Reply to: Taking a break, not trading, salary?

[cojak]

So I queried this with my accountant and they reiterated their position that as ‘I’m no longer trading they don’t recommend taking a salary as it’s a trading expense’ but then they did ask me to send them the link where I’d read otherwise ?♂️

FYI Even though I’m taking some months off I’m still in touch with recruiters / my network / colleagues and responding to requests for work (yesterday) and reviewing VAT returns, sorting self assessment, updating LinkedIn etc.

Going back to bownyboy: I would say “Thanks for the advice, I’ve noted it - now follow my instructions/this is what I am going to do”

As the more qualified here have stated, you can take salary in the instance you’ve described. You run your company, not Gorilla.

(And you don't need to do their work for them by digging out links to prove this - just tell them to do it, end of conversation.)

[youngguy]

If you are asking the accountant for advice (can I do this) they say no, then it is up to you if you follow that advice, if the accountant is running the company for you then they are correct in their assumption that you probably sholdn't take a salary (and might have bigger problems as per CK and Boox).
.

I guess it will come down to what HMRC decide is running.

I've certainly asked my accountant for advice /options over the years (more so the early years) but they always made it clear the decision was mine and I have often gone another route. I think HMRC are clutching a bit based on a portal and monthly fees, especially if ppl have clear interactions with accountants where they sign off. For example my accountant prepares my VAT but I check it and tell them to go ahead and submit every time and I keep all these emails.

For me not taking a salary would be purely because I have an inside role and can live off that income, so no point drawing from ltd funds and paying additional tax.

But in this climate it clearly isn't worth the risk for saving a few quid on monthly fees!

[eek]

How far back?

hmrc can go back 4 years which means until April 5th 2023 the 2018/19 tax year

[youngguy]

the reason they offer any form of discount is to compete with others who also do. And also to reduce the risk of you sacking them off when there’s no work. It’s not really anything to do with effort.

I agree. Its just odd to me that any "real business" would not regularly be negotiating, both it's prices and those of suppliers. One might argue that it is part of the role of a Director to regularly evaluate expenses and the value they bring and make such decisions. Not how HMRC see it of course, despite me instigating the conversation with my accountant.

I can’t see this holding up as evidence of being an MSC, but given HMRC’s focus on MSCs right now I’m not sure I’d be interested in any risk.
maybe ask the accountant for a ‘discount’ for the next years rate if times are so hard?

TBH given the risk, the 1k or so a year is worth paying (for me), just as is keeping the IR35 insurance etc.

I saw the other thread early on but didn't follow it as I've always been so far away from MSC (or so I thought!)

an interesting (partially hypothetical) Question....
I've only just considered asking my accountant to reduce my fees as I just picked up an inside role , but wanted to keep the ltd open as I'm still trying to secure outside work. If this were to become an indicator for MSC, how far back would HMRC go...afterall my ltd hasn't generated any income since a fee reduction.

[SimonMac]

I think this is an area where it has become noticiable to people (especially HMRC) when an accountant takes a more than passing role in the running of the company. If you are asking the accountant for advice (can I do this) they say no, then it is up to you if you follow that advice, if the accountant is running the company for you then they are correct in their assumption that you probably sholdn't take a salary (and might have bigger problems as per CK and Boox).

When I am benched for a long period of time I still submit my nil VAT returns, I run a PAYE payroll etc etc, all activites which go towards the running of the company, so I feel comfotablr taking a salary for these actvities.

[Lance]

Thankyou, will take a look as I missed it.

Can't say I understand though. I pay my accountant to provide an accountancy service (payroll, vat etc etc). If I decide to pause salary and therefore negotiate a lower accountancy fee (they do less for my business so I pay less ) that is sensible business, no?!

processimg salary is a totally negligible task. If anything pausing it for 3 months then starting again is more effort for the accountant as they have to work out a new, higher, rate towards the end of the tax year.
VAT returns still need to be done.

The monthly fee is just a spread of what what they think it will cost to do a full year as most of the effort is for year end accounts.
so there isn’t less to be done.

the reason they offer any form of discount is to compete with others who also do. And also to reduce the risk of you sacking them off when there’s no work. It’s not really anything to do with effort.

I can’t see this holding up as evidence of being an MSC, but given HMRC’s focus on MSCs right now I’m not sure I’d be interested in any risk.
maybe ask the accountant for a ‘discount’ for the next years rate if times are so hard?

[jamesbrown]

Just caught up, this is bonkers. (Not you JB....Hector's whole approach)

paying accountants monthly not wise - pay for services you use is probably better.

Yet, reducing fees (ie not paying for a part of the accountancy service, such as payroll) also not wise. *



One does start to just think running a ltd is not worth it, as the rules and goalposts can be changed at any time (which is likely HMRC's goal). It's never a fair fight!

* Recognising that none of us really know, this is CUK's collective best guess

Yes. Again, I personally don't think it will stick (commercial motivation), but as long as one failure is enough to be "involved with" and as long as one of those failure points is a payment linked to services provided by the MSC, then it would be nuts (with our new awareness/understanding) for an accountancy to offer a dormant company rate or for a client to accept it because, if you put aside the commercial motivation, it is entirely plausible to think that a "lower rate when no services are provided by the MSC" creates a link between payment amount and services provided by the MSC. There is no reason to test the unknown line here.

[youngguy]

Right, there is a commercial reason for a dormant company rate, which is why I don't think it will stick. However, given the risk with HMRC's current stance, it would be madness for any accountant to offer this in the current climate.

Just caught up, this is bonkers. (Not you JB....Hector's whole approach)

paying accountants monthly not wise - pay for services you use is probably better.

Yet, reducing fees (ie not paying for a part of the accountancy service, such as payroll) also not wise. *



One does start to just think running a ltd is not worth it, as the rules and goalposts can be changed at any time (which is likely HMRC's goal). It's never a fair fight!

* Recognising that none of us really know, this is CUK's collective best guess

[jamesbrown]

Thankyou, will take a look as I missed it.

Can't say I understand though. I pay my accountant to provide an accountancy service (payroll, vat etc etc). If I decide to pause salary and therefore negotiate a lower accountancy fee (they do less for my business so I pay less ) that is sensible business, no?!

Right, there is a commercial reason for a dormant company rate, which is why I don't think it will stick. However, given the risk with HMRC's current stance, it would be madness for any accountant to offer this in the current climate.

[youngguy]

It's worth reading this thread (in case you haven't seen it):
MSC Legislation: what is it and why are HMRC using it now to nail contractors? - Contractor UK Bulletin Board

Basically, HMRC say that some accountants are acting as MSCPs (Managed Service Company Providers). In particular, they're referring to this definition:
"benefits financially on an ongoing basis from the provision of the services of the individual,"

So, if your accountant gets more money when you're working than they do when you're on the bench, that could be interpreted as evidence that they're an MSCP and YouCo is an MSC.

Thankyou, will take a look as I missed it.

Can't say I understand though. I pay my accountant to provide an accountancy service (payroll, vat etc etc). If I decide to pause salary and therefore negotiate a lower accountancy fee (they do less for my business so I pay less ) that is sensible business, no?!

[hobnob]

Checks the MSC definitions - I think both jamesbrown and myself have pointed out that charging a reduced fee when the worker is not working may not be the greatest idea in the current business world..

Interested in why this might be dangerous? (I'm not being confrontational - I've obviously missed info and you are far more clued up than I)

It's worth reading this thread (in case you haven't seen it):
MSC Legislation: what is it and why are HMRC using it now to nail contractors? - Contractor UK Bulletin Board

Basically, HMRC say that some accountants are acting as MSCPs (Managed Service Company Providers). In particular, they're referring to this definition:
"benefits financially on an ongoing basis from the provision of the services of the individual,"

So, if your accountant gets more money when you're working than they do when you're on the bench, that could be interpreted as evidence that they're an MSCP and YouCo is an MSC.

[youngguy]

... but post March 2023 that reduced fee strikes me as very dangerous.

Hi,

Interested in why this might be dangerous? (I'm not being confrontational - I've obviously missed info and you are far more clued up than I)

I assumed reducing ltd costs temporarily (eg if you are in an IR35 contract) might be a wise thing to do, whilst one looks for outside contracts etc, as may not taking a salary or div's above £2k from the company , assuming one can live off the inside income.

[Andy Hallett]

You run the business. You can pay yourself a salary.

If your accountant is telling you how to run your business, run.

[eek]

I agree with this and also we exactly don't know how he phrased the question to his accountant.

From memory, Gorilla provide reduced fee if you are taking a break etc however with this they will not process a salary so probably there is something on this as well.

Checks the MSC definitions - I think both jamesbrown and myself have pointed out that charging a reduced fee when the worker is not working may not be the greatest idea in the current business world..

Now your statement does provide a valid reason as to why the accountant and Gorilla said what they did but post March 2023 that reduced fee strikes me as very dangerous.

[jamesbrown]

Fair enough, they may not have asked the question perfectly, but we all managed to understand what the OP meant. It doesn’t reflect too well on Gorilla but, hey ho, even competent professionals can make mistakes in a rush, I suppose. Still, it’s those kind of mistakes that sap confidence.