Dividends to be treated as earnings for NI?

[UKSBD]

Has anyone any info on a recent decision by HMRC to treat certain
dividends as earnings for NI purposes?

[Maslins]

Not sure what particular decision you're talking about, but I do know that if you're a 1 man band Ltd Co you should ensure you produce dividend vouchers and have board minutes of the meeting you have (with yourself) to declare the dividend.

If you don't do any of that, then they have been known to argue that what you say are dividends are actually salary, and chase you for the PAYE/NI on it.

[MrPAYE]

No recent announcements from HMRC on this.

You may be thinking about "IR35" rules which dictate that, for one man ltd co's, the majority of your income is 'employment earnings' and subject to PAYE and NI (irrespective of how you have split this between salary and dividends) if you are deemed to have an employer/employee relationship with your end client. In other words, dividends are ineffective if IR35 rules apply.

If your next question is around when/how would IR35 kick in, I suggest you do a search on here for employed or self employed for further info on this subject.

[Alpha]

He is probably talking about this case

[/URL][URL]http://www.financeandtaxtribunals.gov.uk/aspx/view.aspx?id=4420 (http://www.ukbusinessforums.co.uk/forums/PA%20Holdings%20Ltd%20and%20Kully%20Janjuah%20v%20 HMRC%20%5B2009%5D%20UKFTT%2095%20%28TC)

This may have an impact in future on dividends (Original case was dividends paid from an ET) however it is far too early to say.

Two principles were made during this case

1) if a dividend is a dividend, the fact that it can also be employment income for tax purposes does not mean that it can also be subject to tax under PAYE: confirmed dividend tax trumps PAYE

2) there is nothing in the taxes act which says that a dividend should not be classed as earnings for NICs: nothing trumps NICs

[UKSBD]

Link isn't working, but from what you have posted it looks the same.

Is this nothing to worry about yet, and if they ever do decide that NI
is payable on dividends will they be able to backdate?

[UKSBD]

From my brief reading a payment can be classed as a dividend and an
earning, although only taxable once, it means there is no reason why
NIC's shouldn't be paid on dividends.

Time to start worrying?

[Alpha]

Link corrected:)

[UKSBD]

What do you make of 98 - 101?
Does that mean there is no reason dividends can't be classed as earnings
for NIC. or is that only in certain circumstances.