Safe and Effective tax

**Nixon Williams** · 8 November 2006, 17:13

General advice would be against two shareholders until the outcome of the Arctic case is known in the new year, safer to keep to one shareholder at the moment. Depending upon who the other shareholder is, you might be able to transfer shares to them if the case goes against the Revenue.

We would suggest (as we do with our clients) that payments of salary and dividends are paid monthly as this is easier, there is no problem with this, although if a client prefers quarterly dividends then that is not a problem.

There is no absolute safe way of knowing whether the contract is caught by IR35 or not, although some of the legal specialists have a good record so far.

I hope this helps.

Alan

**TheFaQQer** · 8 November 2006, 18:27

Hi,

My accountant advised not to do 2 shareholders, just 1. And not to do a monthly dividend, in case it's perceived as salary if it comes too regularly.

I'm sure some would agree, and others disagree - I follow his advice since that's what I pay him for!

Faqqer

**Nixon Williams** · 9 November 2006, 11:00

Originally posted by TheFaqqer

Hi,

My accountant advised not to do 2 shareholders, just 1. And not to do a monthly dividend, in case it's perceived as salary if it comes too regularly.

I'm sure some would agree, and others disagree - I follow his advice since that's what I pay him for!

Faqqer

Provided dividends are paid from profits then there is no problem with monthly dividends. I would guess that accountants advise against monthly dividends because of the extra work!

**Meerkat** · 9 November 2006, 11:33

eh?

Wot extra work? Mine just said write yourself a cheque and put it in the dividend column of the spreadsheet we sent you

**meridian** · 9 November 2006, 12:19

Originally posted by Nixon Williams

General advice would be against two shareholders until the outcome of the Arctic case is known in the new year, safer to keep to one shareholder at the moment. Depending upon who the other shareholder is, you might be able to transfer shares to them if the case goes against the Revenue.
<snip>

A forum I went to a little while ago hosted by the PCG recommended something different:
As the Arctic case isn't a test case, each situation has to be judged on it's merits, so their recommendation was to set out your circumstances slightly differently to the Arctic circumstances, e.g:
- instead of 2 shares issued, issue 100
- instead of 50/50 split, make it 40/60
- make the non-fee-earner a director instead of just Secretary
etc

**malvolio** · 9 November 2006, 13:07

Interesting. Haven't seen that one before... I would tend to follow Alan's advice myself, since that may be a little over-cautious but safely covers the bases for this tax year. Basically there are two scenarios at present, that PCG are right or that HMRC are right. You can choose either one, as long as you explain why on your SA form - but if you are wrong and we lose Arctic, HMRC will be coming for the missing tax and you will be at the head of the queue. Far better, if you have the option, to set it up in a way where S660 doesn't possibly apply until we know the rules.

And if the Arctic case isn't a test case, why are HMRC spending around £500k to take it to the Lords when the amount under dispute is around £7k....??

**Nixon Williams** · 9 November 2006, 14:09

Originally posted by Meerkat

Wot extra work? Mine just said write yourself a cheque and put it in the dividend column of the spreadsheet we sent you

If we prepare a dividend for a client we issue the dividend vouchers and board minutes so that all the correct paperwork is there. An entry on a spreadsheet is not conclusive evidence of a board agreement to pay a dividend etc.

Alan

**freelancer_in** · 9 November 2006, 17:00

Thanks Alan, meridian.

Then, is it accountant's responsibility to make sure the company doesn't get caught by IR35???

I haven't got my contract checked by some specialist yet. Can I do that now? Whom would you suggest I go for?

cheers,,,

**Pondlife** · 9 November 2006, 17:05

Originally posted by freelancer_in

Thanks Alan, meridian.

Then, is it accountant's responsibility to make sure the company doesn't get caught by IR35???

No. IR35 is based on your contract conditions and working practises.

Originally posted by freelancer_in

I haven't got my contract checked by some specialist yet. Can I do that now? Whom would you suggest I go for?

cheers,,,

Bauer & Cottrell
Accountax

HTH

Safe and Effective tax