Limited company director

[Thingsthatgo]

I work for a very small company, just me and my boss. We get on very well and I love my job. The company has two main parts, retail and evening classes, and my boss is looking into splitting the company into two limited companies, which will help with his VAT bill. They are separate businesses and I think splitting them out is fine, but it needs checking. He has asked if I would like to be the company director of the education business. I have said that I will think about it/look into it. Please could anyone give me an insight into my responsibilities as a company director?
I see myself staying with the business for the long term, and trust my boss completely. (I’ve known him for 20 years).

make sure you read up www.gov.uk/guidance/being-a-company-director

We did this with our family business.

Company director means your details will be listed on company house. I'm not sure how your salary is paid but this might change. I would sit down with the accountant and do a full scope on what this entails and any implications.

Thank you @BritInUS1 I have had a look at that link, I guess a lot of the responsibilities are geared towards much bigger companies, but it certainly looks doable.
Thank you @doadeer yes, I’ll have a chat with our accountant, just wanted to have vague idea beforehand (accountant is not always the best at explaining things!)!

I'd ask how it will affect your mortgage / rent, pension etc. What liability would there be if the business went bust? How will your salary be paid? What responsibilities will you have for accounting fees and charges? Stuff like that

@doadeer great. Thank you. They are very useful questions. It hadn’t occurred to me that it could affect our mortgage when it comes up for renewal.

The whole point of a limited company is that you are not personally responsible for liabilities. It will have absolutely no effect on your rent, mortgage or pension and your salary won't change unless you want it to.

Do not submit your home address to Companies House (unless you are for some reason keen for anyone to be able to find out where you live). Instead submit the registered address of the company.

Read the link above. This is all that a Company Director has to do.

A director can become liable in the case of negligence or fraud or wrongful trading, insolvent trading etc., so you need to be properly involved in the company management so you stay fully aware of what's going on. You have no defence in law if you turn a blind eye or simply aren't being told what's going on. It's up to you to make sure you've access to the bank statements, management accounts, book-keeping, insurance policies, contracts etc so that you can comply with your legal responsibilities. Your wages should increase to recognise the importance and responsibilities of a directorship.

Whatever you do, don't allow yourself to be a director in name only just so the owner can pretend it's not him running the company!

You can't just "split" a company to save VAT. It's not that easy. HMRC have a set of rules called "disaggregation". There are several aspects that they consider whether the "two" businesses are genuinely separate. Just being different "trades" isn't enough. There are other tests, such as whether there are common customers and/or suppliers, and another test as to whether the "management" is genuinely separate. Having the same people doing the management/administration from the same office using the same equipment (computers, etc) could well be caught by the disaggregation rules. I suspect he only wants the OP to be a director to give the illusion of them being separately managed, but if the owner continues to "run" both companies and the OP is merely a puppet (shadow director), it could well be deemed artificial separation if there are other "common" factors and simply won't work.

I'd echo the previous poster saying that if the OP goes ahead, they need a substantial increase in wage to account for the extra risks, responsibilities and obligations they're taking on.

Thank you @user1497207191 My boss is doing some research currently to find out whether his two businesses can be divided legally. Everything I have read so far, including all of the points that you made, would suggest that he can do so, but he will ensure that it is all above board before he does so.
I was brought in to run the school, but neither of us anticipated how much demand there would be for it. We thought it would be a small part of the business, but it has become very successful in its own right. My wage is very generous, but I shall certainly put forward an argument for a pay rise! Thank you.

If the reason for splitting a company into separate ones is largely in order to save on VAT, then it is tax evasion and HMRC will come down on that like a ton of bricks. You really don't want to get involved in that sort of thing if you can help it.

Might I suggest that you contact a different accountancy practice to the one your boss uses, and go and ask for their advice.