Readers’ forum: Excessive pay?

My client’s company carries out business in several countries around the world. One of the shareholder directors is non-UK resident for tax purposes and carries out all of her duties for the company outside the UK. She is paid what we consider to be a reasonable salary considering the importance of her work and her general performance levels.

HMRC has now advised me that it considers the remuneration paid to this individual to be excessive – although it is not clear what basis there is for this position. The department then proposed that the amount of remuneration that it considers to be excessive should be treated as a loan to a participator under CTA 2010 s 455.

This suggestion of course would mean that there is a liability to corporation tax on the company on the amounts concerned.

I consider HMRC’s position to be hopelessly incorrect...