Reply to: Accountant Problems

[Alan @ BroomeAffinity]

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Not really that much of an advert anyway when he can't even spell Accountant

[adam11]

UK Accountat

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[Danielsjdaccountancy]

Daniel.. just in reference to NI...

Gotcha

[ASB]

So I could have 10 jobs - and earn 70k without paying NI?

What about if I leave one and hand the other my P45 (as kitty would be doing?)

Yes. (provided they are not associated in which case the pay is cumulated for NI purposes).

HM Revenue & Customs: Employee has more than one job

Conversely you could have 3 jobs each paying 50k and pay considerably more than you would with one job paying 150k. (This case is resolvable by applying to NICO for deferment since the upper earnings limit is actually across all employments and defined by statute. It can be awkward to resolve, but you generally get there in the end. Don't expect NICO to be writing to you saying "hey you've overpaid...")

[TheFaQQer]

Right. Interesting. Didn't realise that one.

Not that it is relevent to me, purely hypothetical.

Thanks.

Just thinking about this.... I've never delved into the related companies type stuff as it is also not relevent to me.... What stops me from having 3 limited companies each earning some revenue from different contracts for the year and taking a 7k salary from each?.. I assume HMRC will just say that this is an artificial structure to avoid NI if they are all the same contracting type business? But can't do much about it if they all get revenue from different business models - i.e ONe Contractor Company, One selling fish etc etc.

I'd take it that if they were significantly different revenue streams, then you could do it and get your £7k from each one without paying NI.

If they were too similar, then the Ramsay principle would apply.

[prozak]

By that logic paying dividends could be seen as avoiding NI. If you're a director and being paid a notional salary from each company to recompense you for your director duties, then I don't see a problem.

You may have problems with related/associated company rules for CT and VAT though (depending on business type and ownership).

interesting.

though with CT at 20% now the benefit of doing this seems negligible as anything over 7475 is going to be taxed anyhow.

So I guess the benefit is about £80.... i.e. the corp tax you wouldn't pay on the additional personal allowance of £400 - odd that is not currently being paid to avoid NI.

[prozak]

Self-assessment is in on your worldwide income so you only get 1 personal allowance, therefore not possible.

Daniel.. just in reference to NI...

[Clare@InTouch]

Right. Interesting. Didn't realise that one.

Not that it is relevent to me, purely hypothetical.

Thanks.

Just thinking about this.... I've never delved into the related companies type stuff as it is also not relevent to me.... What stops me from having 3 limited companies each earning some revenue from different contracts for the year and taking a 7k salary from each?.. I assume HMRC will just say that this is an artificial structure to avoid NI if they are all the same contracting type business? But can't do much about it if they all get revenue from different business models - i.e ONe Contractor Company, One selling fish etc etc.

By that logic paying dividends could be seen as avoiding NI. If you're a director and being paid a notional salary from each company to recompense you for your director duties, then I don't see a problem.

You may have problems with related/associated company rules for CT and VAT though (depending on business type and ownership).

[Danielsjdaccountancy]

Right. Interesting. Didn't realise that one.

Not that it is relevent to me, purely hypothetical.

Thanks.

Just thinking about this.... I've never delved into the related companies type stuff as it is also not relevent to me.... What stops me from having 3 limited companies each earning some revenue from different contracts for the year and taking a 7k salary from each?.. I assume HMRC will just say that this is an artificial structure to avoid NI if they are all the same contracting type business? But can't do much about it if they all get revenue from different business models - i.e ONe Contractor Company, One selling fish etc etc.

Self-assessment is in on your worldwide income so you only get 1 personal allowance, therefore not possible.

[prozak]

NI isn't on a P45, that form shows the previous pay and tax only. So yes, effectively you could.

Right. Interesting. Didn't realise that one.

Not that it is relevent to me, purely hypothetical.

Thanks.

Just thinking about this.... I've never delved into the related companies type stuff as it is also not relevent to me.... What stops me from having 3 limited companies each earning some revenue from different contracts for the year and taking a 7k salary from each?.. I assume HMRC will just say that this is an artificial structure to avoid NI if they are all the same contracting type business? But can't do much about it if they all get revenue from different business models - i.e ONe Contractor Company, One selling fish etc etc.

[Clare@InTouch]

So I could have 10 jobs - and earn 70k without paying NI?

What about if I leave one and hand the other my P45 (as kitty would be doing?)

NI isn't on a P45, that form shows the previous pay and tax only. So yes, effectively you could.

[northernladuk]

So I could have 10 jobs - and earn 70k without paying NI?

What about if I leave one and hand the other my P45 (as kitty would be doing?)

I take it this is hypothetical as a permie and not realistic to the contracting via LTD setup.

[prozak]

Firstly, no NIC (either employees or employers) would be due on an annual salary of £7000 - the National Insurance bands are per 'employment' not per person. So you could have five jobs, each paying a salary of £7000, giving a total income of £35,000 and you would not pay any NIC.

snip blah blah CT stuff...
Alan

So I could have 10 jobs - and earn 70k without paying NI?

What about if I leave one and hand the other my P45 (as kitty would be doing?)

[jmo21]

For what it's worth, I'm also one connection away from Julie on LI, via an agent.

<creepy>very cute</creepy>

[Nixon Williams]

Whoa!

you're gonna have to justify that one Alan.

Anything Kitty now earns is taxed at 20% personal (assuming she is still under the higher tax rate) - negating the CT benefit, essentially just passing the tax to her personal tax band.

Plus she pays 12% NI.
Plus there is 13.8% Employers NI.

Plus every pound she earns means 25% to be paid on the dividends she has already taken (she has already said she is over the higher tax rate due to dividends i think)


Or am I wrong?

By all means please prove me wrong. I am no expert.

Firstly, no NIC (either employees or employers) would be due on an annual salary of £7000 - the National Insurance bands are per 'employment' not per person. So you could have five jobs, each paying a salary of £7000, giving a total income of £35,000 and you would not pay any NIC.

If the person was a higher rate taxpayer (and already used their tax allowance), then there would be no difference at all on the total tax paid, as the example below illustrates:

Fee income of £50,000 and ignore all expenses, VAT etc.

Taking a salary of £7,000 would leave profits of £43,000, meaning corporation tax of £8,600 would be due. Assuming that the remaining profit of £34,400 is paid as a dividend, this would give a total income of £41,400 (34,400 + 7,000).

From this income you would be liable for 40% tax on the salary (£2,800) and 25% tax on the dividend (£8,600), so the total tax would be £11,400.

So your net income would be £30,000 (£41,400 - £11,400).

If NO salary was taken, then the corporation tax would be £10,000 - leaving a dividend of £40,000 that could be paid, the tax on this would be £10,000, so again leaving a net income of £30,000

The arguement for a salary on this basis was marginally better when the corporation tax rate was 21%, but the effect of this is now almost gone as most companies will now be fully paying corporation tax at 20% on their profits.

However, on top on this, the extra salary will earn additional 'credits' towards the state second pension, probably not a lot but every little helps as a large supermarket states!

I hope this explains.

Alan