Reply to: newbie alert ;)

Re: Dividends

In a span of 10 years (which I'm sure many of us fall into easily) I would be amazed if you don't get at least one visit from the IR.

I would love to know who's never had a visit in a decade (or more).

I'm not disputing how you should run your buisness. I know the IR have no brains but to me it's common sense that tells me:

a) X Ltd pays minimum wage but takes monthly dividend to top up their income

b) Y Ltd pays 14k PA and takes quarterly dividend.

I know the IR should treat both Ltd the same but IMO and think X Ltd would get a good "looking" over by the IR.

Just my opinion. I don't want the IR to reinterpret another obscure rule and end up like that S660a couple.

Re: Dividends

Not having to complete my annual return leaves me at a slight disadvantage on this one but iirc there is no mention on it of frequency anyway - just the total. So I'd agree with SJD (just as well I guess - he does it for a living) that there should be no correlation.

What I would ponder over is what it looks like if there actually is an investigation.

My personal tack is to pay a low but not minimum wage salary and around 3 divvis a year. What it really comes down to is whether or not you need the divvis to live on and/or whether you can get significantly more return by investing the money personally rather than leaving it in the company and getting the rather modest interest most banks pay.

Re: Dividends

How would the IR even know that you were declaring monthly dividends, unless they had already started an investigation?

Re: Dividends

In the past 10 years we have dealt with over 4000 clients, and never have the Revenue questioned monthly dividends. There also appears to be no correlation between declaring a low salary and having a Revenue investigation.

Re: Dividends

>there is no loss of income by reducing the frequency of dividends

Totally agree with you.

That's why I couldn't understand why somebody would want to highlight to the IR about a monthly dividend (when the IR could say you are treating it like a monthly salary) but if the Ltd delay taking a dividend by a few months, the IR would have no come back.

You've loss nothing except a possible gripe from the IR and a few months to think how to spend the money

Obviously, it's up to the director to run their business the way they see fit.

Re: Dividends

I definately agree with you partimer - as I said in my post it is likely that both paying frequent dividends and a low salary may well make a contractor more vulnerable to IR inspection.

Just making the point that there is no loss of income by reducing the frequency of dividends. Increasing the salary however, will cost you a lot in extra tax.

Re: Dividends

Guys,

I think you misread what I was saying:

>who take dividends every month have ran into IR

I was implying that the IR take a dim view of people who treat dividends like a monthly salary.

That's not saying you can't do it, (same as you can take a low salary). I saying from the people I know, the IR has mainly given grief to people who make a monthly dividend citing it as salary. (I would lean towards the IR on this point since I don't think many large businesses do this)

In another thread I've said that you can run your business as you see fit. (Not saying it's right or wrong)

However I would try as hard as possible not to appear on any IR radar for a long a time as possible. IMO monthly dividends and low salary attracts unwanted IR attention.

All a gamble and we'll all eventually get a visit from the IR but I'm trying to delay it as long as possible.

Hope that clears it up.

Re: Dividends

It's not wrong to declare dividends on a monthly basis but IMO you may be asking for trouble.

I personally pay myself a quarterly dividend, as advised by the accountant.

Having said that low salaries are probably also asking for trouble and I pay myself a low salary - well there is money at stake on that one

Re: Dividends

It's a common mistake to believe that you can't pay frequent dividends. As long as you get the documentation right you can pay yourself as frequently as you like, every day even.

What you have to do is set up the company in such a way that the Directors can declare dividends.

Just because some Revenue troll doesn't like it doesn't mean its wrong!!

Response to partimer

"People who take dividends every month have ran into IR who maintain (quite rightly) that if you're paying yourself dividends every month then it should be treated like salary (and the NI that goes with it). "

Not sure where you get that idea.
Your accountant should tell you that dividend regularity is not an issue. It may raise a red flag but it certainly does not condemn you to pay "salary" taxes.

Hey Malvolio

Two recommendations for SJD in just the few posts I have read in the last few minutes.

Are you getting commission now?

>leave the money in the business account

As a newbie you should know that the money is your companys until you decide to pass it across as salary or dividend or expense, etc.
Your business account is not your personal slush fund
You have got to pay the taxes and VAT, etc.
You'll be surprised by the number of newbies that go and spend the VAT money and not realise that you are actually a VAT collector for HMCE !!

Once you've calculated all the debits from your business, the money you have left you can try to extract it in any of the ways I've previously mentioned.
Most business accounts nowadays pay gross interest (you are a business after all) and if your account doesn't then you're with the wrong bank.

There are other ways of "making your money work harder" but not at this point in your business. Speak to your business advisor (you normally get one when you open a business account at most high street banks).

thanks for the info partimer

so is my only option to leave the money in the business account ?

cheers

>setting up a business account, and then doing
>something like a direct debit from it into
>(for example) an ING Direct account

You don't want to do that unless you are telling the IR that you're getting salary every month.

People who take dividends every month have ran into IR who maintain (quite rightly) that if you're paying yourself dividends every month then it should be treated like salary (and the NI that goes with it).

thanks for the replies chaps

Yes I can see that they are certainly more expensive than a few other firms that have been mentioned, but they're literally 10mins from me and being recomended, I thought I'd give them a go. If they dont cut it I figure can always move.

Could anyone point me in the direction of a good business account ? What Im thinking of doing is setting up a business account, and then doing something like a direct debit from it into (for example) an ING Direct account on a regular basis - although I'll have to speak to my IFA as Im not sure if this is the best solution; just one that comes to mind.

cheers