IR35 - salary and dividends
My client has set up a limited company which he is confident falls outside of IR35. I have advised that the higher the salary drawn from the company (as opposed to dividends) the less likely that HMRC will challenge the employment status. However, assuming my client wants to be very risky and draw as much in dividends as possible, how much would you recommend he take as salary? His personal allowances are used up elsewhere so could he just take it all as dividends with no salary?
On another point, I know there must be enough reserves in a company to cover dividends drawn, but is this net or gross dividend? As the tax is only notional, can we ignore it and take the net figure drawn?
SC
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Assuming he is not a higher rate tax payer