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WHERE THE COMPANY'S PROFIT IS LOW If the company's profit
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before paying its directors is always fairly small, it would not be a good plan to make their earnings so large as to turn the profit into an outright loss. To be content to reduce it to about zero, is as far as they should go. However, if the profit is usually fairly good and in one exceptional year it drops very much lower than usual, there may be good grounds for keeping the directors' pay up to a fairly good level, even though this leaves the company showing a Loss. The loss would then be relieved by offset against the profit of the one immediately preceding year or if that was inadequate the balance would be taken forward to subsequent years.
In these circumstances the directors should be careful and moderate in their approach to the subject. If they normally draw £5000 each per year they might on this occasion take £3000 rather than only E500, but the actual figures should be settled after looking carefully at all the facts. The main problem which will, obviously, be facing them is to make sure the company is capable of returning to its normal profit-making capacity after this setback.
PART-TIME DIRECTORS
A reasonable remuneration of part-time directors is now an allowable expense of the business but any attempt to pay disproportionately large amounts for small contributions of work will lead to the fee being rejected by the Inspector from the company's tax computations.