One for the contractors with Ltd companies
Discussion
When the workload's a bit unstable, and cashflow is similarly irregular, how do you deal with extracting a wage? Do you estimate a fixed annual salary and then risk operating at a loss by the end of the year if you have a dry spell, or do you estimate the proportion of your daily rate that will be your own wages and draw that at pay time?
Obviously this is more aimed at the contractors who work short contracts as opposed to those on 3-year deals with security.
Cheers,
Phil
Obviously this is more aimed at the contractors who work short contracts as opposed to those on 3-year deals with security.
Cheers,
Phil
Youy must be careful with limited companies. If a director/shareholder draws so much from the company in the form of salary or wages and thereby puts the company into an insolvent position, he will be deemed to have behaved at the least negligently and perhaps even fraudulently.
He could lay himself open to prosecution or investigation.
He could lay himself open to prosecution or investigation.
As long as you remember to take heed of the time limits surrounding such transactions.
Although this is a common method of providing remuneration to director/shareholders, the Revenue are not overly keen on it, especially if the Director's Account is cleared by the voting of a dividend.
Depending on the frequency that money is drawn out by the director, they may be able to successfully argue that these payments could not be construed as dividends and should have been treated as regular earnings i.e. salary.
Although this is a common method of providing remuneration to director/shareholders, the Revenue are not overly keen on it, especially if the Director's Account is cleared by the voting of a dividend.
Depending on the frequency that money is drawn out by the director, they may be able to successfully argue that these payments could not be construed as dividends and should have been treated as regular earnings i.e. salary.
Eric Mc said:
As long as you remember to take heed of the time limits surrounding such transactions.
Although this is a common method of providing remuneration to director/shareholders, the Revenue are not overly keen on it, especially if the Director's Account is cleared by the voting of a dividend.
Depending on the frequency that money is drawn out by the director, they may be able to successfully argue that these payments could not be construed as dividends and should have been treated as regular earnings i.e. salary.
Although this is a common method of providing remuneration to director/shareholders, the Revenue are not overly keen on it, especially if the Director's Account is cleared by the voting of a dividend.
Depending on the frequency that money is drawn out by the director, they may be able to successfully argue that these payments could not be construed as dividends and should have been treated as regular earnings i.e. salary.
Agree, but they rarely do ... As long as they get the £ and it seems a fair amount then I've found that little attention is then taken.
Declaring one dividend for the year at the start of the personal financial year ( assumes 31 march company tax year end )and then drawing it down during the year has worked for me in the past
Eric Mc said:
Frequency is the key. Monthly "dividends" are decidedly dodgy. Quarterly is just about acceptable. Half yearly and annual are OK.
Dividends should also be backed up with boardroom minutes, draft accounts and dividend vouchers.
Dividends should also be backed up with boardroom minutes, draft accounts and dividend vouchers.
As I said, do one annually and draw it down during the year. You can always retrofit where required and as to minutes etc ... well a bottle of wine and ms word + a couple of hours would suffice ... It's not as though they knock on your door, there is advance notice !
These things are more than often picked up during "PAYE Inspection Visits" rather than during Corporation tax investigations. The PAYE Inspectors are often prompted to ask what the nature of certain payments to directors are - their view being that regular and frequent payments constitute "remuneration" or "salary" rather than "distribution of profits (dividends).
Eric Mc said:
These things are more than often picked up during "PAYE Inspection Visits" rather than during Corporation tax investigations. The PAYE Inspectors are often prompted to ask what the nature of certain payments to directors are - their view being that regular and frequent payments constitute "remuneration" or "salary" rather than "distribution of profits (dividends).
Yup, agree. That's why I take the options of drawing down a single dividend during the year and annual PAYE return. That way I have up to 12 months to make it all look sensible !
Anyhow, looks like I'll give the EBT route a go until GB kills it ...
Gassing Station | Business | Top of Page | What's New | My Stuff