To ask why people think directors that take dividends are tax avoiders?

[Milo2]

Small Ltd companies are currently left out of the UK government funding. Why? The directors still have families to feed and bills to pay.

I’ve seen a few people on here rubbing their hands with glee. Saying things like ‘good it serves them right for taking dividends’.

Some have compared directors to those that avoid paying tax and it’s completely unjustified.

Am I being unreasonable to ask why there is so much hate for these directors?

Also would you be upset if you had no hot water or heating to find that your local heating engineer had gone bankrupt and couldn’t help you? If so, why would you hate them so much when all they do is work hard and pay their taxes just like everyone else?

I am a ltd company director and have never never done that @Kannet and @alloutoffucks. Some people whether ltd company, self employed, unemployed or staff are swindlers. Don’t judge us by what they do.

When I said "last 30 year" I meant to add "that I've been a contractor". Avoiding tax by paying dividends actually has been possible for longer than that!

@nicknamehelp The people who earn the least give proportionately more of their income to charity.

Also, there are virtually no personal expenses that can legally be put through the company. Almost every story of someone doing it is describing something illegal.

@Random63638
I have just been told that the examples I gave of personal expenses are weak because everyone does it anyway. So perfectly acceptable to put through extra meals and hotel accommodation to extend a one day training day into a weekend away.

It may not be strictly legal, but this kind of stuff is pretty common.

Plus until the rules were really tightened up you were all paying way less tax than you would have under paye.

@allout I'm sorry but I don't agree with you there just because people dont shout about it doesn't mean they dont give. Also if you have company social media they can help smaller organizations get to more people by promoting them which alot do which in turn gets more donations in.

Plus not all small co directors are wealthy or middle class as some seem to think. But on here its ok to make these sweeping assumptions of society from your view point without considering anybody elses.

@alloutoffucks the thing is that just because you don't work for companies that have training days or work travel or helpful policies on magazine subscriptions, doesn't mean it's not perfectly normal in many industries and many firms. So if you have an issue with it, you should be complaining about this for all companies, not just LTDs.

As others have pointed out - eg the BIL putting the Christmas dinner on company card - there are people who take the piss and abuse the system. But that's not true for most of us. Incidentally, this happens in big companies too - I'm still shaking my head over the executive who turned up at a very expensive corporate awards dinner with his wife AND mother, all paid for by the company....

And I think you completely misunderstood my example re the meal with my friend - I planned that meal with the express purpose of pitching my business. The fact that she was a friend was irrelevant. It was no different to any sales person leveraging a contact, meeting that contact over lunch/coffee/drinks and pitching their business, and paying for it at the same time. The fact that we ALSO had a nice evening and chatted about our DC isn't the point. Again, in normal professional/corporate environments that is just part and parcel of engaging with vendors, contacts, potential employees/ers etc. When I had dinner with another friend just before social distancing, that was paid for privately as she is not a friend AND work contact but just a friend.

Also, I am a small business but my business provided work to 9 people (on a freelance/ad hoc basis - not as employees) last year. I can assure you those people are desperately hoping my business doesn't go under because they want to continue earning that money. each of them have learnt between £1,000 (minimum) and £15,000 (max) as a result of work I've sent their way. Ironically, I would much prefer NOT to pay them and keep that money for the business as the business is not THAT profitable, but unfortunately the way my work comes in, I physically can't do it all at once so have to outsource some of it.

@nicknamehelp I am going by the data. The data collected by Institute of Fundraising shows that the lowest paid give proportionately more to charity. You can disagree as much as you want, but that is not what the facts show.

proportionately more of their income

@Random63638

A company car is legitimate. That is then also legally used as a family car. That's a massive boost to a household.

@alloutoffucks if someone is self employed but unaffected by covid19 then they are legitimately entitled to still claim the support from the government. It's another sign that HMRC have rushed things through in the simplest way possible.

It is, of course, taxable income, so ultimately people that do this will end up paying higher taxes but it just seems unfair/immoral.

alloutoffucks
You have said:
everyone I know who runs their own limited companies do expense things I have to pay for myself. Every single one.Books that interest them about their field of work. Magazine subscriptions. Lots of things that I have to pay for as an employee.
If you need something its an expense pure and simple if you are self employed, ltd or an employee

Most of us get statutory sick pay and little job security. And my DP is "self employed" i.e. made to be by his employer.
A good company will provide a better benefits package than basic SSP and either the company needs employees in which case they should employ them or its a temporary contract. If your husband is working permanently but under the guise of self employed then that's simply so he has no employment rights and that makes a bad employer

Most IT policies do not allow personal use for IT not because they are bad employers, but because it stops them having the headache of what is acceptable personal use and potential liabilities. For example if n employee shares a meme about how you can't change your sex and that leads to a police visit for hate crime, is the company liable in some way if it did not have detailed policies setting out what is acceptable use?The company needs appropriate policies in place - the example you gave for me would fall under equal opportunities and lead to disciplinary. The whole point of having policies in place sets out what is and isn't acceptable - staff who go outside whats acceptable will be dealt with under the disciplinary process. The vast majority wont, so again, why penalise everyone for the minority? A lazy company in my opinion.

Everything you say just seems stuff spouted by companies who want to do the bare minimum with the least effort and risk. Not treating staff, the employees who do a huge amount of work and contribute to the growth of the company with any kind of compassion or respect.

I really wish people would look around at their employers and say they deserve better, to be treated like trustworthy people because only then would these shit bosses be called out for their crap behaviour and the dislike to the vast majority of company owners trying to do the right thing by everyone would stop and using a computer or mobile wouldn't be seen as tax avoidance!

Another point is yes a company can pay out for anything the Directors wish it to but when the accountant works out the tax which is owed on the companies profits these items get added back to increase the profit and therefore the tax. So there is no avoidance of tax by a company paying for private items!

Many deadbeat fathers do this as a way of avoiding child support

More nonsense. Dividends are taken into account as part of total earnings.

1. "It is bollocks (often repeated) that we should be taxed less because of the risks we take, lack of employment rights, etc.

The reward for that should be a higher daily rate of pay. It's not the tax-systems job to reward us for what we do, it's the clients.

Two people with exactly the same income should pay exactly the same tax, regardless of the risks.

If being a contractor is riskier than being an employee, you don't do it unless you are paid enough extra to make it worthwhile.
This is why "temps" in nearly every field of work are paid more than full-time employees."

^This

There is greater risk in being SE or a Ltd company^, of course.

If - once you have built up the business - you are not getting substantially more net income than you would as a salaried employee

then you are in effect much worse off than being an employee
It is your personal decision to continue doing this because you prefer freedom of being your own boss or whatever

That is absolutely your choice, but no reason the taxpayer should now replace your usual income,
any more than other shareholders & investors who may depend on that income too.

btw, I was told when I first started SE that if my gross wasn't 60% over what I'd get as an employee, to cover sick pay, extra work expenses, fallow periods etc
then it made no financial sense

Even more important for a Ltd company

And no employer pays travel to an employee from home to work because that would be a taxable benefit.

It's not allowable for a company director or sole trader either.

Travel from home to a fixed workplace is never allowable for anyone.

However, just like normal employees, travel from your permanent workplace (office or depot etc) to visit clients, for courses, etc IS allowable and is exactly the same whether you're an employee, sole trader or director.

By the way, I'm an accountant and lots of clients of mine think they're getting away with stuff by paying for personal things through the company.

They're not. I take them back out again and allocate them to a director's loan account, which is then "repaid" to the company by way of an indrawn dividend.

There are people in any type of self employment that think they can cheat the system but the same could be said of some employees too.

Have you ever thrown a sickie? Pinched some stationery from the store room? Of course there's more opportunity to fiddle the system if you own the business rather than just work for it but don't assume that all business owners are guilty and all employees are innocent.

*undrawn, not indrawn. Stupid phone.

I did not say my DPs employer were good employers. Mine is. And no books that interest me in my field of work is not a legitimate employee expense. Books I need for my work are. But I enjoy my work and read lots about the subject.
Most people work for small companies. Most only pay statutory sick pay. Mine does pay some sick pay, but not loads. But getting a job outside public sector or very large corporate employees with decent sick pay is not easy.

Anyway you have benefited from paying loads less tax and NI over the years. So this one time the rules do not benefit you - tough luck.

You can claim furlough if you paid yourself an actual wage and paid the going rate of tax and NI for years. If you have chose not to to make more money, then tough.

Two people with exactly the same income should pay exactly the same tax, regardless of the risks.

Try telling HRMC and Treasury that. There's been professional and trade bodies calling for that for the last 20+ years.

Employees pay 11% NIC
Sole traders pay 9% NIC
Directors of their own limiteds pay 24.8% if paid via wages.

Please explain why?

As you see from the above, a director pays over twice the amount of NIC if they take their earnings via wages. Then people wonder why they don't!

Successive governments have had 25 years to sort this out and have failed to even address it. Gordon Brown actually encouraged people to start their own limited companies by offering tax breaks specifically aimed at small limited companies, hence why in the early noughties, the likes of tradesmen, window cleaners, dog walkers, etc all set up limited companies - they were encouraged to do so!

Of course, anyone who gloats at other people losing income is an utter shit
(other than re NRPs avoiding CM)

This thread seems to be about whether the taxpayer should replace dividends
This should never be an expectation for any shareholder or investors

Some people rely on stock market investments and may also have lost most of their income,
but they should not expect to have this replaced either

A hell of a lot of people have lost a hell of a lot

Throwing a sickie, pinched some stationery ffs!
No I haven't. And lots of firms now have policies to stop people throwing sickies or get rid of people that do. If that is your equivalent you are harking back to the 70's. Lots of employees actually go into work when they are ill.

Another point is yes a company can pay out for anything the Directors wish it to but when the accountant works out the tax which is owed on the companies profits these items get added back to increase the profit and therefore the tax. So there is no avoidance of tax by a company paying for private items!

That's exactly what we do. Anything dodgy isn't allowed.

But fewer people actually try to claim dodgy things than you would think. There's a lot of "pub talk" and bravado about what people claim they claim. Most of it is attention seeking bullshit.

"a director pays over twice the amount of NIC if they take their earnings via wages. Then people wonder why they don't!"

No, that's tax planning
which normally has some - if not huge - advantages

but it does have these natural consequences

People gambled that they would never be without income for X months
and lost

My brother runs his own small ltd company and there are costs to running a Ltd company and risks.
They don't contribute the bare minimum they pay corp tax on profits!
A lot of the people who he knows that runs their own small ltd companies don't fiddle the system with cash in hand jobs etc and are honest hardworking individuals who work long hours. It's not all minimum work for maximum benefit!!
Not sure how it would actually work but maybe they could use SA302 and average over say the last three years and if for example a company didn't make a profit this current year then any money paid could be declared at year end and then the director make any overpayment back per month.