SJD v NW advice = confusion

[malvolio]

You don't know the answers until you ask the question.
I was happy with all the answers until this started. Gone from a sensible discussion to this. Typical.

That's the point, basic netiquette. Different people express different views on the same subject. Some of them will diverge from what you might be expecting, but that's the nature of the beast. The trick is for you to ignore what you consider to be the inappropriate comments, not to ask that people don't post them in the first place.

[psychocandy]

A pay myself £5715. To others, rather than paying £1024 a year in the hope they dont inspect you, wouldnt it be much cheaper to use that money to pay for either pcg and or IR35 insurance?

Hmmm. Good point.

[psychocandy]

you can see why I'm confused?
It's all very well to say it's up to the client but if Nixon Williams say it's fine to do that then why not to do it. I'm not a lawyer or an accountant so I should take their advice.

my point exacly in another thread. Its seems advice depends on which accountant you use. Confusing.

[BlasterBates]

If you pay yourself minimum salary you're asking for it because you're paying yourself the absolute minimum. So the HMRC official would have a good argument that you're disguising income to dodge NI. Now it would be impractical to pay yourself the full wack, but anything reasonable lets say 20-30K, which is what a programmer would get would unlikely draw the wrath of HMRC; it wouldn't be worth their while, they'll go after the minimum wagers first. So you've got to pitch somewhere in between.

Bear in mind they've got new systems in place to try and catch people, i.e. new nasty tick boxes which although you may decide not to tick, nevertheless indicate they're out to get you.

[psychocandy]

If you pay yourself minimum salary you're asking for it because you're paying yourself the absolute minimum. So the HMRC official would have a good argument that you're disguising income to dodge NI. Now it would be impractical to pay yourself the full wack, but anything reasonable lets say 20-30K, which is what a programmer would get would unlikely draw the wrath of HMRC; it wouldn't be worth their while, they'll go after the minimum wagers first. So you've got to pitch somewhere in between.

Bear in mind they've got new systems in place to try and catch people, i.e. new nasty tick boxes which although you may decide not to tick, nevertheless indicate they're out to get you.

Now is this an opinion based on experience?

[SueEllen]

my point exacly in another thread. Its seems advice depends on which accountant you use. Confusing.

1. Choose an accountant that reflects your views.
2. Take out Tax investigation insurance
3. Get your contracts reviewed and rewritten to be outside IR35
4. Make sure your working practises on each contract are outside IR35 and keep evidence to prove it.
5. If HMRC get intouch don't talk to them at all but immediately talk to the insurance company.

[Cr1spy]

SJD said: "we would not advise issuing shares to a non income generating spouse as this may be regarded as income shifting by HMRC".

Last month SJD advised me to setup my limited with a 70/30 share split between myself and Mrs. Cr1spy.

Is this advice given by each accountants personal preference? Or is there a difference between initial setup share distribution and post creation share issuing?

[SueEllen]

Last month SJD advised me to setup my limited with a 70/30 share split between myself and Mrs. Cr1spy.

Is this advice given by each accountants personal preference? Or is there a difference between initial setup share distribution and post creation share issuing?

Seems to be each accountants personal preference but then they are also considering things that you wouldn't consider. For example if you and your wife split up you are still the majority shareholder and have control of the company with a 70/30 split. Think Bernie Ecclestone's divorce where everything was in his wife's name before the split.

[psychocandy]

1. Choose an accountant that reflects your views.
2. Take out Tax investigation insurance
3. Get your contracts reviewed and rewritten to be outside IR35
4. Make sure your working practises on each contract are outside IR35 and keep evidence to prove it.
5. If HMRC get intouch don't talk to them at all but immediately talk to the insurance company.

Cheers Sue.

I am now beginning to see the importance of (1).

(4). Could be difficult to prove.

[philip@wellwoodhoyle]

Accountants will only go with their own experiences. I'm more than happy with £7k p.a. directors fees, balance as dividends and a spouse being a co-director and say 20-40% shareholder to share dividends. I've been an accountant for nearly 30 years and specialising in PSC's for just over 10, and NEVER had a single HMRC argument about payroll levels nor dividends/fees to a spouse. So, until there is clear evidence to the contrary, i.e. a change in the law, or anecdotal evidence that HMRC are becoming more aggressive and challenging, then I'll continue to give that advice. Subject to, of course, telling the client that there is a risk of HMRC challenge.

I don't see any point in paying a higher level of directors fees until you're willing to pay a proper market rate, which can be argued to be virtually the same as the contract rate for a single person PSC! There's just no point in paying fees of minimum wage level or £12k or whatever some people like to. They may get a warm feeling, but HMRC aren't stupid enough to accept a level of £12k when they wouldn't accept a level of £7k for a company turning over £100k with £80k profit!!

Of course, some business owners will get challenged, and that will cost them in terms of defending themselves and tax/NIC if they can't defend themselves. That's the importance of tax investigation insurance or membership of the PCG or FSB or whatever.

We have to remember that there is no absolute law against the £7k directors fees method nor is there any law against spousal shareholdings. The only relevant law is IR35. HMRC can't argue about anything else at all. So if you're outside IR35 then you're in the clear. If you're likely to be caught by it then paying yourself £12k payroll instead of £7k is an irrelevance and won't help your case. I've never been convinced about the argument of HMRC going for easy/big cases. I've seen far too many nit-picking enquiries over trivialities with the potential to net only a few hundred pounds in unpaid tax to believe that HMRC would deliberately choose a PSC paying payroll of £7k over one paying £12k or even £25k, for a higher tax take as the outcome - HMRC inspectors just don't think like that, they're not commercially minded. Well, not yet anyway, who knows whether they'll start to use intelligence more wisely in the future, but there's precious little sign of it yet.