Companies Act 2014 section 156

Prohibition of tax-free payments to directors

Section 156 prohibits companies from paying directors' remuneration on a tax-free basis or in any way that is linked to the amount or rate of income tax.

• A company cannot pay a director remuneration free of income tax or the universal social charge, whether the payment is for their role as director or any other capacity
• Remuneration cannot be calculated by reference to, or varied according to, the director's income tax liability or the prevailing rate of income tax
• The only exception is where a contract was already in force on 31 March 1962 and that contract expressly provided for tax-free payment without relying on the company's constitution
• Any provision that attempts to pay a director on a tax-free basis is automatically treated as providing for a gross payment subject to income tax and universal social charge, with the stated amount being regarded as the net figure