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Post Info TOPIC: Wages--ST & Ltd Co
alfie


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Wages--ST & Ltd Co
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What advice do you tend to give to ST's and Directors of Ltd Co's (1/2 person), on paying themselves?

If you had a client that wasn't sure about going ST or Ltd  Co, what advice would you give them?



-- Edited by alfie on Thursday 13th of October 2011 03:23:42 PM

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kjmcculloch83


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Personally I don't do advice on this. I don't know enough about the pros and cons to offer advice, and even if I did I'm not sure my insurance company would be happy.

The only think I do suggest to sole traders is to try to limit the dipping into the account to a weekly amount. This is for no other reason than to help me.

Kris

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Shamus


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Hi Alfred,

there's too many variables for one simple answer.

For example, some businesses will only deal with limited companies making that the way for a client to go but at times legislation such as IR35 makes payment using dividends bob viable (beyond the 5% of turnover rule).

Every business needs to be judged on it's own merrits as to what's best for that business.

Also worth checking as an aside. If you are giving advice as to a clients business structure does your PII cover you for that?

There are quite a few threads on the site about setting the optimal rate for tax and NI purposes. Personally I shy away from that and don't advise using payment structures that wave big red flags at HMRC. However, if you decide to go down that path just do a site search for directors salary and you will get numerous hits.

kind regards,

Shaun.

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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Shamus


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Hi Kris,

looks like we had similar thoughts on this. (my post was delayed by a phone call... Actually business this time rather than someone from India wanting to know what sort of TV I have).

What are your views on the low wage, high dividend model advocated by some?

Whilst it's legal, personally my advice is still that people should pay themselves a wage to live on then the dividend is the redistribution of profits over essential outputs including directors salary... That's not necessarily the most tax efficient approach and I've always made that clear to people.

My view is based on following the principle behind dividends rather than the letter of the (tax) law.

However, my belief is that this has been abused for so long by so many that there's got to be a change in the wind (probably of the unthinkable sort such as when IR35 was first introduced to stop the use of dividends by IT contractors).

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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
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