Reply to: Paying a wage out of Ltd co. but not actually 'working'..

[chris79]

Beats me why some people have difficulty undertsanding just because the co may not have any roles or income at present, you somehow cant 'take a wage' from that co!

Yeah beats me how my wife does the books for my company yet Hector says I'm income shifting, beats me how I rent out my services to clients yet he also thinks my dividends may not be legal and wants NICs/tax paid on them. Beats me why I have to waste my own money to 'insure' against this bullsh*t created by some 'have cake, can eat' public purse funded dogmatic half-day working loafers who wear suits from M&S...

Sometimes employment and tax laws are not so black and white and seeking clarification on such issues is a sensible thing to do.

******* weird or are some people just incompetent permies who've gone contracting?

Or sensible for double checking an unknown situation before going in feet first...

[BolshieBastard]

Beats me why some people have difficulty undertsanding just because the co may not have any roles or income at present, you somehow cant 'take a wage' from that co!

******* weird or are some people just incompetent permies who've gone contracting?

[TinTrump]

...thresholds that are likley to be in place going forward.

http://forums.contractoruk.com/gener...uzz-words.html

That will aggravate someone.

[Bengal]

Because you were rambling on about it not being legal, which it is. Salary from a non trading co may not be the best option but it is legal and does register NI, which is a benefit

I don't see anyware in my post saying anything about what is being proposed is illegal. I was merely pointing out some facts around the tax and NIC position and also a potential approach of HMRC but then adding a couple of possible get outs (or solutions).

HMRC are getting smart to what goes on out there and are increasingly looking to recatagorise payments into something else, when looking at the facts. They are desparate to increase the tax/NIC take.........

[Bengal]

Oi! why aren't you picking on me as well. My post was equally insulting though definitely more humourous and subtle.

I didn't necessarily find your comments insulting but was curious (see my post just above this post of yours).

It gets my goat when someone slags of someone without adding there own view (that is of course if they have the nonce to have a view) and without considering what I might do for a living!

[Turion]

Because you were rambling on about it not being legal, which it is. Salary from a non trading co may not be the best option but it is legal and does register NI, which is a benefit

[Bengal]

WHS+ his advice maybe be offered with much gratiousness, goodwillyness and cheapness, but comes with little use-ness.

A Ltd co can pay a wage to any loafer it likes, director or no, for as long as it likes - nuff said. After all, who says that the Director is not doing 'research' which happens not to generate company income at that moment .

Don't follow what you are getting at. The point I'm trying to make is, sure you can pay a salary to a person for ever and a day but if you pay it as salary, you will incuur an additional cost of 12.8% NIC as an employer, this rate goes up in April 2010............so there have to other ways of doing it, so whats useless about that?

[Bengal]

dont listen to bengal he/she/it is talking through their arse
speak to an accountant

I don't take kindly to your comments, justify yourself! What's the basis of your comments........do you know better?

[PhilAtBFCA]

chris79

Interesting idea.

Something to think about though...

If you accumulate profits of £250k then you will pay corporation tax on that, first.

Then you take out the salary at £15k and pay tax on that at prevailing rates.

The company has no further income, so makes a loss. Lets assume tax cannot be reclaimed.

Now you are paying tax twice ?

Your could try:-

Accumulate £250K and pay corporation tax.

Dividend out a bit each year, and no problems as long as the tax laws dont change, you have on going accountancy costs, but you could minimise with a once a year payment, you may have bank cash risk if your dont spread it arround a bit .

On the other hand you could try accumulate £250k , close company, extract money under ESC16 capital gains tax and using Entrepreeneurs relief pay 10% tax, or go abroad for 5 years and pay no CGT. ( This paragraph is a generalisation, its actually not that simple, but you get the idea ?)


Phil

[Turion]

dont listen to bengal he/she/it is talking through their arse
speak to an accountant

WHS+ his advice maybe be offered with much gratiousness, goodwillyness and cheapness, but comes with little use-ness.

A Ltd co can pay a wage to any loafer it likes, director or no, for as long as it likes - nuff said. After all, who says that the Director is not doing 'research' which happens not to generate company income at that moment .

[mrdonuts]

Mate a fundemental point that has not been mentioned is that if you pay a waage/salary each year month you will have to operate PAYE and account for NIC (employees and employers up to state retirment age and then employers NIC only after that) subject to the personal allowance and earnings thresholds that are likley to be in place going forward.

The payments will be regarded as being made from an Employer Financed Retirement Benefit scheme (essentially an unapproved retirement benefit scheme) and so the same would not qualify for any tax/NIC breaks.

However, there are circumstances under which an Employer Financed Retirement Benefit Scheme can be treated as an approved scheme but the rules are a bit complicated and so would advise you to take some good advice from an accountant who understand pension schemes. There are also something called annuities that can be purchased I think which don't rise to tax etc. Speak with a pensions advisors is your best bet on this one.

dont listen to bengal he/she/it is talking through their arse
speak to an accountant

[thunderlizard]

How does the tax man view this if you keep a large stash of money in a company then use it to fund a wage for years down the line despite not actually 'working'...?

That wouldn't bother him. As long as you pay the right amount of tax on your income he wouldn't care how much or how little work you do to earn it.

If you worked in a shop for a week, and the shop was open but nobody happened to walk in, you'd still expect to get paid your week's wage. Your situation is just an elongated version of that.

[electronicfur]

He can pay himself a minimum wage and dividends for years.

Should be no problem.

Also there is the option in the meantime of investing the money retained in the company using a company trading account.

[Bengal]

Just wanting some clarification on this:-

Accumulate a small pot of money in the limited company, say £250k.. then pay yourself a wage of say £15k a year out the company for approximately 15 years...

Just trying to figure out a 'pension' option for someone I know who does not have a pension and will be at retirement age shortly..

Putting money away into a pension right now doesn't seem a good idea purely for the accessibility issues (i.e. not being able to get hands on the money if it was required sooner)...

How does the tax man view this if you keep a large stash of money in a company then use it to fund a wage for years down the line despite not actually 'working'...?

Any other ideas what to do?.. The person in question is 50yr old, little home equity, no pension, no savings, but runs a limited co. as a consultant and has good earning potential.

Mate a fundemental point that has not been mentioned is that if you pay a waage/salary each year month you will have to operate PAYE and account for NIC (employees and employers up to state retirment age and then employers NIC only after that) subject to the personal allowance and earnings thresholds that are likley to be in place going forward.

The payments will be regarded as being made from an Employer Financed Retirement Benefit scheme (essentially an unapproved retirement benefit scheme) and so the same would not qualify for any tax/NIC breaks.

However, there are circumstances under which an Employer Financed Retirement Benefit Scheme can be treated as an approved scheme but the rules are a bit complicated and so would advise you to take some good advice from an accountant who understand pension schemes. There are also something called annuities that can be purchased I think which don't rise to tax etc. Speak with a pensions advisors is your best bet on this one.

[MPwannadecentincome]

check the pension rules, you can put in a lump sum, get your tax relief then promptly withdraw 25% (?) tax free - depending on your age.