Tax campaigners issue warning over ‘stooge’ directors
HMRC’s consultation on ‘tougher consequences for promoters of tax avoidance’ highlighted a problem of individuals being recruited to act as ‘stooge’ directors
The Low Incomes Tax Reform Group (LITRG) has issued a warning to people on lower incomes of the potential risks when answering an advert to become a director of a company in exchange for a fee, as it may be a form of tax avoidance.
The tax campaigners’ warning is in response to HMRC’s consultation on “tougher consequences for promoters of tax avoidance”, which highlighted a concerning problem of individuals being recruited via social media to act as “stooge” directors to front umbrella companies that are not compliant with tax law.
It said they are also likely to be attracted by the fees on offer for agreeing to act as a director, but the individuals involved usually have no understanding or experience of a director’s role and do not realise they are leaving themselves exposed to being fined, or to criminal prosecution.
As directors are legally responsible for running companies, the group says that becoming a director is “never something to be undertaken lightly, but should be avoided at all costs by people who are not involved in the running of the company and so do not exercise any control or influence over it and are simply paid to forward on correspondence”.
In the eyes of the law, they are treated like any other director and are potentially liable for any problems with the way the company is run.
Victoria Todd, head of LITRG, said: “It is important for anyone thinking about becoming a director of a limited company to understand what the role entails and what their responsibilities are, as they may be fined, prosecuted or disqualified from being a company director in future if they do not meet their responsibilities.
“We are concerned about the growing number of social media adverts being used to find stooge or nominee directors who are then being used to ‘front’ non-compliant umbrella companies in return for a fee. This is usually an attempt to try and disguise the real ownership of the company.”
She added: “We are warning people of the dangers of signing up to be a stooge director and advising any that have already signed up – to do their research and consider resigning their directorships as soon as possible.”
