Shadow director issues and benefits in kind
Produced in partnership with Stephen Parnham of Stephen Parnham Taxation Limited
Shadow director issues and benefits in kind

The following Private Client guidance note Produced in partnership with Stephen Parnham of Stephen Parnham Taxation Limited provides comprehensive and up to date legal information covering:

  • Shadow director issues and benefits in kind
  • What is a shadow director?
  • Why does it matter?
  • The wide definition of shadow director
  • The benefits code
  • The charge on living accommodation
  • The charge on loans
  • The charge on the residual category
  • The territorial limits of the benefits code

This Practice Note considers shadow directors of offshore companies and the extent to which such directors may be subject to benefit in kind charges arising under the benefits code in Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). For more guidance on de facto and shadow directors and their duties and responsibilities pursuant to the Companies Act 2006 and common law, see the De facto and shadow directors Practice Note (subject to subscription to Lexis®PSLCorporate).

What is a shadow director?

A shadow director is a person in accordance with whose directions or instructions the de jure directors are accustomed to act. A shadow director is effectively a person who occupies the position of a director, regardless of whether officially named or identified as such.

The statutory definition of a shadow director is essentially the same throughout the legislation and is most likely to be encountered in the Insolvency Act 1986, s 251, Company Directors Disqualification Act 1986, s 22(5), ITEPA 2003, s 67(1) and Companies Act 2006, s 251(1). The definition specifically excludes professional advisers.

The definition within the legislation is intended to be broad and should not be strictly construed. The courts have historically considered that a person must exercise real influence over the company’s affairs to satisfy the definition.

Why does it matter?

UK resident individuals may be