Reply to: 2016 - Travel & Subs & Pensions

[pr1]

IIRC taking a salary of about £7.5k means I pay no NIC at the expense of £500 in CT savings but it means my dividends increase by £2k. My take home is the same but my wife gets an extra £700 (almost anyway) in dividends. You could argue this is balanced out but the extra CT but I'd rather my wife had the extra money in her pocket rather than it still be sitting in the company, plus the employee NIC (and employer NIC if the allowance goes away) negates most of the extra CT saving anyway.

i.e. it's less tax efficient but more money in your (wifes) pocket sooner

[TheCyclingProgrammer]

Interesting. I'd have assumed the corporation tax savings would have made it worth taking the full personal allowance (if you are taking employment allowance, that is).

For a one man band (with or without a spouse) it seems like claiming the employment allowance, and paying up to the full personal allowance, would cost you about £300 in NI, but save you over £500 in CT. I don't see how reducing dividends costs you more than the £200 in savings.

Admittedly, I haven't done the maths because it doesn't apply to me. My other employees are eating up the employment allowance, so I'd have to pay full NI if my salary was up to the personal allowance level. Even that is actually pretty close, it seems to me, would cost about £600 in NI vs £500+ in CT savings to pay myself up to the personal allowance.

(Of course, NI has to be paid in real time while CT is deferred until after the end of the year, so you get a little more interest by moving costs to CT rather than PAYE taxes. But that's negligible.)

IIRC taking a salary of about £7.5k means I pay no NIC at the expense of £500 in CT savings but it means my dividends increase by £2k. My take home is the same but my wife gets an extra £700 (almost anyway) in dividends. You could argue this is balanced out but the extra CT but I'd rather my wife had the extra money in her pocket rather than it still be sitting in the company, plus the employee NIC (and employer NIC if the allowance goes away) negates most of the extra CT saving anyway.

[jamesbrown]

Yes but the same guidance does also suggest that a salary (which covers basic admin duties) might be indicative of an implied contract of service. So it's not black and white.

At the risk of having to return to the guidance document (), I do vaguely recall that there was, perhaps, some ambiguity about whether a CoSec could be a "worker" for the purposes of AE. I don't recall this being distinguished on the basis of remuneration though. I would take the - dare I say it - common sense view that if the work and remuneration are consistent with the duties of the office alone, this "couldn't possibly" be interpreted as an implied contract of service. Essentially, I don't believe they're trying to catch us out, but rather afford some protection to those that should be considered workers for the purposes of AE.

[WordIsBond]

I don't normally take my full personal allowance as it reduces my dividends and consequently my wife's (she has a 25% share) so it's more effective to reduce my salary a bit and therefore no NIC due anyway. Next year I haven't figured out the numbers yet.

Interesting. I'd have assumed the corporation tax savings would have made it worth taking the full personal allowance (if you are taking employment allowance, that is).

For a one man band (with or without a spouse) it seems like claiming the employment allowance, and paying up to the full personal allowance, would cost you about £300 in NI, but save you over £500 in CT. I don't see how reducing dividends costs you more than the £200 in savings.

Admittedly, I haven't done the maths because it doesn't apply to me. My other employees are eating up the employment allowance, so I'd have to pay full NI if my salary was up to the personal allowance level. Even that is actually pretty close, it seems to me, would cost about £600 in NI vs £500+ in CT savings to pay myself up to the personal allowance.

(Of course, NI has to be paid in real time while CT is deferred until after the end of the year, so you get a little more interest by moving costs to CT rather than PAYE taxes. But that's negligible.)

[TheCyclingProgrammer]

If you do this, I will admire your courage but not your discretion.

You can always have the company do auto enrolment but both of you opt out of it. But I'd want to see the exact rules on who can claim the employment allowance -- you don't want to organise things in one way to be able to claim it and then have them say you can't use it if the only employees are officers. What he said in the Budget is one thing, but what does the legislation say?

Agree with everything you say. Definitely got to see how the legislation plays out first. I don't even know what my salary will be next year with the dividend changes. I don't normally take my full personal allowance as it reduces my dividends and consequently my wife's (she has a 25% share) so it's more effective to reduce my salary a bit and therefore no NIC due anyway. Next year I haven't figured out the numbers yet.

[WordIsBond]

This has also got me wondering about the NI employers allowance from next year. It will no longer be available to one man companies - but does having my wife in the payroll as company secretary mean I can continue claiming it whilst on the other hand claiming she isn't a worker for auto enrolment purposes?

If you do this, I will admire your courage but not your discretion.

You can always have the company do auto enrolment but both of you opt out of it. But I'd want to see the exact rules on who can claim the employment allowance -- you don't want to organise things in one way to be able to claim it and then have them say you can't use it if the only employees are officers. What he said in the Budget is one thing, but what does the legislation say?

[LisaContractorUmbrella]

Just to clarify the T&S situation - the changes to legislation, if they go ahead as they are laid out in the consultation doc, will apply to all workers who work through an intermediary - a PSC is considered to be an intermediary for these purposes.

It is not linked to IR35 as the standard employment status indicators - MOO, ROS and SDC have been disregarded and only supervision or direction or control or the right thereof is being used instead. Effectively, you will need to prove a negative i.e. that you are not under SDC or the right of in order to be able to claim T&S expenses.

[TheCyclingProgrammer]

Your accountant is correct, assuming you (Director) and your wife (Company Secretary) are the only two involved. Office holders are explicitly dealt with in the detailed guidance (see p.11 of the Detailed Guidance for Employers). Providing your wife doesn't not have a contract of service (express or implied) for other duties - in other words, providing she is not an employee as well as an office holder - she is not within scope.

Yes but the same guidance does also suggest that a salary (which covers basic admin duties) might be indicative of an implied contract of service. So it's not black and white.

This has also got me wondering about the NI employers allowance from next year. It will no longer be available to one man companies - but does having my wife in the payroll as company secretary mean I can continue claiming it whilst on the other hand claiming she isn't a worker for auto enrolment purposes?

Two separate things I know but it seems like it might be a case of having my cake and eating it?

[Jessica@WhiteFieldTax]

Providing your wife doesn't not have a contract of service (express or implied) for other duties - in other words, providing she is not an employee as well as an office holder - she is not within scope.

I would imagine that if - in essence is wife just Company Secretary or is she a Secretary a well - is the source of TCPs unease.

I can understand that, but there is no history in company or employment law, that I'm aware of, of elevating the CoSec to worker. Unless the circumstances are egregious I think the CoSec role covers all work done for co.

Egregious could be making a random, non family, employee of co CoSec and claiming that experts them from auto enrolment.

[jamesbrown]

I asked my accountant the same thing. My wife is company secretary and receives a small (< £3k) salary for this and some basic admin.

My view was that she risked being seen as a worker and therefore in scope. My accountants view was that as she's an office holder and her salary is small that I shouldn't worry and should just opt out of the whole thing.

I'm not 100% confident but inclined to take my accountants advice.

Your accountant is correct, assuming you (Director) and your wife (Company Secretary) are the only two involved. Office holders are explicitly dealt with in the detailed guidance (see p.11 of the Detailed Guidance for Employers). Providing your wife doesn't not have a contract of service (express or implied) for other duties - in other words, providing she is not an employee as well as an office holder - she is not within scope.

[Jessica@WhiteFieldTax]

I asked my accountant the same thing. My wife is company secretary and receives a small (< £3k) salary for this and some basic admin.

My view was that she risked being seen as a worker and therefore in scope. My accountants view was that as she's an office holder and her salary is small that I shouldn't worry and should just opt out of the whole thing.

I'm not 100% confident but inclined to take my accountants advice.

Concur with your accountants advice. The salary is quite small in the scheme of things, and there is no valid HMRC argument that cosec is anything other than officer.

[TheCyclingProgrammer]

So what about 'implied' contracts, i.e. spouse receives salary for doing some work, but there is no formal contract in place? Is this sufficient to blow Auto Enrolment out the window with TPR?

I asked my accountant the same thing. My wife is company secretary and receives a small (< £3k) salary for this and some basic admin.

My view was that she risked being seen as a worker and therefore in scope. My accountants view was that as she's an office holder and her salary is small that I shouldn't worry and should just opt out of the whole thing.

I'm not 100% confident but inclined to take my accountants advice.

[SteelyDan]

Regarding the pension. If there are no employment contracts and you are both directors/secretaroes you would be exempt. I would however recommend checking with an IFA though for this point

So what about 'implied' contracts, i.e. spouse receives salary for doing some work, but there is no formal contract in place? Is this sufficient to blow Auto Enrolment out the window with TPR?

[RajaStyle]

Regarding the expenses...

In the initial discussion document limited companies were not mentioned.
In the current consultation document the scope has been expanded to include limited companies to reflect the feedback Unions gave to the discussion document.

There is a survey http://forums.contractoruk.com/accou...penses-up.html to gauge what impact these changes would have to limited company contractors. Can I ask you to spend 2 minutes and fill it in...

done. Thanks All

[northernladuk]

It would have been fair to assume this has come up for discussion in the last month so a quick search could have saved you some time. We've been at it hammer and tong for awhile now.