Directors income support scheme proposed
This proposal demonstrates how a viable method of support could be provided for limited company directors. These individuals have received very little support during the coronavirus pandemic.
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Support is for people who pay NIC
Shame on all parties looking to just on the free money bandwagon
Glad to see ICAEW have not tarnished their reputation
"Support is for people who pay NIC" Is it though? ... can you explain how to "just" on the bandwagon?
erm, isnt this just a little bit too late - its taken these experts how many months to come up with this? And meantime how many of those supposed 946k have already claimed furlough, UC or simply gone out of business
erm, isnt this just a little bit too late - its taken these experts how many months to come up with this? And meantime how many of those supposed 946k have already claimed furlough, UC or simply gone out of business
Unclear to me what "working director" means in this scheme. A "full-time working director" (c.f. s.67 ITEPA)? Or any director who gets all or most of their income in the form of earnings and dividends from the company and does a bit of work (e.g. a spouse or partner at home who answers the phone)?
Thank you. Contrary to some small minded beliefs not only NICs but quite a few other taxes are paid either by the company or the directors/shareholders. And the legal burden born by them is high. Tarnishing the reputation of small company directors in this way and the denial of help to them is small minded and smacks of entrenched beliefs and an inability to change and keep up.
I don't think these are small-minded beliefs at all. Owner/directors who've deliberately structured their tax affairs to pay de-minimis salary and take the rest as investment income can't then expect taxpayer support when their investment income dries up. They could have paid themselves entirely on payroll and had the same financial support via furlough as any other employee.
I do sympathise with the (many) who probably didn't pre-covid understand the difference, and even more sympathy with those who were acting on their accountants advice without having the difference explained to them. But a large proportion would have taken the tax savings even if they had been explained.
I don't agree. However you legally structure your finances has nothing to do with covid. There should have been no difference and certainly no cap on who can claim (a cap on what they receive, yes).
I don't think these are small-minded beliefs at all.
Yes they are, anyone who thinks otherwise clearly doesn't have a clue what they are talking about
"I do sympathise with the (many) who probably didn't pre-covid understand the difference,..."
Why did they not understand? As their accountant did not do their job correctly and fully explain it (oh my gawd! shocking). Or they had the situation explained clearly that they are free to structure their tax affairs within the current law and any savings that provides.
Let me guess which most sane people would go with. This is similar to the current HMRC mentality that all sole directors are using tax avoidance to get one over on them - so now HMRC can exact their revenge and not support these businesses which pay corporation tax, PAYE, and VAT. All of which will be lost post-Covid and instead HMT will have to foot the bill for benefits and job seekers allowance. Sounds like "cutting off your nose to spite your face" but this seems to be government policy at the moment. Like a petulant child!
What a ridiculous comment. So somebody who is acting in accordance with the law, structuring their affairs to minimise tax, is not afforded the same help as others when they need it?
Ceri, can I ask. As the sole director of a limited company are you telling us that you do not receive your own income as dividends? Do you prefer to take no dividends and only pay yourself a salary?
What advice would you give to your clients?
Ceri, can I ask. As the sole director of a limited company are you telling us that you do not receive your own income as dividends? Do you prefer to take no dividends and only pay yourself a salary?
What advice would you give to your clients?
The reason many don't do as you suggest is that cash flow isn't that even and profits aren't that predictable out in the real world.
In fact, any advisor who suggests that a salary for all the profits should be paid out on a monthly basis...well, they shouldn't be advising clients on how to run their company...
Many directors have not taken anything out of their companies this year, making sure their employees have been seen to and the business has survived- should they have no upside to all this risk?
You may as well say that all directors should pay themselves at least the minimum wage for every hour they work and be taxed as heavily as everyone else despite taking all the risks and often working 100+ hours a week- even though in practice many work for very little whilst growing the business and reinvesting THEIR profit back into the business to enable growth.
Also, dividends attract tax too: firstly 19% Ct and then from the net amount you then take your dividend from available profits and pay a further 7.5% as a basic rate taxpayer or 32.5% as a higher rate taxpayer (for a total rate of 51.5%).
The difference in tax between dividends and salary aren't actually that great any more...
Also, many businesses need or are required to have the protection that being a ltd company affords.
Many owners also leave considerable amounts of their money in the business rather than take it all as salary or dividends as the company needs the money to grow/for stock/etc...
"The difference in tax between dividends and salary aren't actually that great any more.."
...but the difference in NICs between dividends and salary...
Why are landlords excluded then? Only Directors looking to minimise contributions to the state entited to free money
They all had Interest free loans, No employee got one of those
Paul, they are loans... to be repaid. Unlike SEISS giveaway to people who could keep working and still be paid them. There are many flaws in all of these things.
Why are landlords excluded then? Only Directors looking to minimise contributions to the state entited to free money
They all had Interest free loans, No employee got one of those
Oh dear thats embarrassing! - loans are to be repaid whether they are interest free or not, employees got paid salary (which is not going to be repaid). They are not the same thing.
In fact to make things even worse the employees on furlough were able to do DIY, play with the kids, do what the heck they liked all day even go out and work a second job while their employers got diddly squat
Baffling why you would get confused over that.
I do agree with you on one thing though, yes - landlords have been shafted as well
So you do not think employees should have the support then?
Only businesses?
No I do not think landlords or investors were shafted.
Investors accept the market. Covid is just one of many risks
A lot of heat and little light has been generated on the question of the application of CJRS to small company directors. Overall I agree with Ceri but with one important exception. The way that the CJRS scheme (aka furlough payments) has applied to annually paid employees (mainly small company directors) is shamefully unfair and arbitrary . Depending upon when in the year the annual payment and related RTI submission is made, some companies will get 7 or 8 months' worth of CJRS support (eg payment date in December), some only 5 months (eg payment date in late March) and others up to 12 or 13 months (eg payment date in October). The only mitigation for this glaring anomaly is that in most cases the salary payments were relatively small, ie below the NIC threshold.
As far as concerns DISS I think this comes far too late. If through lack of support small companies have gone to the wall that is regrettable, but the fact remains that there seems to be no political impetus for DISS or anything resembling it.
As far as concerns the argument surrounding dividends, they are investment income and no one got any support for dividend income lost due to COVID. Dividends are not treated as earnings for pension contribution purposes nor for most other purposes (although some mortgage companies did allow their inclusion). It is unrealistic to expect HMT to make an exception now.
So are small company directors now being "punished" for avoiding tax by receiving dividends rather than a larger salary? That depends on your point of view. I am a professional adviser with clients in both camps, ie self-employed and working through companies. The tax saved over the years by the latter group generally far exceeds the value of any support lost now. So as long as they can continue to trade they are better off.
Excellent idea although the chances of it being implemented are fairly remote.
The people who take the most risk in setting up and running their companies have been the ones who have missed out most. The most prudent who paid a small salary to ensure cashflow have been hit the hardest.
Self employed people got money just for being affected.
Employees got paid to stay at home and do nothing.
Meanwhile, small business Ltd company owners who take all the risks got practically nothing and also get accused on these forums of getting their just deserts for the sin of being prudent in their profit retention and payout plans.
I know many a director of a company who is scratching their head or tearing their hair out as they had to watch their bills mount up, take out loans they will have to repay, pay their employees tax and NIC and holiday pay and wages whilst their employees had several months off and the directors get sod all support.
Business owners will be paying all this back for years and suffering on their income because of it.
But still some people here think the marginal tax difference between (well managed when available cash flow funded) dividends and paying a salary to the owner should be the be all and end all of whether someone should get support...
What about the international coffee chains
They lost loads on money
Surely UK owes them lots for Covid related lost UK income
And every Footsie company, my pension depends upon it
And Apple
I note that it says that the Directors salary should be added back when calculating the relative profit. I am not entirely sure about that one because the Director may have claimed furlough so has already received one lot of 80% back on that!
And do all shareholders take all profit every month?
How much of that profit gets shared with non workers to save tax?
Its rubbish.