CT and responsibility

[salazie]

You're not being too cautious at all. That's exactly the way to operate, IMO, unless you need the extra cash for something. The end of year bonus is always nice.

I'm a little confused by this - I'm all for putting money away 'just in case', but surely if the taxman was going to investigate it could be pretty much at any point in the future (up to 6 years is it?), and so to cover yourself you'd have to keep the money in the company until then. If you pay yourself the full amount in dividends at the end of the year then you're barely better off, although I guess you are covering yourself during that 1 year period... But then the investigation could come in the following year, after you'd paid youself the divi's?

Or does it not work like this?

[boredsenseless]

I'm being to cautious then. About 50% of my money gets put to one side to cover CT and any periods I'm out of work.

Take just enough each money to live in the manner to which I'm accustomed plus a bit more.

Looking forward to the accountant telling me what we can take from company under Divs at the end of the year.

No you're not, it seems to me that this is a very sensible way for a company to operate. You can hardly gear up for an opportunity that may involve taking on a couple of subbies (who you have to pay before you get paid) if you've taken every penny out of the company.

[NotAllThere]

I'm a little confused by this - I'm all for putting money away 'just in case', but surely if the taxman was going to investigate it could be pretty much at any point in the future (up to 6 years is it?), and so to cover yourself you'd have to keep the money in the company until then. If you pay yourself the full amount in dividends at the end of the year then you're barely better off, although I guess you are covering yourself during that 1 year period... But then the investigation could come in the following year, after you'd paid youself the divi's?

Or does it not work like this?

Ah, you misunderstand. I do not operate my company this way in case of investigation or IR35 liability. I do it to ensure I can pay corp tax and vat and paye and whatever, and I don't declare a dividend out of profits that I don't have.

The opposite end of the spectrum, as has been expressed a few times in this forum, usually with the words "HELP" close by, is to just take money out of the company as and when, and sort out the taxes at year end. At no point during the company year, with this way of working, do you actually know how much dosh you've got. A very risky way of working.

If you know that your company can afford to pay your £40,000 a quarter more than you need to live on, then by all means declare a divvy. The point is we don't always know what our liabilites nro our income will be at year end. So we work like this to avoid a nasty surprise when the vatman comes a knocking cos you can't afford to pay that VAT bill, cos you've spent all the company money on wine, women and song.

[salazie]

Ah I see, sorry - got the wrong end of the stick. Thanks for clearing it up for me!

[r0bly0ns]

And don't forget that Corp Tax is going up 1% a year for the next couple of years thanks to Gordon Brown.