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Ridiculous tax article in The Times

It would be funny how bad this is if it was not so serious

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For those wishing to keep their blood pressure levels up now January is over, an abysmally written article on taxation of directors from The Times. Just to give you a taste, it repeatedly refers to directors as "self-employed".

https://www.thetimes.co.uk/article/low-tax-of-directors-is-unjustifiable...

Replies (26)

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By 0098087
01st Feb 2021 11:49

Had at least two clients applying for mortgages last week told me they were self employed as directors. Told them that was nonsense

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Replying to 0098087:
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By Paul Crowley
01st Feb 2021 12:02

Lenders regularly use the term self employed for a co business owner
Even use the term to describe the reference they want for company owners

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By tom123
01st Feb 2021 11:55

Are you sure you are not feeling too sorry for those who can, legitimately, arrange their affairs to pay a bit less?

As a wage slave, I am not sure my sympathies point fully in that direction.

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Replying to tom123:
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By LukeS
01st Feb 2021 12:00

It's not THAT much less when you take into account dividend tax.

Plus as a wage slave you get 5.6 weeks paid holiday

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By tom123
01st Feb 2021 12:47

But there is nothing to stop the business owner taking holiday is there?
He can draw a full salary if he wants.

The fact that he chooses to go without holiday is up to him.

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By tom123
01st Feb 2021 12:07

Personally, I tend to learn quite a bit from the IFS, so not too keen to diss them!

If only we had, oh, I don't know, an office of tax simplification or something.

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Replying to tom123:
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By Hugo Fair
01st Feb 2021 12:22

Be careful what you wish for. A session I attended with the OTS a couple of years ago brought forth the suggestion that the solution would be to ban DLAs "as they induce a laziness in shareholder-directors regarding the timing and amount of their remuneration". It didn't fly at the time, but you can see where they were coming from ... and suggestions like this tend not to die, merely hibernate!

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Replying to Hugo Fair:
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By tom123
01st Feb 2021 12:49

But then, I can see their logic.
Draw a monthly salary under PAYE, and perhaps quarterly dividends, with minutes.

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Replying to Hugo Fair:
RLI
By lionofludesch
01st Feb 2021 13:32

Hugo Fair wrote:

Be careful what you wish for. A session I attended with the OTS a couple of years ago brought forth the suggestion that the solution would be to ban DLAs "as they induce a laziness in shareholder-directors regarding the timing and amount of their remuneration". It didn't fly at the time, but you can see where they were coming from ... and suggestions like this tend not to die, merely hibernate!

It used to be unlawful for directors to borrow money from their companies.

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Replying to lionofludesch:
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By Paul Crowley
01st Feb 2021 15:07

I think the 'issue' is evil self employed directors leaving money in their company and not paying tax to get it out

There was a system in place for deemed dividends on close investment companies
That is the answer to sort these rotters out

Better still it would sort out those people who want to hide their ill-gotten rent inside company wrappers

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Replying to lionofludesch:
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By Wanderer
01st Feb 2021 16:49

lionofludesch wrote:

It used to be unlawful for directors to borrow money from their companies.

Got it in mind that pre CA2006 it was unalwful but there was no sanction for a private company!
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Replying to Wanderer:
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By lionofludesch
01st Feb 2021 16:56

Wanderer wrote:

lionofludesch wrote:

It used to be unlawful for directors to borrow money from their companies.

Got it in mind that pre CA2006 it was unalwful but there was no sanction for a private company!

I believe you're right, though I'm not going to bother looking it up.

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Replying to lionofludesch:
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By Paul Crowley
05th Feb 2021 10:36

I think I remember it as unlawful but with loads of exceptions

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By Paul Crowley
01st Feb 2021 12:07

If only people writing about tax and commenting on tax (politicians) actually understood tax and employment law

DAFT timing of commentary given those directors got bu66er all covid support saving the country BILLIONS in CJRS

Would this be a warm up to saying NO to the daft little directors group looking for Covid Dividend Support Scheme?

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By DJKL
01st Feb 2021 12:32

It is more likely a warm up to taxing them more heavily in the future, first get them villified as scroungers/chancers (was not a problem with bankers), next bring in legislation to hit them safe in the knowledge that by then all their bleating as to how unfair the new arrangements are will be ignored by the great British public as "well they would say that, have been ripping off the NHS for years, make them pay "fair" taxes" etc etc.

How will one do this, myriad ways but one might be to first differentiate smaller companies (close) from other companies then dividends paid by them get treated as earnings with both marginal tax and NI (EE and ER) but maybe CT relief for this cost.

No doubt a treasury planted story to sell the mood, or have I been caught by the "accountants all become cynics" syndrome?

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Replying to DJKL:
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By Hugo Fair
01st Feb 2021 12:49

Careful. If you report the exact words from Treasury meetings they may realise that you've planted a microphone and turn it off!

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Replying to Paul Crowley:
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By legerman
01st Feb 2021 13:03

Paul Crowley wrote:

DAFT timing of commentary given those directors got bu66er all covid support saving the country BILLIONS in CJRS

I've got to disagree with you there. Directors were entitled to furlough just as all other employees were. That they chose to take some pay as dividends instead of salary is their perogative, and usually good advice given by accountants. However as dividends are paid as a reward for investing in a Ltd Co from profits accrued, I can't honestly see how the Gov could have done any different.

For the record I am a Director

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Replying to legerman:
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By DJKL
01st Feb 2021 13:19

Maybe we get something nicely complicated, all dividends up to say 10% of net assets in a year (goodwill will be interesting) are treated as investment income and taxed as dividends, any sums in excess treated and taxed as remuneration, "It all makes work for the working accountant to do" to paraphrase Michael Flanders.

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By Beach Accountancy
05th Feb 2021 10:26

It was on a Monday morning HMRC came to call...

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By lionofludesch
01st Feb 2021 13:38

Just bring in a Class 5 NIC charge on directors' dividends. Or jack up dividend tax, which has already cut down the difference between self employed and owner directors to a large extent.

Job done.

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Replying to lionofludesch:
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By DJKL
01st Feb 2021 15:37

Catch is that would hits third party investors in listed companies who are not tax sheltered and given prevailing interest rates there are a fair few such investors for dividends, where else can you pick up 5% pa passive returns.

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Replying to DJKL:
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By lionofludesch
01st Feb 2021 16:59

Ach - collateral damage.

Limit it to close companies.

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Replying to lionofludesch:
paddle steamer
By DJKL
01st Feb 2021 17:18

Current definition may not be sufficient or you end up with son of umbrella companies to circumvent the distinction(segmented assets and shares)

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By lionofludesch
01st Feb 2021 17:24

I'd get rid of umbrella companies.

These people are employees whom their employers don't want to employ because they don't want to give them employment rights. It's a shameful circumventing of the employee welfare legislation.

However, that's for another thread on another day.

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By Mr_awol
01st Feb 2021 15:16

I cant read the full article as paywalled, but the beginning seems to be saying that s/e and directors can work their finances to pay a lot less tax than employees - which is true enough.

As for the distinction between s/e and Ltd - well i have some sympathy with the layman getting confused here. To all intents and purposes many Ltd Co directors are running a self employment via a corporate vehicle - and can be differentiated from those who set up a company for non-tax reasons

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David Ross
By davidross
05th Feb 2021 09:55

I would read the article in full - if I wanted to pay to subscribe to The Times!

From responses already given, it seems that a lot of you already do

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