Director responsibilities for tax and accounts
What directors are personally responsible for: signing accounts, declaring dividends correctly, keeping records, and avoiding wrongful trading.
The seven statutory duties
The Companies Act 2006 sets seven duties directors owe to the company. Breach can lead to personal liability, disqualification, or worse.
- Act within powers granted by the company's articles
- Promote the success of the company
- Exercise independent judgment
- Exercise reasonable care, skill, and diligence
- Avoid conflicts of interest
- Not accept benefits from third parties
- Declare interests in proposed transactions
Filing responsibilities
- Sign and approve annual accounts before they are filed
- Ensure the CT600 is filed within 12 months of period end
- File confirmation statements at Companies House
- Maintain registered office and PSC (Person of Significant Control) information
- Notify Companies House of changes to directors, addresses, share capital, etc.
Dividend rules
Dividends can only be paid out of distributable profits — broadly, accumulated post-tax profits not yet distributed. Paying a dividend when there are no distributable profits is unlawful and can be reclaimed by the company or its liquidator.
Properly document dividends: a board minute approving them, dated dividend vouchers showing the amount, the date, and the shareholder.
Director's loan accounts
If you take more out of the company than your salary plus dividends voted, you have an overdrawn director's loan account. Owe the company more than £10,000 at any point and you face benefit-in-kind tax. Don't repay within 9 months and 1 day of year end and the company pays a temporary 32.5% extra tax (s455 charge), refundable when the loan is repaid.
Wrongful trading risk
If the company can't pay its debts, directors must consider whether to stop trading. Continuing to incur new debts when there is no reasonable prospect of avoiding insolvency is wrongful trading — directors can be made personally liable for the additional losses.
Records to keep personally
- Copies of board minutes and resolutions
- Dividend vouchers and tax return entries
- Records of any director's loan account movements
- Notes on any conflicts of interest declared
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