Does anyone have a way of explaining to me what if any difference there is between these? We take a relatively small salary just above tax and NIC limits, as advised by accountant, and supplement with regular dividends taken out of legal profits. For domestic accounting reasons we would rather take these dividends monthly, at least until the company has built up a decent warchest into 2nd year trading.
So, I see a lot of stuff on forums etc about the Taxman deciding to treat dividends taken as salary and back charging NIC and PAYE accordingly, but I can't see why he can? Surely if you are legally able to take a small salary and a large dividend, and are actively encouraged to do so by every accountant worth his salt, how can the Taxman then decide that what you are really taking is all effectively salary. Err. Of course you are. If by salary he means "money on which to live and do all that other stuff that wages are basically for".
What am I missing folks?
So, I see a lot of stuff on forums etc about the Taxman deciding to treat dividends taken as salary and back charging NIC and PAYE accordingly, but I can't see why he can? Surely if you are legally able to take a small salary and a large dividend, and are actively encouraged to do so by every accountant worth his salt, how can the Taxman then decide that what you are really taking is all effectively salary. Err. Of course you are. If by salary he means "money on which to live and do all that other stuff that wages are basically for".
What am I missing folks?
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