Salary when company does not earn any income.

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Hi,
One of my clients has a company which has not been working for 3 months, The director of this psc wants to take salary from the company to avoid dividend tax. Can he be given any salary when the company does not earn any income?
Thanks in advance

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By andy.partridge
23rd Aug 2017 20:33

You say the company has not been working. What does that mean?

If the company can afford to pay him, why shouldn't he be rewarded with a salary?

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By Godwinc46
23rd Aug 2017 20:59

Hi, thanks for your reply. How can we determine if a company can afford to pay the director? Lets say the DLA account balance is a debit of 5000 and the company has not been trading for 3 months.Can the company issue salary which can be adjusted aganist him DLA account balance? So that the director can reduce his loan outstanding and he does not need to pay 25 percentage tax.
thanks in advance

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Replying to Godwinc46:
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By andy.partridge
23rd Aug 2017 21:20

On the basis of the information supplied I don't see a problem.

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By mrme89
23rd Aug 2017 21:15

I think you mean 32.5%?

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RLI
By lionofludesch
23rd Aug 2017 22:36

If he only owes £5000, why not give him a £5000 dividend?

Assuming the profits are there, of course. We see numbers telling us what the loan is and, by implication, what you want the answer to be. You ask how you can know if the company can afford to pay a salary - how about preparing some of those old fashioned accounts thingies ?

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By Duggimon
24th Aug 2017 11:06

Salary, of course, being an entirely tax free alternative to dividends.

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By OC
24th Aug 2017 15:09

If the company is actually actively trading but hasnt for example secured contracts which explains nil income then I dont see an issue with it

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