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 think maybe some of the posters on this thread who have such disdain for the self employed get sick pay, holiday pay etc, and are working from home still getting paid. When all this is over and you need your roof fixed, your hair cut, your car fixed etc, you might find the person you used has gone out of business.
^This.

Can I also point out that HMRC's employment versus self employment rules actively encourage "employers" to take on freelancers and contractors as limited companies and actively discourage them taking on sole traders or partners.

Just saying .... lots of freelancers/contractors didn't actually have any choice but to set up as limited companies!!

Like IR35, the employment versus self employment anomalies haven't been properly tackled by HMRC/Treasury/Chancellors for the past 25 years. I can only presume such problems have been left in the "too difficult" in-tray and kicked into the long grass for a subsequent govt to deal with.

Not any more. This virus has highlighted the anomalies and once it's over, the Govt, HMRC and Treasury are going to have to deal with it once and for all. It's all be dragging on unresolved for 25 years and that's an absolute disgrace.

@BlingLoving I have never worked anywhere where you can use a computer and phone for work for personal use. Most companies have policies against this for very good reasons. Most places these days this would get you sacked. I pay for my own phone and computer.
And our household income with both of us working is less than the figures being bandied about here.

Personal expenses - trips away for weekends with a training day in the middle. They claim hotel for weekend and meals out. Mileage to travel from home to work. Books that interest them about their field of work. Magazine subscriptions. Lots of things that I have to pay for as an employee.

All as often provided to "normal" employees by their employers. What's the difference???

@alloutoffucks the issue isn't self employed people its your employers
You are bitter - its all shit for you so it needs to be shit for everyone else
OR
You don't like the situation you're in, you want better so go out and find it

What motivated me to start my own company?
I didn't like who I worked for, I didn't like their values or the way they treated people so I went off, started on my own and I tell you what. I treat my staff really fucking well and i'm proud of that.
I pay a fair wage, I pay a bonus based on company performance, we give good holidays, a good sickness package, flexible working and I pay my bloody taxes fairly.
I can assure you there's lot out there like me, but people don't talk about those who are doing well and doing it in an ethical way they like to rip each other down and assume if someones doing better than them its because they are cheating or defrauding someone.
Have a word with yourself and look to make you situation better not pull everyone else down whose trying

As for a self employed/director using a works phone or computer for personal purposes, that's specifically allowed BY TAX LEGISLATION so it's not a loophole, not tax avoidance. HMRC specifically say they can do it!!

As for a self employed/director using a works phone or computer for personal purposes, that's specifically allowed BY TAX LEGISLATION so it's not a loophole, not tax avoidance. HMRC specifically say they can do it!!

More important, those rules are the same for employees too! If an employer prohibits their employees from using their phones/computers for personal use, then that's a rule made by their employer, not a tax rule!

@alloutoffucks I am a senior IT professional- I have never worked in an organisation where you weren’t allowed to use your laptop or phone for a reasonable level of personal activities

@BlingLoving The majority of people work in small companies like I do. I have never worked anywhere where you get those benefits. Sure in the very well paid corporate world maybe effectively getting free meals and some free accommodation to extend your training into a holiday is common. And books and magazine subscriptions are not something anywhere I have worked has done unless essential.

You may think these examples are weak, but I think we live in a totally different world. And the people I know who have limited companies and do all this would not be working in well paid jobs in big corporate firms getting all these benefits. They would be working in firms where they had to pay for things themselves.

Not any more. This virus has highlighted the anomalies and once it's over, the Govt, HMRC and Treasury are going to have to deal with it once and for all. It's all be dragging on unresolved for 25 years and that's an absolute disgrace.

I really hope this is true. HMRC and politicians have steadfastly refused to create a simple statutory definition for employees vs self employed for all purposes. They seem to revel in the idea that one can be deemed an employee for tax purposes (after years of expensive court action) but still get no no employee rights "because that's a different part of government" it is shit and unfit for purpose.

@lordered That shocks me. Everywhere I have worked says no personal use in their IT policy. Is it just because you are senior and I am not?
I am honestly shocked at that.

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

Karma if you ask me

@AmIAWeed I actually work for a very good employer and am not at all bitter.

I am beginning to think the people commenting on this thread are very well paid and used to working in very senior jobs in big corporates before setting up as a limited company. Because at the level I am good and bad companies have blanket bans in IT policies for personal use, don't pay for extra hotel nights so you can extend your training day into a weekend away, don't pay for meals if you are meeting with a friend and happen to want to have a quick discussion about work, and don't pay for your travel from home to work.
All of that means on a lower salary than you all seem to have, I do effectively have less income to spend on my family. The travel from home to work in particular adds up.

I am happy in my job. But no I don't think it is fair that people who have been able to take advantage of the rules for limited companies, should be complaining because for once in their lives the rules do not benefit them.

@alloutoffucks no- the relevance of me being senior is that I sign off on the acceptable use policies so am very aware of their contents

Just to add, acceptable use policies don’t change based on your level of seniority- the whole point of policies is that they apply to everyone

My bil in a company director. We went out for a big family Christmas meal, the cost was hundreds, He paid it on his credit card (we all paid our shares to him in cash). He then asked the staff for a VAT receipt. This is the sort of thing that goes on all the tome and it's what gives a bad reputation

And no employer pays travel to an employee from home to work because that would be a taxable benefit.
Travel from home to work for a lot of people can be a fair bit of money.

Anyway you have all had the benefits of being a limited company including paying less tax and NI, so hard luck.

OP I just tried to post the following on your other thread but it was deleted. So I've not read this one in full.

• - - -

I think part of the problem here re the reaction you are getting is the kind of company you own.

You are quite vague about the 'problems' you fix for GP surgeries/care homes etc, and make it sound as if you are tireless healthcare workers of some kinds, but I presume you have one of the private companies to which cleaning and maintenance within the NHS is now outsourced.

Cleaners etc. in companies like this tend to be working at minimum wage, which they wouldn't be if they were still part of the NHS proper, with the extra slice of needless management being the directorships and managerial sections of these companies.

So while I don't wish to see you or anyone else in hardship, I'd personally like it very much if this model wasn't in existence and see it as a thin end of the wedge for the privatisation of essential services.

I absolutely hate the fact that companies like this are able to take dividends within public services provision. I think a lot of people feel the same way.

And I absolutely have a gut reaction of absolute RAGE that a private company, whose very raison d'etre is to make money out of what they do, is responsible for the following - You know the local GP surgery? It was us that went to them when all the medication was going to go off because something went wrong. All those people got the medication that they needed that day or week because we fixed the problem.

I personally do not think that these activities belong in the hands of private companies that have a director paying themselves dividends. I just don't. Others may disagree with some very solid economic reasons, which is fine. But I do think that that gut feeling about the privatisation of essential public services is a factor in the way people are responding.

I am a contractor, semi-retired, working part-time Don't need or want government money.

My summary:-

1. For most of the last 30 years it was true that large amounts of tax could be avoided by paying dividends instead of salary.
2. This was because you avoided employer and employee NI.
3. Higher personal tax on dividends was introduced very recently, a big chunk of the difference has been eliminated. So it is no longer true that massive tax avoidance is possible.
4. VAT is irrelevant for most of us, it's not a tax on us. (Appreciate there are some exceptions. Even as a "disguised employee", if you work for a bank, they don't charge VAT on their outputs, so the VAT they pay for your services is a real and unfair addition on the cost of labour.)
5. On the other hand, corporation tax should be counted as part of our personal tax contribution. When comparing one-person companies with employment, both corporation tax and employer NI should be treated as part of the tax-burden on employment. (For the employees, employer NI should be regarded as both part of their income and a payment of tax.)
6. The proper way to look at employer NI is not that it's an extra tax on us, but that our pay is lower than we think it is. You should not compare a 100K salary with a 100K company income, you should compare an employer cost (salary+employer NI) of 100K with a 100K company income.
7. 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.

@kannet Exactly! And those on this thread are pretending it does not.

It isnt tax avoidance its tax planning. Also can only draw dividends out of profits so a good way to keep a company solvent and employing people.
These directors who many think are paying less into society than the rest are not right once you include the VAT, corporation tax, rates on property they occupy, employing people who contribute to the pot etc All at a greater risk to their own financial security than if they got a job in a big firm and in total would probably pay less tax in the long run.
If you are in a job do you put your house up as security to the bank to suppory your firms overdraft!?

Directors of small ltd co are just doing their best like everyone else and often with the added stress at this time of making decisions which affect other peoples employment and pay.

Also how many times do small companies out their hands in their pockets to support a small local charity or sponsor a team or offer work experience......

While it’s true that some people avoid tax this way for most it’s a legitimate financial planning decision. Company directors of small companies typically pay themselves last and won’t always be able to accurately predict how much there will be left over at the end of the month for their pay. As such most tend to pay themselves a conservative salary and then take extras as dividends when possible. Most people just have zero commercial sense and a probably quite envious as well so jump on the arsehole tax avoided bandwagon.

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?
A few years ago decent firms used to have policies that talked about reasonable use and with specific exclusions such as porn. But it is such a headache that a lot now just say no personal use.

Tax planning is a middle class phrase for legal or on the edge of legal tax avoidance.
Most people are paye.

@RandomLondoner yes I pretty much agree with everything you said- as I posted upthread I don’t think contractors should be eligible for the same level of support as employees in this crisis. I do get annoyed with people who think contractors should pay more tax than employees though or who think that drawing dividends instead of salary means you’re getting away with significantly lower tax than everyone else when that simply isn’t the case anymore.