Reply to: Payment advice (sorry newb)

[Bluebird]

Just to add to this, I am with one of the very popular accountants who posts on here and they advocate monthly div's to top up my 'low salary'. The key is to make separate payments for salary, expenses and dividends through the company accounts in order to differentiate.

As with everything in contracting, there is no definitive rule book, if there was I would be a millionaire

Thats what I do - about 4 payments leave MyLtd account each month and arraive in the same Personal Bank A/c the same day

[Signo_cypher]

As often as you like. There is absolutely no case law or legislation stipulating how frequently you can pay dividends.

If HMRC tried to argue that dividend payment frequency had any bearing on IR35 status, the judge would laugh in their face which is probably why, as far as I am aware, it has never been raised in court as an issue.

Just to add to this, I am with one of the very popular accountants who posts on here and they advocate monthly div's to top up my 'low salary'. The key is to make separate payments for salary, expenses and dividends through the company accounts in order to differentiate.

As with everything in contracting, there is no definitive rule book, if there was I would be a millionaire

[TheFaQQer]

Well my accountant said I could not pay myself salary as I started the contract in July. So I just pay myself a dividend each month - enough to live on.

I have not other option until I save some cash up.

Sounds like you need a new accountant!

By paying a salary, but leaving the money in the company, you are essentially giving the company a loan each month until it can pay you. That is no different from you loaning the company £10000 at the start and them repaying you when funds are available.

You could even charge interest on the loan to the company, but would need to declare that as additional income on your self assessment.

[SueEllen]

Did he say why ?
Sounds like a load of b0llox to me.

Sounds odd to me as well as if a company is not making any profit how can they pay dividends to shareholders? There as if a company has any employees they always have to pay the employees wages.

[Bluebird]

Well my accountant said I could not pay myself salary as I started the contract in July. So I just pay myself a dividend each month - enough to live on.

I have not other option until I save some cash up.

Did he say why ?
Sounds like a load of b0llox to me.

[Gahoo]

Well my accountant said I could not pay myself salary as I started the contract in July. So I just pay myself a dividend each month - enough to live on.

I have not other option until I save some cash up.

[NotAllThere]

As often as you like. There is absolutely no case law or legislation stipulating how frequently you can pay dividends.

If HMRC tried to argue that dividend payment frequency had any bearing on IR35 status, the judge would laugh in their face which is probably why, as far as I am aware, it has never been raised in court as an issue.

Not entirely. There is some legislation which HMRC can, and have used, that converts the dividend into salary, and require the NI contributions to go with it. This is only a danger if they can show that the dividends were not paid out of profit.

This was something that I was made aware of in the 90s, so it's got nothing to do with IR35.

[VectraMan]

I suppose the other question is what you're going to do with the money. At the moment mine's either sitting in the business deposit account, or my personal deposit account. I think both pay the same interest, and the tax works out the same.

If you have personal debts, you're generally better paying them off as soon as possible, so the sooner you get the money out of the company the better.

[ASB]

Draw the cash as and when you need it {i.e. borrow it}.

Debit directors current account of course. Ensure at the end of they year that a dividend is paid to cover this, credit the directors current account.

If there is not enugh profit (i.e. net shareholders funds would be negative) then you will have to pay salray of the difference to ensure the loan is cleared.

Decide with the accountant whether to declare any BIK on the loan you had.

It's not entirley unknown in this sort of circumstance for a number of divdend payments to be entered in the books at non contemporaneous times. This will reduce the value of the loan outstanding at any given point thus reducing potential BIK of the interest free loan. This is between you and your conscience.

discuss this strategy with your accountant. Not many will recommend it but most shoud accept it.

[pisces]

Try not to do it monthly. It's not illegal or anything but it will raise suspicions down at your friendly tax office if you are paying monthly minimum salary as well as dividends and they suspect you are IR35.

I draw mine quarterly.

[THEPUMA]

Anyway - how often would you pay yourself a dividend?

As often as you like. There is absolutely no case law or legislation stipulating how frequently you can pay dividends.

If HMRC tried to argue that dividend payment frequency had any bearing on IR35 status, the judge would laugh in their face which is probably why, as far as I am aware, it has never been raised in court as an issue.

[Crossroads]

Anyway - how often would you pay yourself a dividend?

As infrequently as I can to minimise the paperwork - hence once a year.

[TheFaQQer]

ok - well, if I do get an ir35 friendly gig, how often would you say to pay yourself a dividend?

(I know I can ask my acocuntant about this but as I haven't had to yet and am interested to hear what you say).

I'd need minimum of 2.5k a month for living expenses/mortgage etc..

I suppose if I was outside ir35, that would still leave a decent chunk each month in my business account..

Anyway - how often would you pay yourself a dividend?

I pay mine annually.

Some would argue that you should pay yourself enough to live on anyway, and then take the rest as dividends.

[monkeyBoy32]

ok - well, if I do get an ir35 friendly gig, how often would you say to pay yourself a dividend?

(I know I can ask my acocuntant about this but as I haven't had to yet and am interested to hear what you say).

I'd need minimum of 2.5k a month for living expenses/mortgage etc..

I suppose if I was outside ir35, that would still leave a decent chunk each month in my business account..

Anyway - how often would you pay yourself a dividend?

[VectraMan]

I cetainly couldn't live off a minimum wage salary at the moment..

There's one school of thought which says you should pay a salary which is the minimum you need to live on. So then you don't have the problem.

Also there's nothing to stop you paying more of your salary at the start of the year, and then reducing it later, having the same effect overall. The only downside is that you might end up overpaying income tax and having to wait until you've done your tax return to claim it back.