Accountant advised offshore setup.

[ASB]

1.Is there infact a threshold where dividends are subject to further tax.

2.Is anyone else working under this arrangement and is it legal.

and

3.Has anyone heard of anyone being burnt through such an arrangement.

Thanks in advance for any information you can provide me.

1. It's not specific to dividends, but when you go into the higher rate band (> approx 40k) then the tax rate goes up. In the case of salary it is paid before you receive it. In the case of dividends it is not. The sums are worked out on your tax return and it should equate to 25% of the net dividends received in excess of the higher rate threshold.

2. I expect so and legality will depend upon the detail of the scheme. Generally the schemes are legal but some are more open to attack than others.

3. Yes. There are a plenty of cases of people being "burnt". However if the arrangements are used correctly and properly declared and any additional liabilities as a result of payments/loans etc made then there should be few problems.

General advice received would be "run a mile". Personally I think that may be valid advice for a lot of people. The key thing is to know what you are getting yourself into, what the potential downsides are and whether or not the scheme has been successfully defended, whether it is properly declared if it needs to be etc.

Offshore schemes can work. It depends on the scheme and the individual circumstances of the subscriber. There is no one size fits all type of arrangements. Generally they rely on interpretation of legislation and double tax agreements. Often loans and EBTs (though these are, in my view, very vulnerable).

HMRC have a vast armoury of weaponry with which to attack. Providers have similar abilities in defence. However in the event of a loss at commissioners - or acceptance of an assessment the buck will stop with the subscriber, not the promoter.

Ultimately if you want to be sure of no problems all you can do is take all your money as salry paying full NI and PAYE. You give HMRC loads but can sleep easilly. Even dividends puts you further up the risk scale. Going offshore puts you yet further up it.

Ultimately it's you choice. If you go for it ensure it is fully explained. If you feel so inclined get a professional opinion on it. You won't get that here through generalities.

[Toasta]

No - you pay a higher rate on income over the higher level threshold. Wherever that comes from.

So whether you earn £10k through PAYE over the threshold, or £10k through dividends, or £10k through rental income not paid through a company, you pay tax at the higher rate.

Ok thanks Faqqer, I was a bit suspicious that this might have been a line my accountant has fed me to get me on board with the umbrella.

[TheFaQQer]

So am I right in saying, that no matter how much you have earned in paye, there should never be a point when you need to start paying personal tax on dividends?

No - you pay a higher rate on income over the higher level threshold. Wherever that comes from.

So whether you earn £10k through PAYE over the threshold, or £10k through dividends, or £10k through rental income not paid through a company, you pay tax at the higher rate.

[Toasta]

1 - There is a threshold on income, where you pay more tax. Nothing specific for dividends though.

2 - Some people are, and would defend the legality. Most are not, and would not. If it were, everyone would be doing it.

3 - Plenty of people.

HTH

So am I right in saying, that no matter how much you have earned in paye, there should never be a point when you need to start paying personal tax on dividends?

[Toasta]

Just out of interest, when you say plenty of people, is that people who are under enquiry or people who have physically written HMRC a cheque that was higher than the tax they should have paid in the first place?

The question I asked was more, have people been burned by the umbrella?

Because there is a massive lack of transparency with this one and I was more worried about them nicking off with my money.

[THEPUMA]

3 - Plenty of people.

HTH

Just out of interest, when you say plenty of people, is that people who are under enquiry or people who have physically written HMRC a cheque that was higher than the tax they should have paid in the first place?

[TheFaQQer]

1.Is there infact a threshold where dividends are subject to further tax.

2.Is anyone else working under this arrangement and is it legal.

3.Has anyone heard of anyone being burnt through such an arrangement.

1 - There is a threshold on income, where you pay more tax. Nothing specific for dividends though.

2 - Some people are, and would defend the legality. Most are not, and would not. If it were, everyone would be doing it.

3 - Plenty of people.

HTH

[BrilloPad]

I was on paye for the first part of the year, where I earned 35000, then last month was the first month I invoiced through my company which I am advised combined have pushed me over the 40,000 pound threshold and henceforth I will need to pay 25% on any dividends drawn.

but you would pay tax wheteher paying paye or div?

[Toasta]

1. Sounds like over the higher rate threshold? Else could be NI - how is salary/div split?
2. I do use an offshore - but some schemes are more legal than others
3. This board is littered with people who have been burned.

Can you say which scheme your accountant is proposing? Does it fall under 1955 Ramsey dual tax judgement?

Most people on here will advise you to keep well clear.

I was on paye for the first part of the year, where I earned 35000, then last month was the first month I invoiced through my company which I am advised combined have pushed me over the 40,000 pound threshold and henceforth I will need to pay 25% on any dividends drawn.

[BrilloPad]

Hi,

I need a bit of help, i've had a search around but have just ended up a bit more confused.

I am currently working outside of IR35 directly to a client.

On monday I recieved phone call from my accountant advising me that my combined paye salary and dividends had just gone over the threshold of £40k and that because of this any further dividend payments would be subjected to a further 25% tax.

He advised that I setup an offshore arrangement with a company he recommended, similar to a contract where I would sign an employment contract with the offshore company, who would then invoice my client, pay me the minimum salaray and then pay me the remaining money through a loan which would not have to be paid back.

I have started to have my suspicions of the whole setup and was wondering if anyone could answer the following questions.

1.Is there infact a threshold where dividends are subject to further tax.

2.Is anyone else working under this arrangement and is it legal.

and

3.Has anyone heard of anyone being burnt through such an arrangement.

Thanks in advance for any information you can provide me.

1. Sounds like over the higher rate threshold? Else could be NI - how is salary/div split?
2. I do use an offshore - but some schemes are more legal than others
3. This board is littered with people who have been burned.

Can you say which scheme your accountant is proposing? Does it fall under 1955 Ramsey dual tax judgement?

Most people on here will advise you to keep well clear.

[Toasta]

Hi,

I need a bit of help, i've had a search around but have just ended up a bit more confused.

I am currently working outside of IR35 directly to a client.

On monday I recieved phone call from my accountant advising me that my combined paye salary and dividends had just gone over the threshold of £40k and that because of this any further dividend payments would be subjected to a further 25% tax.

He advised that I setup an offshore arrangement with a company he recommended, similar to a contract where I would sign an employment contract with the offshore company, who would then invoice my client, pay me the minimum salaray and then pay me the remaining money through a loan which would not have to be paid back.

I have started to have my suspicions of the whole setup and was wondering if anyone could answer the following questions.

1.Is there infact a threshold where dividends are subject to further tax.

2.Is anyone else working under this arrangement and is it legal.

and

3.Has anyone heard of anyone being burnt through such an arrangement.

Thanks in advance for any information you can provide me.