Readers’ forum: Company profits to directors’ personal service companies

My client Mr X is the director and majority shareholder of Company A. His wife is a minority shareholder. Most of this company’s work is carried out for Company B. In effect Mr X – through his company – operates as a sales agent for Company B which buys and sells goods.

Another separate firm Company C also operates as a sales agent for Company B. That company is run by its joint directors and shareholders Mr Y and Mr Z. All three companies are small and other than this work relationship there are no other connections between the directors and the companies.

I have been advised that the shareholders of Company B have sold their shares to Mr X Mr Y and Mr Z who now each own one-third of the shares in Company B.

The three directors intend to carry on invoicing...