Companies: Enquiries into Directors and Participators: Settlements
Guidance on the approach towards loans to participators and misappropriation of profits is at EM8600+. For extractive irregularities you need to co-ordinate the end of your linked enquiries to make sure there is no danger of tax and other duties being omitted from both settlements. EM8610 sets out the circumstances in which you should seek a charge under ITEPA03/S175 in a settlement with a director in respect of loans giving rise to CTA10/S455 liability that have not been returned (or notified for pre-CTSA APs).
Where, exceptionally, extractive irregularities are to be treated as undisclosed employment income paid out of concealed profits, or you are proceeding on the basis that the irregularities may give rise to either CT or employment income liabilities, a TMA70/S28A closure notice for the director enquiries must include the employment income. Unless a PAYE direction transferring liability from the employer to the employee has been made, credit must be given in the self-assessment for the IT that should have been deducted by the employer.
Linked director enquiries should be settled following the guidance at EM8605. However, even if only non company sources of income are involved, you should not settle a director enquiry by contract or by formal closure before you have a signed contract from the company as this would rule out alternative recovery from the director.