Ltd Company Contractors here please, Jonnycoupe ?

Bear

Bear

Bear

Soldato
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Hi all. I am currently in the process of leaving my umbrella company and switching over to my Ltd company. One thing that seems to be a bone of contention is the directors wage.

Some people say pay yourself £110 a week and take the rest as dividends and as it is perfectly legal, I have even phoned HMRC to check it is fine and it is then it is all good. Then some people say pay yourself more as it will not draw untoward attention from HMRC as you arent paying any income tax and NI. There doesnt seem to be any concensus on this.

Secondly and this is where Jonnycoupe might be able to help is, does anyone that works with aircraft have public liability insurance, and if so who is it with as it would seem most people dont want to touch you with a barge pole.

Thanks.
 
Bear said:
Hi all. I am currently in the process of leaving my umbrella company and switching over to my Ltd company. One thing that seems to be a bone of contention is the directors wage.

Some people say pay yourself £110 a week and take the rest as dividends and as it is perfectly legal, I have even phoned HMRC to check it is fine and it is then it is all good. Then some people say pay yourself more as it will not draw untoward attention from HMRC as you arent paying any income tax and NI. There doesnt seem to be any concensus on this.

Secondly and this is where Jonnycoupe might be able to help is, does anyone that works with aircraft have public liability insurance, and if so who is it with as it would seem most people dont want to touch you with a barge pole.

Thanks.
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Salary of £5715 (allowance before NI kick in).
 
Morba said:
I paid myself minimum wage then took rest as dividends.
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Just in the process of setting mine up and I will be doing the same. If it keeps you off the radar then thats good enough for me :) Don't forget that minimum wage is going up Oct 1st (5.93/hr). A good resource for the OP would be to check out contractoruk. There are lots of handy tips & help on the forum.
 
You, you tax avoiders you!

Who are of course avoiding tax perfectly legally. I hope things work out and they don't change the laws again.
 
Cybermyk said:
You, you tax avoiders you!

Who are of course avoiding tax perfectly legally. I hope things work out and they don't change the laws again.
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Well, it's not so bad when going ltd, it's the grey area umbrella companies that you need to look at for that ;)
 
Zirax said:
Just in the process of setting mine up and I will be doing the same. If it keeps you off the radar then thats good enough for me :) Don't forget that minimum wage is going up Oct 1st (5.93/hr). A good resource for the OP would be to check out contractoruk. There are lots of handy tips & help on the forum.
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Technically, minimum wage going up is irrelevant as directors arent employees so are exempt from minimum wage requirements.

Thanks, I have had a look on contractoruk's forums and that is part of the problem as there doesnt seem to be any consensous, just that some people do it to keep their heads down.
 
Bear said:
Technically, minimum wage going up is irrelevant as directors arent employees so are exempt from minimum wage requirements.

Thanks, I have had a look on contractoruk's forums and that is part of the problem as there doesnt seem to be any consensous, just that some people do it to keep their heads down.
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Very true. However with a company who has one member of staff, I like to play it safe. In the grand scheme of things it's not a big dent and for that reason I think it's worth it.
 
I don't know about this but there was something on radio a few days ago saying that the tax office are going to start investiagting businesses that do things like this. Something about abusing loopholes
 
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Zirax said:
Very true. However with a company who has one member of staff, I like to play it safe. In the grand scheme of things it's not a big dent and for that reason I think it's worth it.
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I understand where you are coming from, I just cant decide if its definately worth playing it safe as realistically there isnt a requirement to do so, I mean lets face it, it is perfectly legal to do the whole £110 a week thing.

Just so long as you have your contract seriously looked over with respect to IR35 and it checks out ok, even if you do get HMRC going through your books is it that bad ? Its this sort of thing I dont know anything about and different accountants tell you a different story.
 
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mame said:
I don't know about this but there was something on radio a few days ago saying that the tax office are going to start investiagting businesses that do things like this. Something about abusing loopholes
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Its not even a loop hole as such as directors of companies dont even have to pay themselves a wage, so it is only normal to take advantage of your tax allowance.
 
Oh I might have got it wrong. It was something to do with small companies that abuse tax loopholes.
 
To be honest there are good reasons to pay yourself more salary even if it isn;t as tax efficient:

1. Making NI contributions is not a bad idea
2. Tax after your personal allowance is only 20%
3. The Inland Revenue definitely see that your wage should be enough to live on. £5k does not cut the mustard. Some people take the view that all the people taking less will get looked at first which is valid.
4. Don;t forget you pay approx 19% corporation tax on your divends so even if you only pay 22.5% personal tax that is still a total tax of 41.5%
5. IR35 rules may apply in which case your stuffed.
6. Company pension contributions maximum limits are based on salaries only and not dividends so very little tac free pension payments allowed with minimum wage.
7. Diviended payments not always considered equal to salary as far as mortgage lenders go since you have full control over how much or little you take.
8. Dividends should be paid once or twice per year max. If paid like a salary eg monthly, it is more likely the revenue will view it as a salary and start an investigation.
9. Salaries and NI payments come off your profits and reduce your corporation tax, Dividends don't.
9. All depends on how much per year you intend to take in total. Seek accountancy professional advice tbh.

Great advice here though the figures are slightly out of date:

http://www.contractorinfo.co.uk/index.php?q=node/203
 
My friend has just made a similar swap. He was suprised just how much more hes now taking home.

Im also doing £110 a week directors fee which is not only working for your tax free allowance but the slight NI (13p a week) keeps your contributions going. 21% on the rest thats treated as company profits before being released to shareholders. Of course good to drill down those profits with various expenses ;)

My accounts have done a IR35 compliance check on my contract and they were happy after a few tweaks were made. If anything did now arise they would support you in any HMRC investigation rather than avoiding the issue. Main thing that gets HMRC twitchy is silly things like taking more than your should such that its considered a directors loan. Easy done when you have that pot of cash waiting for end of year Corp Tax but definatley something not to do.

I dont have public liability, the client one would work for has a very specific design process which then of course leads on to CAA and FAA certification. Anything happening downstream would be very hard to pin on you unless you were a signatory? No idea to be honest on that front, I certainly dont have insurance and Im currently automotive so the potential for litigation is always there. Anything ive seen you are just treated as part of the machine that was Ford PAG and the suspension orders where anything relating to an issue is disclosed and all documents collated as a company response. Ive never known anyone held personally responsible for anything but thats the design side. What are you looking at in terms of your 'service'?
 
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