person insisted I resign as a director which I did as I had no choice, she said she could not work with me anymore. yesterday I received a copy of our bank statement I believe in error and I not that she has been paying herself wages and paying for her fuel and food shopping etc out of the company account - can she do this?
Hello, I'm Keith and happy to help you with your question.
She was a director so to an extent she can do as she likes. Whether the playing fast and loose with the company's funds is right and proper is quite another matter. With respect, you were ill advised to surrender your directorship as by so doing you lost a substantial and significant leverage within the organisation.
A director of a company is deemed to be an employee of that company and must be remunerated under PAYE arrangements with appropriate tax and National Insurance deductions made and rendered to HMRC either monthly or quarterly. I suspect that this may not have been happening, but, of course, cannot be sure. Furthermore, her use of company moneys on personal expenditure is at best a loan by the company to a director, a situation fraught with difficulty if not cleared very quickly (within 9 months and one day of end of the Company's Corporation Tax accounting period), and at worst outright fraud especially if done clandestinely without the knowledge of the second director.
I should be inclined to retain a local, trusted professional person in this matter to negotiate on your behalf. The threat of possibly reporting to HMRC and their subsequent involvement and possibly even the police might bring the other party to her senses, but as far as both these authorities are concerned it is a storm in a tea cup. An application to the Court to wind up the company might be another possibility, but such an application does not come cheap. I regret to have to tell you that you might well end up having to write off the whole sorry situation to experience.
I am so sorry to have to rain on your parade like this. Regrettably these situations do tend to arise when friends fall out. I am having to deal with two companies in a similar situation at this moment and it is not easy being Piggy-in-the-Middle between two old friends.
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Thank you for your support. I am so sorry that my response had to be so negative.