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

**TheMonkey** · 13 June 2006, 12:21

Which is why I am my accountant. I am solely responsible for researching and determining what is best for my company.

**Xenophon** · 13 June 2006, 12:49

Originally posted by TheMonkey

Which is why I am my accountant. I am solely responsible for researching and determining what is best for my company.

I thought you were going permanent TM?

**Mordac** · 13 June 2006, 12:50

Originally posted by yetanotherone

When I speak to my colleagues, it appears that everyone gets different advice from 8k to 20 and even one at 30k.

They probably get different advice because they have different circumstances.

**ASB** · 13 June 2006, 12:51

Originally posted by yetanotherone

Basically, what come back have you got if you follow your accountants advice and it turns out to be incorrect.

GT

You need to accurately define incorrect. I don't think advising somebody as to different legal ways of remunerating themselves could possibly be construed as incorrect.

As a director NMW legislation does not apply unless you have a contract of employment with your company, so you are legally free to pay yourself whatever salary you feel like. Obviously there are questions around IR35 and S660 compliance, however none of those make any salary level you choose to pay in any way wrong.

I imagine those who pay themselves a higher salary think they will be further down the track when it comes to potential investigation time. That may be true but I don't think there is any evidence to support it.

**malvolio** · 13 June 2006, 13:21

Nope, it's a defence option. If you pay something around national average salary, and therefore somewhere around national average PAYE and NIs, it is less likely that Hector will chase you for IR35 since (a) you are playing the game like a proper business would and (b) there is not nearly so much profit to be made anyway so why bother chasing you.

Taking £4800 pa or so, while totally legal, is also taking the p*** as far as the taman is concerned. The net difference between that and £30k for the average contractor is not huge, if you consider the average IR35 investigation takes three years and costs around £10k even if you win.

At the end of the day, it's a business risk calculation. The accountant is merely being cautious.

**davisc02** · 13 June 2006, 14:15

I'd have to agree with Mal, the general rule to not get an investigation is basically pay yourself a sensible "average" wage. If you start paying yourself 5k per annum and you have a £1200 a month mortgage which your paying using monthly dividends (because you can't aford to wait quarterly) then your asking for a knock at the door.

**ASB** · 13 June 2006, 14:25

Originally posted by davisc02

If you start paying yourself 5k per annum and you have a £1200 a month mortgage which your paying using monthly dividends (because you can't aford to wait quarterly) then your asking for a knock at the door.

Although that sounds entirely reasonable there is no evidence to back up that assertion.

The experience of the accountants seems to be that the level of salary makes no difference (i.e. they see just as many investigations on a high salary as they do a low one).

**deforce** · 13 June 2006, 15:08

Originally posted by davisc02

you have a £1200 a month mortgage which your paying using monthly dividends (because you can't aford to wait quarterly) then your asking for a knock at the door.

How would the taxman know you've got a £1200 a month mortgage then?

**TheMonkey** · 13 June 2006, 15:24

Originally posted by Xenophon

I thought you were going permanent TM?

Yes - for the most part, but I won't turn down any nice weekenders that pay well so the company is going to stay running.

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