Low Salary High Divvies

[Ruprect]

Rumours are that low salary/high divvies are going to be a pointer that HRMC will use for deciding which PSCs to investigate (for IR35).

So what are the panels thoughts on this? Assuming you're comfortable enough that you're outside IR35, then you should try to be as tax efficient as possible and go for the lowest anyway, and deal with the investigation when/if it comes?

Presumably taking a higher salary/lower divvi is just a guess anyway, and as there is no guidance from HMRC on this you could end up making yourself tax inefficient for no reason at all.

[DirtyDog]

So what are the panels thoughts on this?

Bring it.

[Ruprect]

Bring it.

Hi DD - so you broadly agree with my assessment? I can't see there's any point making myself tax inefficient on the off-chance that it'll make me slightly less likely to be investigated...

[Clare@InTouch]

If it is going to become a more prominent factor it will still only be one of many, and presumably there are more important ones like filing documents on time and paying tax on time.

The same advice as usual would stand regardless - if you're outside of IR35 then you can take what salary you want, just make sure you do all you can to keep proof of your status, get your contracts reviewed, get some insurance in place and maybe join the PCG. Then even if they do investigate you should be able to end it pretty quickly.

[DirtyDog]

Hi DD - so you broadly agree with my assessment? I can't see there's any point making myself tax inefficient on the off-chance that it'll make me slightly less likely to be investigated...

Yep.

I'm confident in my position, and have PCG+ to help argue the case.

I've never been a higher rate tax payer, and am whacking money into a pension plan, so I also figure that there are bigger and better targets out there than me

[Ruprect]

If it is going to become a more prominent factor it will still only be one of many, and presumably there are more important ones like filing documents on time and paying tax on time.

The same advice as usual would stand regardless - if you're outside of IR35 then you can take what salary you want, just make sure you do all you can to keep proof of your status, get your contracts reviewed, get some insurance in place and maybe join the PCG. Then even if they do investigate you should be able to end it pretty quickly.

Yep.

I'm confident in my position, and have PCG+ to help argue the case.

I've never been a higher rate tax payer, and am whacking money into a pension plan, so I also figure that there are bigger and better targets out there than me

Confident in my position too, and also have PCG+

[Maslins]

I don't get it. Low salary high divi is likely to be used by any one person business. This could include plumbers, web designers, accountants, and loads of other sectors where they may have dozens if not hundreds of clients and are a million miles from IR35.

Hardly seems a clear indicator of a high risk contractor to me.

[GB9]

I don't get it. Low salary high divi is likely to be used by any one person business. This could include plumbers, web designers, accountants, and loads of other sectors where they may have dozens if not hundreds of clients and are a million miles from IR35.

Hardly seems a clear indicator of a high risk contractor to me.

HMRC stated in their IR35 enquiry evidence that they are targetting this group, although an additional part of the criteria is low expenses.

Tradesmen usually have high expenses and are much less likely to have a Ltd. company.

The lower the salary and higher the dividend, the greater potential reward there is from an inveatigation. And the numbers are very easy to identify.

[VectraMan]

The lower the salary and higher the dividend, the greater potential reward there is from an inveatigation. And the numbers are very easy to identify.

Didn't we just do this thread?

It makes sense for them to target the cases where they have to most to gain; in fact as taxpayers we should be demanding that they do. They can't tell from your accounts that you had lots of clients, had a right of substitution etc., but they can tell that you paid an artificially low salary, high dividends and had low expenses. If everybody submitted their contracts to HMRC, then perhaps they could use better criteria, but nobody wants to do that do they?

[Ruprect]

Didn't we just do this thread?

It makes sense for them to target the cases where they have to most to gain; in fact as taxpayers we should be demanding that they do. They can't tell from your accounts that you had lots of clients, had a right of substitution etc., but they can tell that you paid an artificially low salary, high dividends and had low expenses. If everybody submitted their contracts to HMRC, then perhaps they could use better criteria, but nobody wants to do that do they?

but what defines "artificially low"?