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?

@DippyAvocado
If this consultant earns £600 a day - then the Governments offer of £2,600 for self employed people is seriously low compared to that.
The Furlough is also a capped 80% and means he cant be working - again much lower than his £600 a day rate.
He also wont be able to claim universal credit as they'll have too much in savings if what you say is correct

That person wouldn't be entitled to help even if the Government was paying Directors in the same way they are self employed people.

I feel like im contradicting myself slightly because i'm actually of the opinion Directors (except those in start up businesses, but that's the same for newly self employed people) have a good package with the grants plus furlough for staff - which self employed people do not

Your anger is based on one example of one person taking the piss out OF the system, where was this anger 6 months ago? Did you report them to HMRC?

@WelcomeToShootingStars
You can only pay a dividend if the company has made a profit.
If the company has made a profit and can pay yourself a dividend you must pay 19% corporation tax
If you pay yourself via PAYE that lowers your profit, so you pay less corporation tax

Why does that illustration have an employer NIC for the employee example?

If they go out for lunch as a couple they put it through as business expenses. All completely legal

No it really isn't completely legal unless it's disallowed for tax and/or declared as a taxable benefit in kind.

As others have said, so much nonsense on this thread.

The key thing is that the business pays corporation tax, it isn't a personal tax. You then draw your salary or dividend payment from what is left.

It's still tax from what the person has earned. A sole trader pays tax on his profits. A company director's company pays corporation tax on those same profits, then the director pays personal tax on whatever he draws out. No one else is paying the corporation tax - one way or another it comes out of the person's earnings.

You're treating dividends as income, but not paying income taxes - including VAT - on it.

If you'd paid yourself via PAYE you'd be able to claim for furlough - and if you turn a profit in the year you can still take a dividend on top.

VAT is not a personal tax for that one companies are just tax collectors
For a small ltd company corporation tax is a tax on the money you have earned so not much different from PAYE
If it’s not would be quite happy not to pay corporation tax for a couple of years

Companies don't pay VAT, they reclaim it on purchases and charge it to customers on sales. No idea why business owners would think they pay VAT - only the end user ie individuals pay it.

Tax efficiency is a very mealy mouthed way of describing tax avoidance.

Surely the state of our infrastructure right now makes it clear why we shouldn't be avoiding tax, and shouldn't be tolerating those that do?

Damnit, didn't mean VAT, meant NIC

Got VAT on the brain right now

If you are still working as key workers, why do you need a bailout?

I don't understand that either @SerendipitySunshine. Also why the new thread

We pretty much all avoid tax, I hope.

Um, why would you hope that?

I'm always getting sketchy tax-avoidance 'advice' from a colleague, who is the same one rabid Corbynista who bangs on about funding the NHS.

I have opinions on how my taxes are spent, but not on how much I contribute tbh.

I prefer to keep things simple - do things right, pay my dues and achieve my company's success through capable business decisions, not fiddling around with tax matters.

(incidentally, my company is doing far far better than taxwanker's in this situation...)

You're treating dividends as income, but not paying income taxes - including VAT - on it.

More nonsense. Dividends ARE taxed as income in the person's tax return, as well as the profits having been subject to corporation tax. As for VAT, I'm speechless - there's no VAT on earnings nor profits nor dividends - so it's completely irrelevant.

You don't pay corporation tax on money that's been paid as PAYE, it doesn't stack. You pay corporation tax on profit after the running costs have been paid. Running costs include wages for people necessary to the running of the business. If you're necessary to the running of the business, pay yourself via PAYE.

They pay less tax. Fact.
One has to wonder why it hasn't been addressed before?

Like I said Kazzy, I meant NIC

They pay less tax. Fact.

Sometimes less, sometimes MORE. FACT.

So if you're PAYE on furlough you get 80% of your wage but do any work and your employers are in deep shit. OP is a director of a Ltd business who are classed as key workers that still need to provide a service to keep hospitals, GPs, schools and care homes up and running but she still wants 80% of her salary plus dividends so she can stop working? Is that right? Or have I really lost the plot?

I'd be interested in the very specific and niche circumstances in which you'd pay more tax Hinge?

We are all going to be worse off after this - the government isn't going to pay us to be in the same position we'd have been in normally. Personally I have lost my self employed income and am not eligible for any help.
The 80% furlough will help many as will the support for the self employed. Others will keep working and being paid. Others will lose their job but be able to find other work. Some will see a very lean few months but then be able to pick up afterwards. Universal credit is there for anyone who has no savings. Overall in many or most families at least one adult will still be earning something. There is also the possibility of a mortgage or rent holiday, delayed Vat and tax for the self employed, loans for businesses. That will have to do for now. It's completely unrealistic for people who earn a fairly decent amount but who have failed to save from their earnings to expect the government to bail them out completely. Really, apart from the destitute (and they can get uc), people should have savings of 6 month's salary for a rainy day, then they would be able to cope with a crisis. Instead people have spent their money on holidays, phones and cars.

@Oldbutstillgotit you have thanked Letty who is completely and utterly fucking wrong. People need to educated themselves before posting.

I'll repost this by Escapeistheonlyoption

Approximate (back of an envelope)

On £100,000 income as paye- tax £ £27,496.40 and
NI £5,964.16.
take home £66,539

On £100,000 corporation tax £19,000 leaving £81k.
PAYE about £12k and Ni on that is about £360 (I think -employee and employer) .
£69k available for dividend with tax on that of £12,737. (plus the £19k corporation tax)

So income £68K as opposed to £66,539

Yes, we are having a party on that extra money.

There is no job security, as this covid has shown, no sick pay, no maternity pay, no holiday pay, no parental leave, no pension contribution from your "employer". You don't work, you don't get paid.

This is not the same as those people who are self employed who do cash in hand jobs and don't declare that income.

This is like berating someone for taking out an ISA. Tax avoidance and tax evasion are two different things. The first one is legal.

@AmIAWeed thanks for that explanation. I suspected it wasn't allowed, but as so many people do it I doubted myself. They all seem to have been getting away with it for years, it does irk a bit.
There also seem to be lots of wives drawing a salary for doing nothing, presumably to avoid tax.
Perhaps I just know some shitty people

I am a childminder and used to be self employed. When my husband started working with me, we converted to a Ltd company, to protect ourselves and our home. We pay slightly less tax, but then pay the money we saved to our accountant. They pay taxes of their own, making up for some of the tax we don't pay. We use dividends as our income varies each month, so a regular salary payment wouldn't work. We don't earn much and now we will be able to furlough ourselves, but our income will be minimal.

I'm grateful for the protection the Ltd company has given us, but I would like to think there is a little more help out there for us.