Is the minimal salary / top up with dividends actually allowed?
I'm a small freelancer accountant & have just taken on my first contractor client. He has set up a limited company and just started work on his first contract. I have explained IR35 implications to him, although the agency he got the contract through has assured he won't be caught by IR35 with this contract. He is going to submit his contract to HMRC for an opinion anyway, just to be sure.
In the meantime, he has registered as an employer & is wanting me to set up his payroll for him. Assuming that he isnt caught by IR35, is it really still acceptable to set up his remuneration as minimal salary (eg below PAYE / NIC thresholds) and pay the rest as dividend? I was under the impression that this is frowned upon by HMRC..... I also have an old work colleague who does a lot of contractor accounting & says that this is the norm - virtually all contractors pay themselves a minimal salary & top it up with dividend each month.
Am I being daft / too cautious to advise that my client doesnt do this, or is is perfectly acceptable to HMRC for someone to pay salary so that it just falls below PAYE / NIC threshold, then declare legal dividends (with all accompanying paperwork) each month?
Is it advisable to pay below PAYE / NIC threshold but ABOVE the LEL so as to trigger pension credits?
Any advice much appreciated.....
- How quickly do you turn around y/e accounts? 90 6
- Payroo Employer allowance query 224 7
- Director's current account - fuel costs and expenses 193 6
- Enforcing A CCJ 343 7
- RTI 'Late Filing' & paying employees in arrears 95 1
- Reporting no P11d due when PAYE scheme closed by HMRC 5Apr2013 163 2
- PAYE coding notice - deliberate misstatement 286 5
- Comapny valuation qualifications 119 2
- Ex Client from over 3 years ago 415 5
- Director's tax return 380 8
- Sale of assets - availability of AIA to the purchaser 169 3
- Small employers paying people when sick thanks alot! 3,110 34
- Flat rate vat 206 2
- RTI Annual Scheme Query 186 5
- Coming in from the cold 363 3
- Splitting the tax year 176 2
- P11d & Medical Ins 212 2
- Should design costs be capitalised? 183 4
- Submitting tax return 213 1
- Keep receiving RTI late submission notice 273 8
- Residential Property Purchase Above £750K 811
- Using Sage with Sofa Categories 559
- Does anyone have an unwanted ICAEW wooden plaque? 428
- Goods shipped inter EU and VAT Reporting 310
- Free Tax Legislation? 283
- Director Loan account operation 263
- transferring simply accounting 2010 from xp to windows 7 254
- Non-Resident Director - UK Tax Position? 252
- Sage 200 and Access Dimensions reviews 233
- Paye procedures for CVA 171