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Tax return question

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    Tax return question

    Hello

    I ran a limited company for about 8 months while on an IT contract and paid myself about £15K salary and about £130 dividend during the 2013-14 tax year following my accountants advice. My accountant did the tax return and marked me as a company director and not self employed. I have now to do the 2014-15 tax return. I had no PAYE and about £12,500 in dividends from my company, again following my accountant's advice, the company ceasing to trade in July. I then subsequenty had a permie job. So my question is:

    Do I say I was self employed for the 2014-15 tax year? I have correctly said I was a company director.

    I suspect if I don't then I am under IR35, and cannot pay dividends. Or am I mistaken? I am concerned that this will flag up a check my HMRC and they might have a go at me.

    Thanks.

    #2
    You are not self employed as you were an employee of your ltd company.

    IR35 is seperately to this and will depend on contract and working practices.

    Comment


      #3
      Originally posted by Kenny@MyAccountantFriend View Post
      You are not self employed as you were an employee of your ltd company.

      IR35 is seperately to this and will depend on contract and working practices.
      Thank you, much appreciated. Tax doesn't half scare the living daylights out of me and I have a PhD too!!!!!!!

      Comment


        #4
        You are not self employed for tax purposes. Even the tax office get this wrong - when I set up my ltd they told me I needed to register as self employed - this is wrong. You are a company director and paid remuneration for that role, you are not self employed.

        IR35 should be considered on a contract by contract basis - read the guides over to the right ---->

        Comment


          #5
          Thanks. I followed my accountants advice, and since I took dividends in the following tax year, that means I am in effect claiming to be outside IR35. One point in my favour is that it was a security cleared role, where you are not allowed to substitute someone and are not allowed to take in your own equipment for obvious reasons. To be honest I wish he'd done it all as PAYE.

          Comment


            #6
            Bit late to be considering the IR35 status of a contract you did last year to be honest. Yes, by taking dividends you have effectively treated yourself as outside IR35. To be honest, its only likely to be an issue if there is an investigation into your tax return so make sure you have any evidence of being outside IR35 (working practice review, contract review, the contract itself etc.), file it somewhere and forget about it for now.

            Fill out two employment sheets for the 2014/15 tax return - one for YourCo, detailing any salary you were paid and any dividends and a second one for your permie job using the values from your P60 and P11D if you have one.

            Depending on what your salary was in the permie job, you may have some higher rate tax to pay on those dividends. If your annual salary, pro-rata over the time you were in the permie job during that tax year is over the higher rate tax threshold then your entire dividend is going to be effectively taxed at 25% so I hope you put some money aside.

            Comment


              #7
              I don't have any contract review, I simply told my accountant several times that I was inside IR35 and followed his advice. I didn't want to be involved in the tax calculation. However, the sole contract was only 6 months, the company stopped trading in July 2014, so I suppose they could do an investigation but it would cost a lot for minor gain. You would think they would prioritise bigger fish.

              Yes I have money to pay the ~£1800 tax on the dividends. That's not an issue.

              Comment


                #8
                Originally posted by GoodBytes View Post
                I don't have any contract review, I simply told my accountant several times that I was inside IR35 and followed his advice. I didn't want to be involved in the tax calculation. However, the sole contract was only 6 months, the company stopped trading in July 2014, so I suppose they could do an investigation but it would cost a lot for minor gain. You would think they would prioritise bigger fish.

                Yes I have money to pay the ~£1800 tax on the dividends. That's not an issue.
                If you told your accountant you were INSIDE IR35 and you have taken dividends then you have failed to operate IR35 properly. You may not have wanted to be involved in the calculation but your tax affairs are your responsibility. Presumably you have some idea about how IR35 works so why didn't you question your accountant at the time?

                Comment


                  #9
                  Originally posted by TheCyclingProgrammer View Post
                  If you told your accountant you were INSIDE IR35 and you have taken dividends then you have failed to operate IR35 properly. You may not have wanted to be involved in the calculation but your tax affairs are your responsibility. Presumably you have some idea about how IR35 works so why didn't you question your accountant at the time?
                  Well it is too late isn't it. I know plenty of people in security cleared roles, same as mine, who operate outside IR35.

                  I did find it hard to tell them I asked to be inside IR35 and assumed they did the calculations accordingly. It's a big agency, SJD Accountancy.

                  Comment


                    #10
                    Originally posted by GoodBytes View Post
                    . It's a big agency, SJD Accountancy.
                    I thought they were accountants not agents.
                    'CUK forum personality of 2011 - Winner - Yes really!!!!

                    Comment

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