[Finance] Self employed to receive 80% of income from the Gov’t too

[NooBHA]

Those of us who have got Companies that pay us a salary of £8500 or so and the rest in dividends will be stuffed by this. Dividends are an appropriation of profit not a business cost. Its standard advice that we accountants have been giving our small business clients for years and many will have saved shedloads on NI, but it could come back to bite us on the bottom now. As to what government does for the real self employed, its so complex, and HMRC is in such chaos generally, that I can't see that there is any chance of them administering anything that is related to recent income other than using data from submitted SA returns for the last 2-3 years. That would be comparatively easy for them to capture and do something with and in many cases will have bank account details attached to it. Trying to do anything else which requires someone to apply and an application to be processed on a person by person basis just won't work, they don't have the manpower, expertise energy or time. Then they'll have to move on to some help for the zero hours people. Just sitting here hoping that HMRC have got some really good people on board working day and night on a really good portal and supporting system that doesn't crash when it goes live. Don't hold your breath folks ! Given 12-24 months to develop and test systems HMRC don't have a good record.

Early indications during recent Consultations with HMRC are that it will be an online application where the taxpayer enters their own last 3 years profits and any Grant will be auto calculated based on those figures. This hasn't been set up yet as the Legislation is only being passed today.

It is going to take a minimum of about 6 weeks from application to payment. It is absolutely up in the air for now because they haven't even set up the application process yet.

 

[Weststander]

So would you say it's probably not worth rushing through this years tax return?
(Only asking as this year will my highest for quite a while)

Rush it through, this may help you in this coming financial assistance.

If 2019/20 ends up not affecting this assistance, you haven’t lost out or made your new higher self assessment income tax payable any sooner .... as HMRC do not require income tax payments on account this 31 July.

 

[Uh_huh_him]

I have some sympathy with Boris on this as he isn't an expert, and that clip is a bit out of context of him saying 'you could...take it on the chin", "or enforce draconian measures", or "strike a balance". I think that is what the government have tried to do with the experts is strike an appropriate balance with our culture, health service, risk etc.

He has been flanked by the scientists and experts at most of his press conferences. While I have more than just reservations about Johnson's integrity, I find it hard to doubt the integrity of the scientists to stand there in front of the country and be puppets for what Boris and Cummings want to do.

You know, with pollution likely to nose dive, air quality improve, NHS the saviours of our population, the Tories could come out of this the party of the NHS, Climate Change, Social Welfare, the lot. They might end up more left than Blair was. The Tories don't have some guiding ideology really, the votes they got from tradtional Labour will mean they will happily move to the left if it means retaining those votes - they have a reason to do that now. Won't matter to the electorate on a whole that they were the ones underfunded the NHS to be in this point where we don't have contingency for an epidemic, but after this they'll invest, invest, invest and come 2024 will be 'Saviours of the NHS'.

Sorry, is this the thread about tax!!??

I hope you're right. I will never vote Tory, but would be impressed if they manage to switch tack and start investing in public services.

 

[Weststander]

“Daniel Barnett - Employment law barrister has been talking to Nick Farrari on LBC this morning, and has confirmed One Man Band Ltd Company Directors ARE entitled to claim 80% of their salary, however dividends will NOT be included in calculating the amount they will pay.

This means that a director who has chosen to take only £8632 per year as a salary WILL be entitled to claim 80% of 1/12 of this.

Those who take a higher salary will be capped at 2.5k to bring it inline with PAYE.

He also said, that those directors who ONLY take dividends as a wage, will more than likely fall under the Self Employed rules and as such will need to wait for goverment to annouce whether they will be planning any releif for the 5 million self employed in this country.

This does create an interesting question, if the government do decide to help the self employed, you might find a situation where directors who have paid themselves a higher rate of dividends could decide to claim via the S/A route, instead of the salary route, in order to increase the amount the government will pay.

However, you will need to bare in mind, that directors MUST follow the same rules as employees who have been furloughed, and this means, that they will NOT be able to do ANY work for their company during the period in which a claim is made.

So directors will only be allowed to claim, if they really do have to close their business down, simply being unable to afford to pay a wage whilst continuing to operate as a functioning director will not be acceptable to claim the relief.”

 

[Weststander]

Right. There will certainly be refunds then owing by anyone who claimed this and declares a profit of more than £35000 for this financial year, including this payment, but thats not going to affect me!

And the question of whether this amount will ultimately be taxable is an interesting one, considering that it is being calculated based on post-tax earnings, hence if we use it to replace our expected earnings then the tax has already been removed.

It’s calculated on pre-tax earnings (tax assessable profits).

 

[NooBHA]

“Daniel Barnett - Employment law barrister has been talking to Nick Farrari on LBC this morning, and has confirmed One Man Band Ltd Company Directors ARE entitled to claim 80% of their salary, however dividends will NOT be included in calculating the amount they will pay.

This means that a director who has chosen to take only £8632 per year as a salary WILL be entitled to claim 80% of 1/12 of this.

Those who take a higher salary will be capped at 2.5k to bring it inline with PAYE.

He also said, that those directors who ONLY take dividends as a wage, will more than likely fall under the Self Employed rules and as such will need to wait for goverment to annouce whether they will be planning any releif for the 5 million self employed in this country.

This does create an interesting question, if the government do decide to help the self employed, you might find a situation where directors who have paid themselves a higher rate of dividends could decide to claim via the S/A route, instead of the salary route, in order to increase the amount the government will pay.

However, you will need to bare in mind, that directors MUST follow the same rules as employees who have been furloughed, and this means, that they will NOT be able to do ANY work for their company during the period in which a claim is made.

So directors will only be allowed to claim, if they really do have to close their business down, simply being unable to afford to pay a wage whilst continuing to operate as a functioning director will not be acceptable to claim the relief.”

Just one point regarding those Directors taking the small £8500 salary.

Their is a possibility they will qualify for nothing.

It looks like HMRC are likely to use the February payroll to calculate the level of the Grant Due.

Normally those Directors are on an Annual Payroll Scheme so they won't have a February Salary to calculate from.

 

[LamieRobertson]

My old accountant used to worry me because I always signed for ‘From receipts and information as submitted to me’ on his remittance form.

He used to bend things though.

Was his first name Uri?

 

[Wrong-Direction]

Was his first name Uri?

[emoji23]

Sent from my SM-A600FN using Tapatalk

 

[atfc village]

similar situation here, good luck mate!

10 minutes after i posted ,a text from my boss confirmed due to safety we are laid off quite right too but are jobs with the work we have are safe. Thanks for your kind words ,good luck too you too.

 

[stingray]

What about the self employed one-man-band's who started limited companies that effectively employed themselves as 1 member of staff on paye, but due to cash flow of the business paid themselves a minimal salary, then paid corporate tax on profit dividends at the end of the year? A perfectly reasonable way for a 1 person business to be run, but 80% of their salary is likely to be not very much?

evasion loophole bites back

 

[Weststander]

evasion loophole bites back

It’s tax planning/mitigation/legal avoidance of tax.

Evasion is illegal activity such as suppressing income, overstating business costs, or not declaring an entire source of income.

 

[Baldseagull]

What about the self employed one-man-band's who started limited companies that effectively employed themselves as 1 member of staff on paye, but due to cash flow of the business paid themselves a minimal salary, then paid corporate tax on profit dividends at the end of the year? A perfectly reasonable way for a 1 person business to be run, but 80% of their salary is likely to be not very much?

I think directors salaries are not included in the scheme, so even if they paid themselves through PAYE more than dividend, they are screwed. Also, employers need to pay this up front and reclaim later, Gov site says preferential loans available from the banks for this purpose, the banks say it will take 3 months to sort out. This isn't going to work, but to be fair, I don't know what will work, not in a capitalist system anyway.

 

[trueblue]

It’s tax planning/mitigation/legal avoidance of tax.

Evasion is illegal activity such as suppressing income, overstating business costs, or not declaring an entire source of income.

This.

Single person companies are simply utilising the tax laws quite legitimately. So many employees moan about this arrangement without realising that in some industries it's almost impossible to get a proper 'job' with luxuries like sick pay, holiday pay, other employee benefits or a pension. To add insult to injury, it's a constant battle now with companies who want to tax you the same as a proper 'employee'. New rules make them liable if they incorrectly deem you to be self-employed.

That can has been kicked a year down the road because of the virus, but it's still a farce. My major client recently informed me I should now be taxed as an employee (based on several incorrect assumptions), then 3 days later blew out months of work, completely unpaid. So 80% of next to f**k all is probably the best I can hope for until society starts returning to normal. And after that I will still need to battle against the unrealistic HMRC rules on what constitutes employment.

I'd say having no guaranteed work at all - only bookings that can be wiped out with no compensation or notice - should pretty much be the definition of self-employed.... but there are so many other ridiculous hoops to jump through.

 

[LlcoolJ]

Dividends are not covered at all - That comes under the Category of ''Too Bad'' And rightly so

Why rightly so? It's just another form of income which has already been taxed.

I completely agree with the majority of everything else you've posted on the subject btw. But that just sounds like you're positive about shafting some people who will now have no money.

Which isn't nice.

 

[LlcoolJ]

This.

Single person companies are simply utilising the tax laws quite legitimately. So many employees moan about this arrangement without realising that in some industries it's almost impossible to get a proper 'job' with luxuries like sick pay, holiday pay, other employee benefits or a pension. To add insult to injury, it's a constant battle now with companies who want to tax you the same as a proper 'employee'. New rules make them liable if they incorrectly deem you to be self-employed.

That can has been kicked a year down the road because of the virus, but it's still a farce. My major client recently informed me I should now be taxed as an employee (based on several incorrect assumptions), then 3 days later blew out months of work, completely unpaid. So 80% of next to f**k all is probably the best I can hope for until society starts returning to normal. And after that I will still need to battle against the unrealistic HMRC rules on what constitutes employment.

I'd say having no guaranteed work at all - only bookings that can be wiped out with no compensation or notice - should pretty much be the definition of self-employed.... but there are so many other ridiculous hoops to jump through.

Hopefully one positive out of this shitstorm is that the ridiculous IR35 changes will be firmly booted into the long grass.

They were going to screw the economy as it was, and now we are going to require a long period of recovery. It would be utter madness to implement them any time soon (next few years). But it was madness anyway so who knows?!

 

[LlcoolJ]

evasion loophole bites back

Ill informed nonsense right there.

 

[Baldseagull]

A small employer wanting to retain staff on the 80% of wage, is likely to need to ask the bank for a loan to do this for more than a couple of weeks, but what compels the banks to loan money to a company that may be not seen as a good credit risk?

 

[LlcoolJ]

Just one point regarding those Directors taking the small £8500 salary.

Their is a possibility they will qualify for nothing.

It looks like HMRC are likely to use the February payroll to calculate the level of the Grant Due.

Normally those Directors are on an Annual Payroll Scheme so they won't have a February Salary to calculate from.

All mine are done monthly so that any adjustments through RTI are easier to manage.

Well, I say that but because HMRC **** them up on a regular basis (and then can't comprehend how to process legitimate alterations) it's still not easy to manage.....

One of my clients is still owed £8k through CIS which I've been chasing for about a year. But because it's through the company PAYE system it's like banging your head against a wall of stupidity.

 

[LlcoolJ]

I think directors salaries are not included in the scheme, so even if they paid themselves through PAYE more than dividend, they are screwed. Also, employers need to pay this up front and reclaim later, Gov site says preferential loans available from the banks for this purpose, the banks say it will take 3 months to sort out. This isn't going to work, but to be fair, I don't know what will work, not in a capitalist system anyway.

What would work is either a short period of universal income or of direct payments based on income. Be that PAYE or based on SA302s.

Anything else will just be an enormous **** up.

And anything else is what we will be getting.

 

[pauli cee]

Rush it through, this may help you in this coming financial assistance.

If 2019/20 ends up not affecting this assistance, you haven’t lost out or made your new higher self assessment income tax payable any sooner .... as HMRC do not require income tax payments on account this 31 July.

Thanks WS