Reply to: End of year advice for ltd co needed!!!

Re: It's a trade off, really

malvolio

Can we stop these mind games please ?

Don't you think we all have enough to contend with, without making light of issues that need mature discussion. There are many inexperienced contractors on this forum who need our help and guidance without infighting and the associated confusion.

Unlike the PCG forum there is scope on CUK for mickey taking without the fear of being banned and most of us are as good as receiving it as giving it out. I have to say that accounting, legal, tax and company issues really ought to be taken seriously though.

Have a good evening

Re: It's a trade off, really

The current best business practice for contractor limited companies is apparently to pay a quarterly dividend and pay a minimum wage salary.

Well of course it is, as ony fule kno.

Have you thought that that is how I do it myself and I'm just being argumentative?

No, thought not... Now stop banging on. You're right, ok?

(BTW, I thought the thing about lambs and sheep was mid-18th Century in origin, although the original sentiment was from Jonah - can't remember the actual quote though)

Re: It's a trade off, really

Let's just agree to differ

Well you can do malvolio but you would be agreeing to differ with qualified accountants and general opinion, not me and I believe this demonstrates your problem !! Logic would say pay a half yearly dividend like other genuine companies, together with a feasible salary. Logic also probably says pay IR35 tax - you seem to have used logic on the one hand and rejected it on the other ? I would be very surprised if your contactor working practices make you any less vulnerable to an IR35 investigation than anyone else.

The current best business practice for contractor limited companies is apparently to pay a quarterly dividend and pay a minimum wage salary. If you have a problem with this, take it up with your accountant and mine. I think the feeling is that the Revenue do not use dividend frequency or salary level as pointers to IR35 status so as the expression goes ' might as well be hung for a sheep as a lamb '. For the classically educated I believe this is a quote from the bible (proverbs) but couldn't make qualified comment

Re: It's a trade off, really

Nah, no point. Let's just agree to differ. I'll take the stance that keeping my head down at the cost of comparatively little extra tax to the revenue is how I want to work things and cut down on the already intolerable uncertainty that we all face in the current regime. Others prefer to minimise the amount of tax they pay by whatever legal means they can adopt.

Both are legal, both are defensible, neither is wrong. As I said, it's a choice.

Re: It's a trade off, really

On the face of it paying a monthly dividend and paying a small salary will cause problems with the Revenue. Many people have historically paid dividends quarterly/half yearly and paid themselves larger salaries with associated higher tax to avoid possible attention from the Revenue. The government have seen fit to seriously increase both employers and employees National Insurance to compound the negative effects of this higher salary approach over the last few years.

There is a generally accepted view that Dividend frequency of more than 4 times a year, although illogical, has not caused increased attention from the Revenue. As for salaries, why don't you ask your accountant how much his contractors outside of IR35 are paying themselves on his advice ?

IMO the government would have been better advised to insist that contractors pay themselves a fair salary for the job they do instead of bringing in the highly controversial IR35. Having said that the increases in National insurance would have grated, especially when we bear in mind the poor quality of services they are apparently supposed to pay for.

awaiting an intelligent riposte from the classically educated Malvolio - I imagine I will be waiting some time.

Re: It's a trade off, really

Yes, you have - I don;t, nor do I intend to.

Then again, why you tjhink it's releva nt to my (possibly flawed) view on how it works.

Re: It's a trade off, really

Malvolio, I am a little surprised by the advice you are giving to contractors outside of IR35, as from memory you are already paying IR35 tax or have I got that wrong ?

It's a trade off, really

You can be sure that the revenue are comparing salary against divi on the SA forms and looking for imbalances.

By doing the low salary/frequent dividend route you are raising the possibility of an investigation by Hector thinking you're trying to minimise your tax liablility (and yes, I know that's still legal, but will you tell Hector or shall I?) and raising the chances of getting smacked if they do assess how you operate

Plan B is to run a bit more like a conventional company with a sensible salary and divis when profit margins permit. That costs you a little bit more gross tax (i.e. adding up corporate and personal liability) but minimises your exposure to the sniffer dogs.

PAYE/NIC/IR35 investigations seem to average about two years and cost you about £10k. It's really a personal choice at the end of the day.

Re: Freq and amount

There was a discussion about this recently. Although most people avoid paying monthly dividends, no one (including some accountants) had ever heard of a contractor getting into trouble for doing it.

If you think about it, the IR have no way of knowing that you are paying dividends monthly unless they have already started an investigation.

Still best to avoided, if you ask me.

Freq and amount

Reading this through again something came to mind that I thought I had read about.

If you pay yourself a dividend more than 4 times a year you raise suspicion with the IR. By paying yourself a dividend monthly, the IR may deem it (in the infinite?!) wisdom as being a "salary in kind" and tax you on it as if it were salary.

I am sure I will be corrected if I am wrong!!

Another thing that I don't think I saw when hastily reading through this thread.....been to the bloody dentist again

£49K dividend will cost you dear personal tax wise unless you shared the dividend with another shareholder.

Did you say you had A N other shareholder to share the divvy with ?

54K...bloody heck... and here I am chugging along at a meagre 18K to live on.. Well, okay, so the rest will come out after April 6.

Sal.

Agreed...

Totally agree. I confess to smacking Mustang down with his first set of questions, but he (I assume he - she may not be, of course!) managed to glean the good advice from the "here we go again" snide comments.

Basically if you know the answers (a) you're almost certainly a cynical old git, (b) you 've forgotten how hard it was to find them out in the first place and (c) I work for a living so why should I sell my information for free.

And get an accountant that does both sides - mine costs £75 a month (probably too much but it's not worth changing) plus another £75 for my annual SA form and another £75 for the company returns. About two days gross income, so I don't really care.

Don't know what yours is charging, but it would appear to be too much - he is supposed to be a service provider, after all.

Bear with it....

No advice to give on your original post but just wanted to comment on your view of some of the advice.

Bear with it!

I have made a few posts now (I am also relatively new to contracting) and received a lot of good feedback. Some sarcasm but mostly great advice. My personal view is that:

1) It's a harsh world out there with with a number of minefields to negotiate on the way. The IR and other factors make it hard on everyone so after several years exposure, I am not surprised people develop their more cynical side. Maybe we will too.....?!

2) After reading a lot of entries here on this bulletin board, there are a fair amount of idiots around too! Some just come across that way and others are the genuine article. The latter being more worrying since they give contractors/freelancers a bad name! >:

3) A lot of people request basic advice (including me) because there is a lot to take in when you set off. Anyone going out on their own is fooling themselves if they are doing it to just make a "quick buck"!

I for one, appreciate the advice this site gives me, and grit my teeth when I read sarcasm but understand where they are coming from. Thanks to those that have helped me and those that will in the future!!

Hope you resolve your original issues with your accountant.

Re: One born every....

thanx for the advice

mucho apprecaited!