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Another one from the IR

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    Another one from the IR

    This has just been put on Shout99

    Tax man eyes dividend payments Recently Published
    by Susie Hughes at 09:54 25/01/07 (News on Business)
    The tax man could be gearing up to take a more offensive stance against dividend payments, with owner managed businesses in the firing line, according to a firm of specialist accountants and business advisers.
    DTE claims HM Revenue wants to use the employment securities legislation to levy PAYE tax and national insurance contributions on dividends, traditionally used by owner managers as a tax-efficient way of taking cash out of their businesses.

    AdvertisementMervyn MacDonald, head of tax at DTE said: “This is one further step further down the slippery slope that may ultimately lead to all withdrawals from companies being subject to PAYE tax and national insurance.”
    He fears the latest HMRC move is part of a broader tax assault on shareholding directors of owner managed companies.

    Mr MacDonald said: “The principal benefit of this sort of dividend payment is that it does not attract national insurance contributions. However, in December 2006 HMRC published further guidance to its inspectors which I believe could radically alter the situation.

    “The guidance repeats the desire of Treasury ministers to charge PAYE tax and national insurance on ‘the employment reward – the passing of value to an employee in return for the employee’s labour’.”

    He claims that HMRC will chase PAYE tax and national insurance where it believes:


    special purpose companies are used to disguise cash bonuses as dividends;

    a series of low-value shares are issued to employers who receive a small amount via the pay that is topped up with a dividend;

    ‘composite companies’ are trying to circumvent the IR35 regulations that stop self-employed workers from paying less tax where HMRC believes they are really ‘hidden employees’.
    Mr MacDonald said: “The guidance makes no reference to owner managed companies, with just one class of shares paying low salaries and high dividends. However, HMRC’s references to ‘contrived arrangements’, ‘arrangements that are used mainly to disguise cash bonuses’, ‘dividends as benefits’, and ‘thinly disguised general earnings’ lead me to conclude that the low salary/high dividend strategy will soon become an ‘unacceptable arrangement’, potentially subject to attack by HMRC on the grounds that is it in place mainly to generate a PAYE tax and national insurance saving.

    “This is ominous news for the owner managed business sector, which is already struggling under a heavy burden of tax red tape and compliance issues.”

    ================================================== ===

    So it looks like they are targeting everybody who takes a low salary and high dividend. The EDS's of this world must love our money grabbing revenue.
    Rule Number 1 - Assuming that you have a valid contract in place always try to get your poo onto your timesheet, provided that the timesheet is valid for your current contract and covers the period of time that you are billing for.

    I preferred version 1!

    #2
    As I said years ago on Shout99. It is OK for some lazy rich twat to buy shares in a company, do **** all work and rake in the benefits. Investing in your own talent and working your arse off is not OK.And I thought labour were supposed to champion the worker.
    Means of production and all that.
    I am not qualified to give the above advice!

    The original point and click interface by
    Smith and Wesson.

    Step back, have a think and adjust my own own attitude from time to time

    Comment


      #3
      No doubt that radsoft character will be on there applauding it soon enough!
      Rule Number 1 - Assuming that you have a valid contract in place always try to get your poo onto your timesheet, provided that the timesheet is valid for your current contract and covers the period of time that you are billing for.

      I preferred version 1!

      Comment


        #4
        No doubt that radsoft character will be on there applauding it soon enough!
        Rule Number 1 - Assuming that you have a valid contract in place always try to get your poo onto your timesheet, provided that the timesheet is valid for your current contract and covers the period of time that you are billing for.

        I preferred version 1!

        Comment


          #5
          no a slow pc over here....slow pc over here..over here...here...ere...re..e
          Rule Number 1 - Assuming that you have a valid contract in place always try to get your poo onto your timesheet, provided that the timesheet is valid for your current contract and covers the period of time that you are billing for.

          I preferred version 1!

          Comment


            #6
            Originally posted by The Lone Gunman
            As I said years ago on Shout99. It is OK for some lazy rich twat to buy shares in a company, do **** all work and rake in the benefits. Investing in your own talent and working your arse off is not OK.And I thought labour were supposed to champion the worker.
            Means of production and all that.
            Look, when you work hard and get rewarded for it, that is admirable and I personally don't believe that your earned income should be taxed more than unearned income.

            But let us be precise: if we say that you are "investing in your own talent" we are speaking figuratively here. You are not really investing, as in investing capital (= money that a business needs).

            As for buying shares in a company, you are free to do that. then you will be investing, and you will reap the dividend - free of NICs.

            You could buy EDS shares if you want: $13.02 each, last dividend $0.825. Then you would be investing, and raking in the benefits. It is open to all.

            Warning: this does not constitute financial advice.

            Comment


              #7
              I wonder if this is a IR Plan B should the 660 appeal fail
              How fortunate for governments that the people they administer don't think

              Comment


                #8
                Originally posted by expat
                Look, when you work hard and get rewarded for it, that is admirable and I personally don't believe that your earned income should be taxed more than unearned income.

                But let us be precise: if we say that you are "investing in your own talent" we are speaking figuratively here. You are not really investing, as in investing capital (= money that a business needs).

                As for buying shares in a company, you are free to do that. then you will be investing, and you will reap the dividend - free of NICs.

                You could buy EDS shares if you want: $13.02 each, last dividend $0.825. Then you would be investing, and raking in the benefits. It is open to all.

                Warning: this does not constitute financial advice.
                Do I realy have to go through this again?

                If I made pies I could pay myself minimum wage and take profits.
                If my customers came to me I could do the same.
                Because I am tied by the business I am in I am bared from doing the same.

                My favoured example.
                3 guys all working for the same "client". 1 is an employee. 1 is a contractor and 1 is placed by EDS.
                For the sake of argument thay all take 25K in salary.
                EDS get paid 100K. The contractors Ltd gets paid 100K so we can assume that the work is worth 100K.
                The shareholders of the client can benefit from the 75K profit produced by the employee.
                The shareholders of EDS can benefit from the 75K profit produced by their guy.
                The shareholders of the contractors Ltd are not allowed to benefit from the profit the contractor produces.
                I am not qualified to give the above advice!

                The original point and click interface by
                Smith and Wesson.

                Step back, have a think and adjust my own own attitude from time to time

                Comment


                  #9
                  The thing is that the scope is increasing all the time. IR35 was us. Section 660 was all husband and wife companies (including us usually). This is every owner manager company. This will be huge/when if they get it through. This will effectively tax to death every little company in the UK and remove any financial benefit of using a ltd company. Why would anybody setup for themselves if all income taken from the company was subjected to tax, NI and employers NI. Yet the big players in our industry would be uneffected by any of this (again)

                  From the IR perspective this is the best thing possible as it means that the tax due is the tax on the turnover minus the expenses where tax is PAYE, NI and Employers NI. A nice simple calculation.
                  Rule Number 1 - Assuming that you have a valid contract in place always try to get your poo onto your timesheet, provided that the timesheet is valid for your current contract and covers the period of time that you are billing for.

                  I preferred version 1!

                  Comment


                    #10
                    Yet the big players in our industry would be uneffected by any of this (again)
                    This is the whole crux of the matter. Look at who is advising HMRC on such policies, and note who they work for... Yet more corruption of the body politic by business interests.
                    Blog? What blog...?

                    Comment

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