Reply to: Watch your accountants advice - the tax man could be after you

[Lockhouse]

I declare my divvi's quarterly but just draw down the money from the company account monthly as it's easier to budget. Nothing wrong with that.

[ASB]

I have a quick query of my own regarding this.
Asumming I am outside of IR35.

If I pay myself say about £1000 a month. Clearly, I cant survive on this amount cos of mortgage........ and so on.

Am I allowed to take extra money out monthly and declare it as dividends ?

On the last point, do a lot of people do this

cheers

css_jay99

Whether you are inside or outside of IR35 makes no difference at all as to what you are allowed to do (if inside IR35 there will be a balancing payment on the deemed salary at the end of the year).

Monthly (or even daily) dividends are allowed (but anything more regular than quarterly is often frowned upon). Ensure the correct paperwork is prepared.

The IR do not know how frequently you have declared dividends anyway. This is something they discover in an investigation. Frequent declarations of dividends are not going to trigger an investigation since the IR don't know the frequency.....

[Pondlife]

Am I allowed to take extra money out monthly and declare it as dividends ?

My take on this is that tho technically it's not 'wrong' it does smack of being disguised salary. Personally I think you should leave enough in the company so that you can pay your overheads for the year and take divvies once a quarter. You have to be able to demonstrate that the divs were profit.

HTH

[deforce]

Am I allowed to take extra money out monthly and declare it as dividends ?

On the last point, do a lot of people do this

Yes, and yes.

[css_jay99]

I have a quick query of my own regarding this.
Asumming I am outside of IR35.

If I pay myself say about £1000 a month. Clearly, I cant survive on this amount cos of mortgage........ and so on.

Am I allowed to take extra money out monthly and declare it as dividends ?

On the last point, do a lot of people do this

cheers

css_jay99

[pickle]

bums on seats

In my experience it always seems to be the "been at BT for 7 years" bums on seat contactors that decide to pay a higher salary. If you pay 5k a year salary, only claim legit expenses that you have receipt for, pay dividends twice a year, and make sure you have IR35 friendly contracts (and relevant insurance to back it up) then what’s the problem? When hector comes knocking he will find everything in order.

Running a company in a non tax efficient manner is plain stupid. Put it this way, I wouldn’t want to buy shares in your company if I knew you were p1ssing all the profits away in unnecessary tax bills.

Sort it out.

[Numptycorner]

I know, I was just muttering!

[Pondlife]

I'm not risk adverse, I just like to hedge my bets

If it wasn't clear I was agreeing 100% with you.

[Numptycorner]

I'm not risk adverse, I just like to hedge my bets

[Pondlife]

I have thought about reducing it many times, but it's simply not worth the risk IMHO.

This to my mind is the crux of the issue - it's about your personal attitude to risk. Personally I would rather not appear on their radar for any reason. Low salary, excessive expenses etc. Why spend your life having something like this hanging over you. For me it's just not worth it. Maybe I'm just a wuss though

[Numptycorner]

And how many of them were prosecuted as a result?

One got away with a fairly straighforward expenses review, one is still fighting it, not sure about the other.

I'm with the Malvolio position, I know the IR are not very efficient/effective but I have heard from many knowledgeable people that the very low sallary route is highly likely to draw unwanted attention. Maybe it doesn't, but I'm not willing to risk a higher chance of losing 10s of thousands for a 1-1.5k tax and ni saving per year. I have thought about reducing it many times, but it's simply not worth the risk IMHO.

[WhoKnowz]

What if you split the pay between the director and an employee?

I intend to hire someone to work for me and will pay them a salary of between 10-15k per annum.

As I am the director, would I still need to pay myself PAYE?
Would it appear fair if I pay the employee 10K and pay myself 5K?

[malvolio]

I agree, that's my experience as well. It's anomalies that trigger investigations - sudden changes in taxation structure for example, or high income companies with no retained profits. Keeping off the radar is always a good idea - just because something is legal, doesn't mean it's wise - especially with Gay Gordon in charge.

[DaveB]

Of the 3 contractors I know who have been audited. All of them were on low sallary. It could be a coincidence, but I doubt it.

And how many of them were prosecuted as a result?

[Numptycorner]

It may be that they're less likely to investigate people who pay a higher salary, but there's no guarantees about that, and for all we know they might switch to a system of pulling names out of a hat next week. Legally you're either caught or you're not, and if you are caught then it won't matter if you've been paying £5K, £10K, or £20K, you'll still have to find the extra. And if you're not caught, then paying anything more than the £5K is voluntarily paying more tax than you have to.

Of the 3 contractors I know who have been audited. All of them were on low sallary. It could be a coincidence, but I doubt it.