End of year advice for ltd co needed!!!

[malvolio]

It's a trade off, really

You can be sure that the revenue are comparing salary against divi on the SA forms and looking for imbalances.

By doing the low salary/frequent dividend route you are raising the possibility of an investigation by Hector thinking you're trying to minimise your tax liablility (and yes, I know that's still legal, but will you tell Hector or shall I?) and raising the chances of getting smacked if they do assess how you operate

Plan B is to run a bit more like a conventional company with a sensible salary and divis when profit margins permit. That costs you a little bit more gross tax (i.e. adding up corporate and personal liability) but minimises your exposure to the sniffer dogs.

PAYE/NIC/IR35 investigations seem to average about two years and cost you about £10k. It's really a personal choice at the end of the day.

[Rhino]

Re: It's a trade off, really

Malvolio, I am a little surprised by the advice you are giving to contractors outside of IR35, as from memory you are already paying IR35 tax or have I got that wrong ?

[malvolio]

Re: It's a trade off, really

Yes, you have - I don;t, nor do I intend to.

Then again, why you tjhink it's releva nt to my (possibly flawed) view on how it works.

[Rhino]

Re: It's a trade off, really

On the face of it paying a monthly dividend and paying a small salary will cause problems with the Revenue. Many people have historically paid dividends quarterly/half yearly and paid themselves larger salaries with associated higher tax to avoid possible attention from the Revenue. The government have seen fit to seriously increase both employers and employees National Insurance to compound the negative effects of this higher salary approach over the last few years.

There is a generally accepted view that Dividend frequency of more than 4 times a year, although illogical, has not caused increased attention from the Revenue. As for salaries, why don't you ask your accountant how much his contractors outside of IR35 are paying themselves on his advice ?

IMO the government would have been better advised to insist that contractors pay themselves a fair salary for the job they do instead of bringing in the highly controversial IR35. Having said that the increases in National insurance would have grated, especially when we bear in mind the poor quality of services they are apparently supposed to pay for.

awaiting an intelligent riposte from the classically educated Malvolio - I imagine I will be waiting some time.

[malvolio]

Re: It's a trade off, really

Nah, no point. Let's just agree to differ. I'll take the stance that keeping my head down at the cost of comparatively little extra tax to the revenue is how I want to work things and cut down on the already intolerable uncertainty that we all face in the current regime. Others prefer to minimise the amount of tax they pay by whatever legal means they can adopt.

Both are legal, both are defensible, neither is wrong. As I said, it's a choice.

[Rhino]

Re: It's a trade off, really

Let's just agree to differ

Well you can do malvolio but you would be agreeing to differ with qualified accountants and general opinion, not me and I believe this demonstrates your problem !! Logic would say pay a half yearly dividend like other genuine companies, together with a feasible salary. Logic also probably says pay IR35 tax - you seem to have used logic on the one hand and rejected it on the other ? I would be very surprised if your contactor working practices make you any less vulnerable to an IR35 investigation than anyone else.

The current best business practice for contractor limited companies is apparently to pay a quarterly dividend and pay a minimum wage salary. If you have a problem with this, take it up with your accountant and mine. I think the feeling is that the Revenue do not use dividend frequency or salary level as pointers to IR35 status so as the expression goes ' might as well be hung for a sheep as a lamb '. For the classically educated I believe this is a quote from the bible (proverbs) but couldn't make qualified comment

[malvolio]

Re: It's a trade off, really

The current best business practice for contractor limited companies is apparently to pay a quarterly dividend and pay a minimum wage salary.

Well of course it is, as ony fule kno.

Have you thought that that is how I do it myself and I'm just being argumentative?

No, thought not... Now stop banging on. You're right, ok?

(BTW, I thought the thing about lambs and sheep was mid-18th Century in origin, although the original sentiment was from Jonah - can't remember the actual quote though)

[Rhino]

Re: It's a trade off, really

malvolio

Can we stop these mind games please ?

Don't you think we all have enough to contend with, without making light of issues that need mature discussion. There are many inexperienced contractors on this forum who need our help and guidance without infighting and the associated confusion.

Unlike the PCG forum there is scope on CUK for mickey taking without the fear of being banned and most of us are as good as receiving it as giving it out. I have to say that accounting, legal, tax and company issues really ought to be taken seriously though.

Have a good evening