Reply With QuoteThere are concessions that allow directors to perform whatever duties are required to keep companies ticking over.Originally Posted by Captain Morgan
Do the grants available to the self employed require them to stop work?
Sorry, but I do still think you are incorrect, having read the rules many times (too difficult to copy and paste the government guidelines on my phone just now to prove it) an example is, I could have staff in for training on machinery, just as long as they are not making materials, for sale later for example. Again I’d like to think we/ the government would not be that picky, this whole programme is aimed at saving jobs not penalising companies.
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Training is permitted - what is described above cannot be called training.
it wasnt training ,it was to produce items for sale,just seems slightly off that basically the company are getting him to work for nothing as the gov are footing the bill.
I recently had an email from HMRC about what was going to happen, at the moment the grants are not available in fact we won't even be notified if we qualify before the beginning of June, but yes the self employed can still work but any grant we could get ie 80% of the average profit for the last three years average is taxable. as for employees from what I understand it has been stated that those that have been furloughed MUST NOT work.
I understand that Tony, JPCain86 appears to have had ‘issues’ with directors of LTD companies throughout this thread (among others), so my question was directed to him, rather than a general request for clarification.
Do you mean a director has to go to work to keep the company afloat for him/herself and the employees? If so they will not take any money if their is no customer money coming in..
Would you deny directors government money in this position?
Ok I’m prepared to be shot down here but assuming running a ltd company is only really tax efficient when earning “a lot” of money (nowadays)
My question would be why are individuals running ltd companies? Not working as sole traders/self employed?
Many of us don’t have any choice. The only way I can operate in my line of business is as a ltd company. 4 out of 6 of my clients would not hire me otherwise because of tax obligations.
And even when you earn ‘a lot’ of money ltd companies don’t save you much tax these days.
Forgive me but I don’t understand, if you invoice a company for work and they pay you, how does this affect tax?
For those operating a single director LTD company consulting / contractor or interim business you will find that the client will only accept LTD companies.
“ Most freelancers choose to operate as a limited company simply because so many potential clients and agencies will only do business with individuals who operate in this way. The downsides of the limited company are more rules and regulations, accountancy fees tend to be higher and the penalties for getting your paperwork wrong are greater. Plus you will have to pay corporation tax and you can't just withdraw money from the business without formally recording it as a salary, dividend or loan. “
https://www.theguardian.com/small-bu...any-freelances
For many small / med business especially with the LTD company structure is the optimal option.
Some reasons -
Separate and protect personal assets if get sued by customer, employee etc. although with the bank guarantees we sign this is reduced.
Some customers won't deal with a sole trader
Allow investment in the business and choose a bit better how and when take money out.
Allow external investment
As I posted before, the main reason for going ltd was because agencies would not entertain invoices from sole traders even though the work was just a 1-3 day shoot and not some long contract where they were wanting to avoid having to put somebody on the payroll.
I also do a small amount of work for production companies (film/tv) and it means I can avoid issues with those accounts department because of the unique situation the government has put them under where heads of department or trades supplying their own equipment can be self employed but anyone with assistant in their title or is on a particular list of roles is taxed at source. So for the few jobs I would do a year I have to deal with a taxed at source issue which is essentially a pointless process.
As for saving tax? Well the tiny amount that I might save is wiped out by accounting costs.
The only real benefit for me is the fact I can leave money in the business and only pay the second personal amount of income tax after the corporation tax if I want to top up my income (with dividends). Like most directors I have at times only taken what I need from the business if I feel investment or cash flow is the priority.
You still pay corp tax though.
Doesn’t stop the accusations of tax dodging despite others saying the same thing people can’t seem to understand how the system actually works and are unwilling to accept we are not all trying to defraud HMRC.
So they will only work with LTD as in essence there is more comeback if it’s a LTD company and things go wrong?
Since giving up PAYE employment some years ago I have ran a LTD company, worked as a partnership - now sole trader and starting a ltd again. Different client base hence my lack of understanding.
[QUOTE=MrSmith;5388222]As I posted before, the main reason for going ltd was because agencies would not entertain invoices from sole traders even though the work was just a 1-3 day shoot and not some long contract where they were wanting to avoid having to put somebody on the payroll.
I also do a small amount of work for production companies (film/tv) and it means I can avoid issues with those accounts department because of the unique situation the government has put them under where heads of department or trades supplying their own equipment can be self employed but anyone with assistant in their title or is on a particular list of roles is taxed at source. So for the few jobs I would do a year I have to deal with a taxed at source issue which is essentially a pointless process.
Sounds a bit like the CIS scheme used in construction - although the contractor is self employed you pay his tax through cis
Yes, I think construction and film/tv were singled out as they were seen as ripe for rule bending and avoidance though I’m sure we have all seen and heard of smaller building firms and their ‘creativity’.Sounds a bit like the CIS scheme used in construction - although the contractor is self employed you pay his tax through cis
I do find the tv one very odd in its implementation though as a director (head of department) is paid normally but the first assistant director is taxed at source, same in every department. The Director of Photography is not paid in the same way as the person stood next to him pulling focus?!
It works fine if you are only dealing with a few production companies and work in the same role all the time but not if your main income is outside of TV/film.
I’m sure other industries will be singled out in the future if they feel people are being economic with the truth and I don’t have a problem with that at all.
Be nice to be offered some help from the government though I’m not holding my breath.
Ostensibly less in many cases should there be a liability situation then it’s the LTD company who is responsible and the directors personal assets are not at risk, that said you would expect any professional to have sufficient indemnity insurance in place to mitigate this.
I am not a LTD company director so I can’t profess to know the details but I understand that the preference for company to company relationships for consultants, contractors and interim roles has been this way since the 90’s if not before.
And the old saying of ‘He who pays the piper...’ comes to mind.
I do it for liability and legal purposes to separate out my private assets from company assets.
The issue of why operating as a limited company is a separate one. Even as a limited company could presumably pay an appropriate wage through PAYE with reduced dividends.
What relevance does this have to the discussion?
As much as people explaining their reasoning for being limited companies.
One was an apparently genuine question about why LTD vs sole trader.
The other a dig at LTD company directors who take a salary and dividends for various reasons.
I think it’s obvious which was which.
One of the reasons agencies don’t accept sole traders is a few years ago agencies were made liable for the tax of the sole traders if they didn’t pay it. Which by all accounts was quite a regular thing so HMRC put in regulations to stop it happening.
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Not a dig, just stating facts which are more relevant than most posted here. Obviously a sore point so pick on me and ignore stuff not on your agenda.
There are clear areas of unfairness in the government's support for COVID-19 but they include that the self employed can carry on working and receive support without having to demonstrate the degree of impact, if any, on their income from the virus.
One man band limited companies are receiving only limited support in respect of the salaries taxed under PAYE, so a genuine question: if those people truly desire 'fairness' then how many do we think would be willing to agree to their historic dividend income being taxed retrospectively under PAYE if that meant they qualified for grant support?
Last edited by deepreddave; 18th April 2020 at 09:45.
Why are your facts more relevant?
What do you perceive is the issue with directors taking a salary and taxed dividends from their company post paying corporation tax?
I don’t have a LTD company and never have, so my agenda is simply that the government seems to be treating them differently to sole traders and have abandoned small LTD company’s which seems unfair but your view maybe different.
Do you mean after refunding the corporation and dividend tax that will already have been paid?
Why only one man bands?
How would you propose to deal with consultants who might have in excess of 5-10 clients and use other consultants to deliver to the end client, should they be on payg?
I fear it’s not as clear cut as we first think.
Dave this is a fair question, as long as corporation tax and the like is also considered. For anyone running their business without cheating the system, many would be happy to go down this route to be considered for the PAYE safety net I’m sure because there is so little tax benefit involved in running a ltd company now.
Obviously for those evading taxes via ltd companies this is last thing they would want, but frankly who gives a s**t about them anyway as they’re not contributing fairly. Hopefully many of them will get smoked out.
The logistics of this would, of course, be a nightmare and unlikely to happen. But it’s a good question posed certainly.
Oh dear. It's already been taxed, Dave (twice, normally) - this is just another example of a complete lack of understanding which then skews the views of others reading the thread.
Did you genuinely think that dividend payments were exempt of tax?
I actually think it’s a fair question posed Tony and, given PAYE and ltd company taxes are almost at parity as it is, may help those of us that don’t game the system. I think many honest directors would step forward
Haha well hopefully Dave has read the rest of this thread and gets this myth has been dispelled on a tiring number of occasions!
Tony, are you understanding that you'd pay employer and employee NICs on the dividend income if taxed as PAYE salary? This was the main driver for many people moving to limited company status so as to opt for dividends in the first place. 'Tax' includes NICs not just CT and personal tax.
I'm familiar with taxes and referenced the tax savings from paying via dividends a few days ago.
Last edited by deepreddave; 18th April 2020 at 10:28.
[QUOTE=aa388;5388336]One of the reasons agencies don’t accept sole traders is a few years ago agencies were made liable for the tax of the sole traders if they didn’t pay it. Which by all accounts was quite a regular thing so HMRC put in regulations to stop it happening.
Yep similar story in construction. We have to pay contractors -20% on their invoice and the 20% goes direct to hmrc that month ! Conversely, the majority are sole traders who work in this way so they would be ok for the grant.
It’s more relevant that they receive dividends rather than a salary. Not relevant is why they are a company - they could have still payed themselves a proper wage. People explaining that they ‘need’ to be a company miss the point.
My agenda is simply that directors shouldn’t be treated differently to that of shareholders in general. After all, dividends are investment income not a salary or wage.
Just to confirm, I've no axe to grind here and have previously said that I just hope those that really need the help get it.
I think it's important that any discussion on 'unfairness' takes in the overall picture (including why the schemes have been introduced) and not just a selective view, as I suspect that's how the government arrived at the schemes.
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I agree there are far more productive things to do.
I don’t wish to muddy the waters, but I have heard of higher tax band advantages that may or may not be true, if you are shareholder director and you approach the higher tax band, essentially you can make a spouse a shareholder to split the profits? Is this true?..
I haven’t been near this limit so haven’t investigated it to see if it’s a liable option but it’s an interesting concept.
Main reason I go limited is you are protected in your personal life, if for some reason there was law suit you are not going to lose your house..
Yes, in the same way as many s/e pay their spouse a very good wage to assist in their business. Abiding by the rules to minimise the tax you pay is just sensible tax planning and there's nothing wrong with that.
The point is that there are potentially good reasons for treating dividend receipts by directors differently to the salary received by employees (including directors' salaries) or profits from s/e. I doubt a hastily introduced scheme would ever be perfectly fair but that's partly because the current system of status/taxation isn't a level playing field.
I wish everyone well, personally and in their businesses; I'm off out to do my once a day exercise.
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True if you are talking about shares in a large profitable company, however as the sole director of a one man Ltd company a dividend is flexible mechanism to keep money in the business during lean times, plan investment and take money out when times are better. The tax "advantages" are of little importance to most in that position.
No I don't. I think you will struggle to find evidence of me having an issue with LTD directors.
I do however get annoyed with the entitled benefits attitude. I think if people have no other way of getting more and they would struggle without.
It really is swings and roundabouts. I think it is awful that some people will be without for 3 months who are really needy.
I think it's equally awful that some people will take that are not at all needy.
I wouldn't deny anyone money who truly needed it. I question whether some of the people on shouting foul play need it.
Last edited by JPCain86; 18th April 2020 at 12:52.
Another thought re taking dividends - they are not pensionable so anyone taking no salary and taking only dividends is missing out on pension tax relief potentially.
I would imagine if that's the case they would take the pension from their salary wouldn't they
Of course you wouldn’t draw a dividend to pay into a pension. You pay into a SIPP from the business pre-tax just like someone on PAYE (if you have anything left over to do this of course!).
Phew, that was taxing...
This is true although often if there’s more than one director personal contributions are safer as hmrc can challenge whether the employers contributions are wholly and exclusively for the purpose of the business. Hmrc can check whether other employees or directors have comparable remuneration packages. In principle though you are 100% correct.
Edit especially for 1 man ltd companies of course
Last edited by RustyBin5; 18th April 2020 at 15:00.
Did you prove a point. I think the first point relates to the fact that the system that helped contractors is screwing them. If anything I am agreeing that they are being screwed.
Maybe you think they are not 樂.
I think I've made it clear on many posts before that they are my fraudulent friends who claim everything they can.
There are benefits to being self employed. That's not an insult. There are benefits to being PAYE, again not an attack at PAYE. I mean usually in a benefits situation it's the PAYE that get screwed.
Last edited by JPCain86; 18th April 2020 at 15:07.
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