Effect of becomming a director on student tax status

[Jack Kelly]

Hi there,

I am a PhD student in London and I plan to set-up a small film production
company with some friends. We intend to register a Ltd Company at Companies
House within the next week or so.

How will this affect my student tax status? For example, will being a
company director mean that I'll have to give up the tax benefits of being a
student? If so, are there any ways round this problem (e.g. becoming a
secretary rather than a director)?

Many thanks,
Jack

[John-Smith]

Post by Jack Kelly
I am a PhD student in London and I plan to set-up a small film production
company with some friends. We intend to register a Ltd Company at Companies
House within the next week or so.
How will this affect my student tax status? For example, will being a
company director mean that I'll have to give up the tax benefits of being a
student? If so, are there any ways round this problem (e.g. becoming a
secretary rather than a director)?

Just don't tell them. They are most unlikely to find out.

A mate had this problem in the 1970s - he went about it in a legit
manner and was told that it would disqualify him from just about
everything, even though the business was not likely to generate any
significant income.

[Jack Kelly]

Hmm, very interesting. Thanks!

My company is very very unlikely to make any money, either.

Thanks,
Jack

Post by John-Smith

Post by Jack Kelly
I am a PhD student in London and I plan to set-up a small film production
company with some friends. We intend to register a Ltd Company at Companies
House within the next week or so.
How will this affect my student tax status? For example, will being a
company director mean that I'll have to give up the tax benefits of being a
student? If so, are there any ways round this problem (e.g. becoming a
secretary rather than a director)?

Just don't tell them. They are most unlikely to find out.
A mate had this problem in the 1970s - he went about it in a legit
manner and was told that it would disqualify him from just about
everything, even though the business was not likely to generate any
significant income.

[Francis Davey]

Post by Jack Kelly
Hi there,
I am a PhD student in London and I plan to set-up a small film production
company with some friends. We intend to register a Ltd Company at Companies
House within the next week or so.
How will this affect my student tax status? For example, will being a
company director mean that I'll have to give up the tax benefits of being a
student? If so, are there any ways round this problem (e.g. becoming a
secretary rather than a director)?

First point: I was not aware that "student status" gave any advantages
for tax purposes. I never found any difference in treatment between when
I have been a student and when I haven't.

Second point: as far as I know, being a company director doesn't make
any difference at all to one's tax status. Certainly when I was a
director it made no difference to me. Why should it?

Two things make a difference to tax status as far as I can remember: (1)
what you earn (2) whether you are self-employed or not. Putting it very
simply.

If you start paying yourself out of the dividends, or the company is
really a sham personal services company, that might have some effect,
but otherwise I don't see why it should. If you are an employee of the
company, that might make a difference, but there is no reason (again)
why you should be.

Francis Davey

[Daniel Kelly (AKA Jack)]

Dar Francis,

Many thanks for your reply. In answer to your question...

Post by Francis Davey
I was not aware that "student status" gave any advantages
for tax purposes

As a PhD student I earn 12,500 UKP per year, untaxed. I do not have to pay
income tax or council tax.

Many thanks,
Jack

Post by Francis Davey

Post by Jack Kelly
Hi there,
I am a PhD student in London and I plan to set-up a small film production
company with some friends. We intend to register a Ltd Company at Companies
House within the next week or so.
How will this affect my student tax status? For example, will being a
company director mean that I'll have to give up the tax benefits of being a
student? If so, are there any ways round this problem (e.g. becoming a
secretary rather than a director)?

First point: I was not aware that "student status" gave any advantages
for tax purposes. I never found any difference in treatment between when
I have been a student and when I haven't.
Second point: as far as I know, being a company director doesn't make
any difference at all to one's tax status. Certainly when I was a
director it made no difference to me. Why should it?
Two things make a difference to tax status as far as I can remember: (1)
what you earn (2) whether you are self-employed or not. Putting it very
simply.
If you start paying yourself out of the dividends, or the company is
really a sham personal services company, that might have some effect,
but otherwise I don't see why it should. If you are an employee of the
company, that might make a difference, but there is no reason (again)
why you should be.
Francis Davey

[Francis Davey]

Post by Daniel Kelly (AKA Jack)
As a PhD student I earn 12,500 UKP per year, untaxed. I do not have to pay
income tax or council tax.

OK. I thought that might be where the confusion was coming from. As I
recall, most academic grants are tax-exempt, so that you do not pay
income tax on them. You certainly *do* have to pay income tax, you and
every other student. However your taxable income is likely to be so low
as to take you under your personal allowance, so that your net tax bill
is 0.

However if you have income that is taxable from other sources than your
grant which is more than the personal allowance, then that is taxable.

On council tax: council tax is charged on properties not people. A
property occupied solely by students is exempt from council tax, but
students individually are not. If a student shares with a non-student
the property has council tax levied on it. How the occupants divide up
that liability is up to them.

Francis Davey

[Daniel Kelly (AKA Jack)]

Brilliant, thanks loads for the reply.

Jack

Post by Francis Davey

Post by Daniel Kelly (AKA Jack)
As a PhD student I earn 12,500 UKP per year, untaxed. I do not have to pay
income tax or council tax.

OK. I thought that might be where the confusion was coming from. As I
recall, most academic grants are tax-exempt, so that you do not pay
income tax on them. You certainly *do* have to pay income tax, you and
every other student. However your taxable income is likely to be so low
as to take you under your personal allowance, so that your net tax bill
is 0.
However if you have income that is taxable from other sources than your
grant which is more than the personal allowance, then that is taxable.
On council tax: council tax is charged on properties not people. A
property occupied solely by students is exempt from council tax, but
students individually are not. If a student shares with a non-student
the property has council tax levied on it. How the occupants divide up
that liability is up to them.
Francis Davey

[Tom]

Post by Jack Kelly
Hi there,
I am a PhD student in London and I plan to set-up a small film production
company with some friends. We intend to register a Ltd Company at Companies
House within the next week or so.
How will this affect my student tax status? For example, will being a
company director mean that I'll have to give up the tax benefits of being a
student? If so, are there any ways round this problem (e.g. becoming a
secretary rather than a director)?

What student tax status? What student tax benefits?

[Daniel Kelly (AKA Jack)]

Dear Tom,

Thanks loads for your reply.

Post by Tom
What student tax status? What student tax benefits?

As a PhD student I earn 12,500 UKP per year, untaxed. I do not have to pay
income tax or council tax.

(yes, this is just a cut-and-paste from the reply I gave Francis - but I am
really greatful for all three replies I've received so far... thanks!)

Many thanks,
Jack

Post by Tom

Post by Jack Kelly
Hi there,
I am a PhD student in London and I plan to set-up a small film production
company with some friends. We intend to register a Ltd Company at Companies
House within the next week or so.
How will this affect my student tax status? For example, will being a
company director mean that I'll have to give up the tax benefits of being a
student? If so, are there any ways round this problem (e.g. becoming a
secretary rather than a director)?

What student tax status? What student tax benefits?

[Tom]

Post by Daniel Kelly (AKA Jack)
Dear Tom,
Thanks loads for your reply.

Post by Tom
What student tax status? What student tax benefits?

As a PhD student I earn 12,500 UKP per year, untaxed. I do not have to pay
income tax or council tax.

Your income (I hope) is classed as 'educational grant'. Income which is
not exempt for this reason IS TAXABLE (over your personal allowance).
Any income you earn from teaching for example is taxable, and you must pay
tax if you earn over about £4650. You have *no* exemption for the
national insurance limits on any money you earn.

If you keep your total income (excluding 'educational grants') under your
personal allowance then you won't pay tax. Similarly, keep your weekly
wages under about £80 and you won't pay national insurance.

For council tax, AFAIK, you only need to be a full-time student to be
exempt (in a student-only house) and you can earn what you like without
paying council tax.

hth

[Daniel Kelly (AKA Jack)]

Dear Tom,

Thank you so much for this very detailed reply - you've given me far more
information than either my careers service or Companies House! Thanks.

Yes, you're right - my PhD income is a stipend from the Medical Research
Council and is classed as an educational grant.

So, just to check that I've understood you correctly... You recommend that I
go ahead and sign up as a company director because it wont make any
difference to my current finances (I'm not expecting to earn a penny from
the company, at least not for a few years).

Thanks loads,
Jack

Post by Tom

Post by Daniel Kelly (AKA Jack)
Dear Tom,
Thanks loads for your reply.

Post by Tom
What student tax status? What student tax benefits?

As a PhD student I earn 12,500 UKP per year, untaxed. I do not have to pay
income tax or council tax.

Your income (I hope) is classed as 'educational grant'. Income which is
not exempt for this reason IS TAXABLE (over your personal allowance).
Any income you earn from teaching for example is taxable, and you must pay
tax if you earn over about £4650. You have *no* exemption for the
national insurance limits on any money you earn.
If you keep your total income (excluding 'educational grants') under your
personal allowance then you won't pay tax. Similarly, keep your weekly
wages under about £80 and you won't pay national insurance.
For council tax, AFAIK, you only need to be a full-time student to be
exempt (in a student-only house) and you can earn what you like without
paying council tax.
hth

[Tom]

Post by Daniel Kelly (AKA Jack)
Dear Tom,
Thank you so much for this very detailed reply - you've given me far more
information than either my careers service or Companies House! Thanks.
Yes, you're right - my PhD income is a stipend from the Medical Research
Council and is classed as an educational grant.
So, just to check that I've understood you correctly... You recommend that I
go ahead and sign up as a company director because it wont make any
difference to my current finances (I'm not expecting to earn a penny from
the company, at least not for a few years).
Thanks loads,
Jack

You probably have understood me correctly, but for the record - I made
no such recommendation.

I think what I was saying is - if your personal taxable income is below
your personal tax threshhold then you shouldn't pay tax on that income. It
won't affect the tax status of your educational grant.
errm that's it.

IANAL
cheers

[Daniel Kelly (AKA Jack)]

Cool, thanks.

Jack

Post by Tom

Post by Daniel Kelly (AKA Jack)
Dear Tom,
Thank you so much for this very detailed reply - you've given me far more
information than either my careers service or Companies House! Thanks.
Yes, you're right - my PhD income is a stipend from the Medical Research
Council and is classed as an educational grant.
So, just to check that I've understood you correctly... You recommend that I
go ahead and sign up as a company director because it wont make any
difference to my current finances (I'm not expecting to earn a penny from
the company, at least not for a few years).
Thanks loads,
Jack

You probably have understood me correctly, but for the record - I made
no such recommendation.
I think what I was saying is - if your personal taxable income is below
your personal tax threshhold then you shouldn't pay tax on that income. It
won't affect the tax status of your educational grant.
errm that's it.
IANAL
cheers