Accountant advised offshore setup.

[Toasta]

Hi,

I need a bit of help, i've had a search around but have just ended up a bit more confused.

I am currently working outside of IR35 directly to a client.

On monday I recieved phone call from my accountant advising me that my combined paye salary and dividends had just gone over the threshold of £40k and that because of this any further dividend payments would be subjected to a further 25% tax.

He advised that I setup an offshore arrangement with a company he recommended, similar to a contract where I would sign an employment contract with the offshore company, who would then invoice my client, pay me the minimum salaray and then pay me the remaining money through a loan which would not have to be paid back.

I have started to have my suspicions of the whole setup and was wondering if anyone could answer the following questions.

1.Is there infact a threshold where dividends are subject to further tax.

2.Is anyone else working under this arrangement and is it legal.

and

3.Has anyone heard of anyone being burnt through such an arrangement.

Thanks in advance for any information you can provide me.

[BrilloPad]

Hi,

I need a bit of help, i've had a search around but have just ended up a bit more confused.

I am currently working outside of IR35 directly to a client.

On monday I recieved phone call from my accountant advising me that my combined paye salary and dividends had just gone over the threshold of £40k and that because of this any further dividend payments would be subjected to a further 25% tax.

He advised that I setup an offshore arrangement with a company he recommended, similar to a contract where I would sign an employment contract with the offshore company, who would then invoice my client, pay me the minimum salaray and then pay me the remaining money through a loan which would not have to be paid back.

I have started to have my suspicions of the whole setup and was wondering if anyone could answer the following questions.

1.Is there infact a threshold where dividends are subject to further tax.

2.Is anyone else working under this arrangement and is it legal.

and

3.Has anyone heard of anyone being burnt through such an arrangement.

Thanks in advance for any information you can provide me.

1. Sounds like over the higher rate threshold? Else could be NI - how is salary/div split?
2. I do use an offshore - but some schemes are more legal than others
3. This board is littered with people who have been burned.

Can you say which scheme your accountant is proposing? Does it fall under 1955 Ramsey dual tax judgement?

Most people on here will advise you to keep well clear.

[Toasta]

1. Sounds like over the higher rate threshold? Else could be NI - how is salary/div split?
2. I do use an offshore - but some schemes are more legal than others
3. This board is littered with people who have been burned.

Can you say which scheme your accountant is proposing? Does it fall under 1955 Ramsey dual tax judgement?

Most people on here will advise you to keep well clear.

I was on paye for the first part of the year, where I earned 35000, then last month was the first month I invoiced through my company which I am advised combined have pushed me over the 40,000 pound threshold and henceforth I will need to pay 25% on any dividends drawn.

[BrilloPad]

I was on paye for the first part of the year, where I earned 35000, then last month was the first month I invoiced through my company which I am advised combined have pushed me over the 40,000 pound threshold and henceforth I will need to pay 25% on any dividends drawn.

but you would pay tax wheteher paying paye or div?

[TheFaQQer]

1.Is there infact a threshold where dividends are subject to further tax.

2.Is anyone else working under this arrangement and is it legal.

3.Has anyone heard of anyone being burnt through such an arrangement.

1 - There is a threshold on income, where you pay more tax. Nothing specific for dividends though.

2 - Some people are, and would defend the legality. Most are not, and would not. If it were, everyone would be doing it.

3 - Plenty of people.

HTH

[THEPUMA]

3 - Plenty of people.

HTH

Just out of interest, when you say plenty of people, is that people who are under enquiry or people who have physically written HMRC a cheque that was higher than the tax they should have paid in the first place?

[Toasta]

Just out of interest, when you say plenty of people, is that people who are under enquiry or people who have physically written HMRC a cheque that was higher than the tax they should have paid in the first place?

The question I asked was more, have people been burned by the umbrella?

Because there is a massive lack of transparency with this one and I was more worried about them nicking off with my money.

[Toasta]

1 - There is a threshold on income, where you pay more tax. Nothing specific for dividends though.

2 - Some people are, and would defend the legality. Most are not, and would not. If it were, everyone would be doing it.

3 - Plenty of people.

HTH

So am I right in saying, that no matter how much you have earned in paye, there should never be a point when you need to start paying personal tax on dividends?

[TheFaQQer]

So am I right in saying, that no matter how much you have earned in paye, there should never be a point when you need to start paying personal tax on dividends?

No - you pay a higher rate on income over the higher level threshold. Wherever that comes from.

So whether you earn £10k through PAYE over the threshold, or £10k through dividends, or £10k through rental income not paid through a company, you pay tax at the higher rate.

[Toasta]

No - you pay a higher rate on income over the higher level threshold. Wherever that comes from.

So whether you earn £10k through PAYE over the threshold, or £10k through dividends, or £10k through rental income not paid through a company, you pay tax at the higher rate.

Ok thanks Faqqer, I was a bit suspicious that this might have been a line my accountant has fed me to get me on board with the umbrella.