Death of the Contractor

[TechJinx]

Personally, I don't see much point in paying regular dividends but I equally can't see how irregular ones would keep you off any radar given that the SATR includes total dividends only and, in any case, paying monthly dividends is perfectly legal. There are relatively few rules with dividends and they are simple; pay them from distributable profits and complete the proper paperwork.

I hope so - in my first year of contracting so don't have the total funds to pay annual dividends yet so am relying on a monthly model, albeit a varied amount each month depending on what I actually need. Which unfortunately is a lot at the moment seeing as we've moved house and apparently need new furniture that "matches"......

[BolshieBastard]

You want to keep off the radar,

He says while pushing these re worked contracts for the public service where it is Government FUD to make off payroll contractors be caught by IR35.

[TheFaQQer]

Personally, I don't see much point in paying regular dividends but I equally can't see how irregular ones would keep you off any radar given that the SATR includes total dividends only and, in any case, paying monthly dividends is perfectly legal. There are relatively few rules with dividends and they are simple; pay them from distributable profits and complete the proper paperwork.

I agree, although I only tend to take dividends in April. Round about April 7th, I take a big fat one to tide me through the year; round about April 1st I take a smaller one to get close to the tax threshold without going over it.

But as long as they are paid from profits and the paperwork is done correctly, then I see no issue with paying them more frequently. It's when they aren't paid from distributable profits that you run into an accounting and tax mess.

[jamesbrown]

I agree, although I only tend to take dividends in April. Round about April 7th, I take a big fat one to tide me through the year; round about April 1st I take a smaller one to get close to the tax threshold without going over it.

Agreed, and that's exactly how I operate dividends.

[malvolio]

I agree, although I only tend to take dividends in April. Round about April 7th, I take a big fat one to tide me through the year; round about April 1st I take a smaller one to get close to the tax threshold without going over it.

But as long as they are paid from profits and the paperwork is done correctly, then I see no issue with paying them more frequently. It's when they aren't paid from distributable profits that you run into an accounting and tax mess.

You're both missing the point slightly. HMRC's risk analysis is based, among other things, on behaviour that looks like taking regular salary through a different route to avoid the NICs (for example). It doesn't matter that it's legal, it only has to look suspicious. After all, they don't have to prove it's wrong, you have to prove it isn't, so why should they care if they tag you for investigation. Staggering or varying your divis closes that particular risk indicator.

And that's not me, that's an ex-tax inspector talking.

[malvolio]

Personally, I don't see much point in paying regular dividends but I equally can't see how irregular ones would keep you off any radar given that the SATR includes total dividends only and, in any case, paying monthly dividends is perfectly legal. .

True, but you suppose HMRC don't have access to business bank accounts then, if they suspect malpractice...

Otherwise, see my earlier answer.

[TechJinx]

You're both missing the point slightly. HMRC's risk analysis is based, among other things, on behaviour that looks like taking regular salary through a different route to avoid the NICs (for example). It doesn't matter that it's legal, it only has to look suspicious. After all, they don't have to prove it's wrong, you have to prove it isn't, so why should they care if they tag you for investigation. Staggering or varying your divis closes that particular risk indicator.

And that's not me, that's an ex-tax inspector talking.

How did you operate at the start - before you had the retained profit to pay for a whole year up front?

[jamesbrown]

You're both missing the point slightly. HMRC's risk analysis is based, among other things, on behaviour that looks like taking regular salary through a different route to avoid the NICs (for example). It doesn't matter that it's legal, it only has to look suspicious.

And where, precisely, do they find this information? You'd have to be "on the radar" to begin with. This is a complete red herring as an indicator IMHO, and certainly not a factor in terms of legality...

After all, they don't have to prove it's wrong, you have to prove it isn't, so why should they care if they tag you for investigation.

Eh? Please explain how taking regular dividends is, in any sense, "wrong" and, thus, where "proof" comes into this. As you've rightly stated, it would be unwise to pay dividends together with salary as a single payment, but that's a separate issue. Remember, there's an important difference between what HMRC may want to do and what they can do.

[jamesbrown]

if they suspect malpractice...

"Suspect malpractice" being the operative words. I think we're talking at cross-purposes here in terms of what constitutes an indicator. Once you're on the radar, there's little point in talking about indicators.

[jamesbrown]

How did you operate at the start - before you had the retained profit to pay for a whole year up front?

Waited a year (or ~6 months, I think, in reality), although that obviously depends on your circumstances. Dividends shouldn't be viewed as salary anyway; they are a payment for profitability. However, let's be clear that, if you do elect to pay monthly dividends, this is perfectly fine providing you follow the rules on dividend payments (and don't pay them together with salary in a single payment, as that would be asking for trouble).