How much salary do you pay yourself?

[Fred Bloggs]

I don't believe there is any conclusive evidence one way or the other regarding this being a factor when HMRC choose who to investigate and who to leave alone. Nobody outside of HMRC knows the answer. I pay myself £10k a year salary and have done ever since I started contracting. It is probably throwing money away is my current thinking on this though.

[Bradley]

I Don't Think HMRC Know Either ...

I don't believe there is any conclusive evidence one way or the other regarding this being a factor when HMRC choose who to investigate and who to leave alone. Nobody outside of HMRC knows the answer. I pay myself £10k a year salary and have done ever since I started contracting. It is probably throwing money away is my current thinking on this though.

This is from the IR35 Forum Minutes at HM Revenue & Customs: IR35 Forum - Minutes

14. It was observed that there was a lack of consistency in the way HMRC managed its risk assessment and case selection procedures across the country. HMRC said that it applied its risk assessment criteria on a consistent national basis, and that there were standard national processes. The move towards conducting IR35 reviews through specialist teams would reduce the likelihood of inconsistency. HMRC said that it would be glad to investigate any evidence suggesting that IR35 cases had been selected or reviewed in an inconsistent way. It would not however be able to provide any information about whether and if so, what action it might have taken following the provision of such information because of the need to protect taxpayer confidentiality.

In other words "we're not inconsistent in our approach but we're going to act to reduce inconsistency".

Cake ... eat it ...

[pmeswani]

In matters such as this, I always ask myself 'What would Sir Philip Green do?'

Well, I ain't gonna be taking a music show to America for sure.

[Bugbait]

I pay myself £15k gross a year. Yes, it's way more than arguably "needed" but I've been "randomly" audited once and prefer to not give HMRC any reason to dig too deep.

[Jog On]

In matters such as this, I always ask myself 'What would Sir Philip Green do?'

Quite right - we can only follow the lead of our esteemed business leaders and HMRC officials - shining examples that they are..

I've been paying £1k/month net (about ~£14k gross?)

I might appoint someone from HMRC like Richard Broadbent though to see how much tax I can save - he's done wonders for Barclays (something like £113M corp tax on about £4B profit - bet he got a nice bonus for that!) and off to Tesco now as they obviously need more help paying their 'fair share' as well.

We're all in this together folks

[backrubber]

I pay myself £22000 per year... probably completely crazy I know !

[Taxless]

As a director of your own company, provided you do not have a formal employment contract, which would be pretty unusal, you can pay yourself as little as you want as a salary, all the way down to zero and HMRC cannot challenge it.

In these circumstances you are not covered by the National Minimum Wage legislation which is why you can pay so little.

The small salary supported by dividends is a very basic planning ploy for a lot of smaller companies, not just those potentially within the IR35 sphere.

HMRC have no authority to challenge the level of salary taken and they would not use that as a means of selecting any specific case for enquiry.

Some time ago a Parliamentary select commitee told HMRC that their random enquiries were not cost effective and so if you get an enquiry now, your company will almost certainly have been subject to some risk assessment at HMRC and they are getting better at this because they don't have the resources to beggar about so make much more use of modern technology.

The main risk for most people on this site will probably be - Does my company fall foul of IR35?

[Fred Bloggs]

Some time ago a Parliamentary select commitee told HMRC that their random enquiries were not cost effective and so if you get an enquiry now, your company will almost certainly have been subject to some risk assessment at HMRC and they are getting better at this because they don't have the resources to beggar about so make much more use of modern technology.

The main risk for most people on this site will probably be - Does my company fall foul of IR35?

Exactly so, but how do they assess you for risk of IR35? Before they select you, they will not have seen a contract, they will have no idea about workig practices. How do they assess you for IR35 non compliance?

[rd409]

I think the clear indication would be someone who keeps on paying the same amount of dividend every month over a very long period. So I guess if I pay myself £145 a week in salary and £1000 in dividend every week for say few years, that is going to be flagged as a potential IR35 case.
I may be wrong in presuming some things, but this is my idea, so I tent to pay different amount of divs every month, and sometimes even avoid them a month.
I may be wrong, but this would be my 2p.

[Fred Bloggs]

I think the clear indication would be someone who keeps on paying the same amount of dividend every month over a very long period. So I guess if I pay myself £145 a week in salary and £1000 in dividend every week for say few years, that is going to be flagged as a potential IR35 case.
I may be wrong in presuming some things, but this is my idea, so I tent to pay different amount of divs every month, and sometimes even avoid them a month.
I may be wrong, but this would be my 2p.

But, there again, HMRC have no say in when a Ltd Co declares dividends. I declare dividends quarterly, but I could just as easily declare weekly or daily if I wanted to.