Quick question on "money management" (Tax)

[tim123]

Hi guys,

well I have seen large corporates sponsor individuals through a degree/masters on the assumption they work for the company afterwards.

What are your thoughts?
TM

The revenue will allow this because they are un-connected persons. Your wife is a connected person and the revenue will think you are TTP, which you are.

You have almost no chance of being allowed to sponsor you wife for this.

tim

[themistry]

The revenue will allow this because they are un-connected persons. Your wife is a connected person and the revenue will think you are TTP, which you are.

You have almost no chance of being allowed to sponsor you wife for this.

tim

Just to follow up, after speaking with my Accountant, as stated by Tim, "this just aint gonna happen"

Oh well, anything that is legal is worth a shot in my opinion!

Thanks for all help and suggestions here,

TM

[minstrel]

Dividends aren't pensionable so you have to show the salary as being paid. This means that the company pay Corp Tax and then NI contribs to you for the salary. You then pay tax and NI on the salary and get 22% relief on the contrib.

Pay a company contribution and get relief at 19% on Corp Tax. No need to pay Employer NI or employee NI and Income Tax, a much better arrangement. Also, there is a lot more flexibility on the level of contrib a company can make.

I don't agree with what you are saying, but happy to stand corrected if you can prove me wrong.

If I understand you correctly, you are saying that dividends don't come into the picture because it is only salary that counts to pension contribution limits?

I think you are confusing the pension contribution limits (100% of salary) with the differential effect of paying additional dividends and personal contributions instead of company contributions.

I agree that Corporation Tax and NI contributions on salary would outweigh the 22% relief. However, salary is a fixed variable - MyCo is not going to pay me any more or less salary whether I decide to go the company or the personal contribution route. NI and Income Tax are sunk costs whichever route I take so doesn't come into the calculation.

Given that salary is a fixed variable, it boils down to do I pay £x to my pension direct from the company or do I take 19% CT hit on £x, make a dividend distribution and then take the 22% relief.

If you do the calculations I think you'll find if you keep salary fixed it works out better making the contribution personally.

If you disagree, please show your calculations.