SJD v NW advice = confusion

**Clare@InTouch** · 18 February 2011, 16:37

The level of salary is an opinion, there's no hard and fast rule, which is why different firms will make different suggestions. We recommend £12,000 too as it's more commercially realistic, although still a far way away from what you'd be earning in a perm job, and it could help to keep you below the radar. There's nothing wrong with either level, and it's entirely up to you.

**TheFaQQer** · 18 February 2011, 16:40

Originally posted by rightfluff View Post

very confused today. More then usual. Shouldn't happen on a friday but it has.
Currently with SJD. Have been for a while. But after reading numerous threads I'm confused.
Also not happy with SJD over the last few months. Spotted basic mistakes in VAT and Personal Tax returns.
So I phoned Nixon Williams. Lady there seemed very much on the ball.
I told her that SJD have recommended I pay myself £12K gross pa + rest in divi. up to higher rate tax limit. SJD have known for a while that my wife isn't working but haven't said anything about paying her a wage or divi. When I asked again they advised paying her £500pm for admin work but no divis.

Lady at NW didn't understand why I'm paying myself such a high wage of 12K. Should be around £5.8K pa.
She said it's fine to pay the wife a divi. but not a wage. She said HMRC have said that admin for a small LTD is around 2hrs pm at a rate of £10 ph so it's not worth doing.

So my questions are:
1, how can two big accountancy firms have different views.
2, a few people have said it's best to pay around the £10K-12K pa to stay off 'the HMRC' radar. Is this true?
3, what are other people's current set up

I'm fed up of filling in the SJD spreadsheet and having to check their work so I'm moving anyway.

Thanks in advance

1 - Because there are different opinions to be had. Some accountants (like mine) advocate paying a reasonable wage to try to avoid being flagged up under IR35; others believe that this is irrelevant so you should pay the minimum. There is no published guide on why you might get picked, so no-one knows really whether salary really has much bearing on IR35 investigations.

Also, SJD may know the share distribution of your company. If your wife does not own any shares, then she can't receive a dividend. If she does, and you haven't been paying her a dividend, then that's wrong too.

Regarding what rate to pay for admin, it depends on what they do, FFS! There can't be a guideline that says "it takes 2 hours if your company is this big, but 3 if it's bigger etc." My wife is company secretary, sorts the paperwork, does the spreadsheets and expenses, organizes travel for me, signs the contracts, ensures that the contracts are reasonable and have been reviewed, checks for payment on time and chases if necessary (plus the other work she does for the business) - that's not 2 hours work, so I'm not convinced on that one. Plus - would you be paying minimum wage to someone with that much responsibility??

2 - See above

3 - Mrs doesn't own any shares in the company, so can't receive dividends. I pay a low salary (just over the NI threshold) and the rest in dividends, up to higher threshold limit.

**TykeMerc** · 18 February 2011, 16:41

As Clare just said the salary question is all a matter of opinion and some extra tax/NI to pay.

As to the salary for a non working partner that really does nothing for the business that looks like absolutely sound advice with very good reasoning.

**rightfluff** · 18 February 2011, 16:50

Originally posted by TykeMerc View Post

As Clare just said the salary question is all a matter of opinion and some extra tax/NI to pay.

As to the salary for a non working partner that really does nothing for the business that looks like absolutely sound advice with very good reasoning.

I agree with the salary but paying dividends to the wife ?

**Clare@InTouch** · 18 February 2011, 16:59

Originally posted by rightfluff View Post

I agree with the salary but paying dividends to the wife ?

Maybe SJD know something NW don't? If SJD are your appointed advisors then they have full access to your records but NW wouldn't. Perhaps other income to take into account? Without knowing your full background it's difficult to say that either bit of advice is right or wrong!

**TykeMerc** · 18 February 2011, 17:01

Originally posted by rightfluff View Post

I agree with the salary but paying dividends to the wife ?

Dividends go to shareholders. A shareholder doesn't have to be an employee of a company, just the owner of a proportion of the shares.

If your company has 100 shares, 50 owned by you 50 by her and you declare a dividend of £100 per share then £5,000 is paid to your bank account and £5,000 to hers.

**rightfluff** · 18 February 2011, 17:04

Originally posted by Clare@InTouch View Post

Maybe SJD know something NW don't? If SJD are your appointed advisors then they have full access to your records but NW wouldn't. Perhaps other income to take into account? Without knowing your full background it's difficult to say that either bit of advice is right or wrong!

no other income

**Alan @ BroomeAffinity** · 18 February 2011, 17:08

Have you asked SJD why they recommend an £12k-ish salary? I've often struggled as to why it should be the case. Often, NMW is cited which generally doesn't apply to directors. The "commercial salary" argument is clearly nonsense as is the "it draws less attention to the company" argument, IMO. I can't see the sense in it.

**mudskipper** · 18 February 2011, 18:20

We've had these salary discussions before. I'm with SJD and they recommend 7.5K. So seems it varies between regions/offices/accountants rather than being SJD policy.

SJD v NW advice = confusion