National Minimum Wage or £97 pw?

[rawly]

I However at £10k I think they will see you being more cautious. Pushing stuff to the limit is ok, untill you push something too far that you were not mean't to.

There is also another reason for the 10k thing. I was reviewing the QDOS insurance package - which I currently get via Giant - but I'm about to move from them and deal with QDOS directly. In their questionaire you need to fill in for their complete IR35 total insurance - there is a clear statement you have to make explaining what is the reason - if you are paying yourself less than 10k in salary. I don't know if this is standard for IR35 insurance, but QDOS make more of an issue about it, if you are paying yourself less than 10k. It states they can increase the Premium if you are and you also have to give a reason for this on the form.

[THEPUMA]

Yes it is.

It really doesn't matter what the ratio of salary to dividends and expenses is. There is absolutely no legislation that tells you how you have to pay yourself from your company. You could pay yoursefl 100% by way of pension contributions if you choose to. So if there is no legislation preventing you from doing this, why would it be the catalyst for an investigation?

In fact, if you were to apply that logic, surely £10K is just as much of a piss take?! We are talking about plenty of people here who are invoicing over £100K pa so there is absolutely know way that their market salary is £10K and equally I'm certain that 90% of them would not be able to afford to live on £10K pa.

So the logic applied as to why you shouldn't pay yourself £97 pw equally applies if you are paying NMW.

I think there is a misperception on here as to how HMRC go about selecting cases for investigation.

Virtually all of our PSC client base pay themselves £97pw and I can categorically assure you that, since 1999, I have not had a single investigation that has resulted in an IR35 liability being paid. I can only think of a couple of investigations, both of which arose because the client failed to submit their various records to HMRC at all. Both of these were successfully defended.

SO based on my actual experience, the %age chances of an investigation if you pay yourself £97 pw are, well they're nil if you exclude those who submitted their records on time. And if you include them, they are still 0.2% pa.

[THEPUMA]

Rawly - agreed - I made this point in my first post. I would source an alternative provider or pay the additional premium.

[THEPUMA]

Incidentally, I believe the reason for this clause is that it reduces their exposure. It is effectively like paying an excess as you have obviously already paid the first, say £2,000, of any IR35 liability.

[rawly]

I think there is a misperception on here as to how HMRC go about selecting cases for investigation.

It seems to me that QDOS must have data showing you are more at risk under 10k, otherwise they wouldn't ask for a higher Premium. Insurance is all about risk, so there must be statisitics that they have showing you are more likely to be investigated if under 10k.

Interestingly, I've just checked my Giant payslips, and they pay me £200.65bp, which mystersiously is just over £10k.

[turbo]

I would like to hear an explanation from Nixon Williams and SJD as to their exact reasoning behind advising NMW.

I didn't realise that SJD advised NMW - looking at their 'take home 83%' stuff, it looks like they use a 5k salary figure in their calculations.

turbo

[THEPUMA]

I believe that they use £5K for their calculations but actually advise NMW.

[ASB]

Quite a lot has been mentioned about what might trigger an investigations. But what information do HMRC have that might trigger a compliance review ?

- P35 etc
- P14 etc
- SA forms
- Company Accounts

Now all of these things should show the same information. So there are two presentations visible:-

Salary 5035
Dividends 40000 (or whatever)
Expenses 15000 (assuming the normal case of dispensation not obtained - although it is not impossible).

Or:-

Salary 10000
Dividends 35000
Expenses 15000

I rather imagine that neither of those returns is any more or less likely to trigger an enquiry than the other.

There are a number of valid reasons in my opinion for paying, say, 10k. Some of them are:-

- Comfort
- Greater pension contributions
- Definite immunity from prosecution and penalty should HMRC manage to convince anybody NMW does legally apply

This may or may not be worth the payroll costs (which are surely 1,800 odd not the 1,000 that is mentioned).

I very much doubt that there is a greater risk of investigation as a result of 5000 v NMW.

[rawly]

I've just checked with Nixon Williams and they use 10k as basic salary in their illustrations. Isn't it also the case you need to pay yourself a certain amount to get the required NI stamps? I don't know what this figure is, however, or whether any of you regard it as important enough.

[ASB]

I've just checked with Nixon Williams and they use 10k as basic salary in their illustrations. Isn't it also the case you need to pay yourself a certain amount to get the required NI stamps? I don't know what this figure is, however, or whether any of you regard it as important enough.

It is important, the accrued pension benefit is valuable. However I believe that now you get a full years credit if your income is between the LEL (84/87) and the primary threshold (97/100). It used to be that NI became payable on the complete salary once the LEL was reached, thus a number of people would make voluntary contributions in order to keep up NI record rather than pay the NI due on salary.

I have spent a number of years paying myself as little as possible in salary, I still have a "full" ni contributions record according to my latest pension forecast from DWP.