Employed by my own company advice

[James Frederick]

Hello,
I have had my own business for about twenty years which has now ground to a halt. About 5 years ago I became a ltd company and it now pays me a salary. This is made up of a mixture of salary and dividends.
My dividend payment comes to £5500 and my remaining salary is £8600.
Because I am in effect employed where do you think I stand as far as aid from the government.
Any advice really appreciated.
Thanks

 

[Mr D]

Your dividends you get as a shareholder, ignore them. Government is not replacing them.


Your wages - its possible company will be able to get 80% of your monthly salary refunded by HMRC.
Possible - we will know more once full details are published. Hopefully next few days.

 

[ADW]

if you shows to HMRC that your income is coming from both source than you are eligible for both things.

Not seen anything that mentions dividends. Where did you see this? Only related to paye as an employee as far as I have read.

 

[UKD]

if you shows to HMRC that your income is coming from both source than you are eligible for both things.

Both sources being dividends and PAYE?, the government will not pay dividends up to 80% under this government package. This is where the problem is, as many company owners simply pay themselves the least amount of PAYE (£719 a month) which is perfectly legal, and then the rest up to the 40% tax limit bracket via dividends; they will suffer HUGELY from this.

The thing is, if you wish to claim family tax credit, then HMRC will take into account company issued dividends, so I feel they should take them into account now with this situation.

Why? because if they are spunking 80% pay to all and sundry for a potential 6 month holiday at home, then surely employers should be granted the same package allowances.

....especially when employers and company owners are likely to be royally shafted for increased tax when all this is over, to pay for more for the deficit than others who received 80% income guarantees.

 

[OMGVape]

The chancellors hint about everyone “chipping in” after this is all over suggests self employed being taxed equally as the employed. Considering tax and NI is only unequal on dividends suggests to me that dividend income will be included in this package.

 

[Mr D]

The chancellors hint about everyone “chipping in” after this is all over suggests self employed being taxed equally as the employed. Considering tax and NI is only unequal on dividends suggests to me that dividend income will be included in this package.

Taxed and ignoring expenses? Then they could claim the same rights as employees.
So long as someone willing to pay.

 

[James Frederick]

Thanks so much for your quick answers really appreciated. I had assumed that dividends weren't covered.
I make my living from selling children's prints at shows and because of Covid every one has been cancelled up to September.
I pay a fair whack on corpor

 

[James Frederick]

Sorry pressed send too quickly !
Thanks so much for your answers, much appreciated.
Do you think on the info I have given that I might be due anything ?

 

[Gordon - Commercial Finance]

The chancellors hint about everyone “chipping in” after this is all over suggests self employed being taxed equally as the employed. Considering tax and NI is only unequal on dividends suggests to me that dividend income will be included in this package.

Not sure he could justify taxing people who didn’t benefit from the aid that he announced.

 

[tony84]

So to get this right...
Dividends are income and taxable.
But when it comes to supporting self employed people, they are not an income.

 

[OMGVape]

It’s not clear yet, more details are needed.

 

[Mr D]

Not sure he could justify taxing people who didn’t benefit from the aid that he announced.

They will. Tax is a pretty broad brush - whether we get a penny from government or not we will be taxed like all the other similar businesses.

 

[Mr D]

So to get this right...
Dividends are income and taxable.
But when it comes to supporting self employed people, they are not an income.

Depends how many shares the self employed person has and in what.
Daresay there are some self employed people who get a lot of money from investments paid out by dividends.

Will be plenty with no shares. Surviving on government handout or not as they choose and as their trade determines.

 

[adam thompson1981]

Employees are getting help, self employed are getting help.

And directors could be left out to hang.

****ing great.

Wish they would hurry up and release the details it's driving me insane.

 

[OMGVape]

Here is the blurb

https://www.gov.uk/guidance/claim-a...ovid-19-self-employment-income-support-scheme

 

[James Frederick]

I have to say it's " comforting" knowing that there are people in similar situation. Ten of thousands I guess ?

 

[chicker]

I have to say it's " comforting" knowing that there are people in similar situation. Ten of thousands I guess ?

Yep in a very similar boat but haven't taken any divends this year but my PAYE is very low and not enough to survive on and seasonal business like yours. Costs of circa 30k a year and last year gave HMRC 50k in vat alone. Do have personal income protection insurance and with the stress this is causing will probably end up with being signed of and relying on that

 

[OMGVape]

I bet my accountant is smuggly chuckling about all the clients he has advised to take minimum salary and maximum dividends.

But in all fairness, as a company director for over a decade, my contribution to HMRC (very little tax and zero NI) is a fraction of what I’d have paid as a sole trader.

 

[Mr D]

Yep in a very similar boat but haven't taken any divends this year but my PAYE is very low and not enough to survive on and seasonal business like yours. Costs of circa 30k a year and last year gave HMRC 50k in vat alone. Do have personal income protection insurance and with the stress this is causing will probably end up with being signed of and relying on that

Then if business cannot trade, cannot get a grant, don't want a loan your choices are limited regarding income.

Universal credit? Be warned they are swamped - reports of almost a half million claims in past 9 days. Hopefully at the moment they won't be pushing people into jobs.

 

[LTDcompanier]

From the BBC:

Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will have 80% of their salary covered by the Coronavirus Job Retention Scheme if operating through PAYE.

 

[Mr D]

From the BBC:

Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will have 80% of their salary covered by the Coronavirus Job Retention Scheme if operating through PAYE.

That first bit - is that sounding like a service company payment while the second bit sounds like actual wage?

 

[UKD]

From the BBC:

Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will have 80% of their salary covered by the Coronavirus Job Retention Scheme if operating through PAYE.

Have you got a link to this, and I still take it that dividends will not be included in that 80%?

 

[Gordon - Commercial Finance]

From the BBC:

Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will have 80% of their salary covered by the Coronavirus Job Retention Scheme if operating through PAYE.

Is that a direct quote? If so then it’s a bit contradictory.

 

[LTDcompanier]

I can't post links, sorry, not been here long enough. It was from the BBC website.

 

[Newchodge]

The scheme for the self employed states that it does NOT cover ltd company directors - why should it, they are not self employed.

It states that their PAYE income will be covered under the Job Retention scheme (see here https://www.ukbusinessforums.co.uk/threads/furlough-latest-guidance.404842/#post-2997317) however if you are a sole directo you may struggle to show zero work and not providing a service to the company when you have to run payroll and reclaim job retention money, as that may be seen as providing a service. One solution may be to outsource payroll.

 

[Gordon - Commercial Finance]

The scheme for the self employed states that it does NOT cover ltd company directors - why should it, they are not self employed.

It states that their PAYE income will be covered under the Job Retention scheme (see here https://www.ukbusinessforums.co.uk/threads/furlough-latest-guidance.404842/#post-2997317) however if you are a sole directo you may struggle to show zero work and not providing a service to the company when you have to run payroll and reclaim job retention money, as that may be seen as providing a service. One solution may be to outsource payroll.

Do you think we will need to actually show zero work to claim? Not sure how that could be handled.
I’m thinking I will furlough myself a month at a time, and could probably ask my accountant to do payroll for me for a bit, but then I will still need to go onto the bank and make the payments...

 

[Ian J]

Yep in a very similar boat but haven't taken any divends this year but my PAYE is very low and not enough to survive on and seasonal business like yours. Costs of circa 30k a year and last year gave HMRC 50k in vat alone.

No you didn't. Your customers paid the Vat as you merely collected it and passed it on

 

[Newchodge]

Do you think we will need to actually show zero work to claim? Not sure how that could be handled.
I’m thinking I will furlough myself a month at a time, and could probably ask my accountant to do payroll for me for a bit, but then I will still need to go onto the bank and make the payments...

Check how much your accountant charges for payroll. some charge quite a lot. Furlough must last 3 weeks. It can be renewed. There is nothing to say it cannot last 3 weeks, with 1 days' (or even weeks') work, and then re-furlough for 3 weeks. 4

I have now produced 3 new words. Furloughisation, furloughing and re-furlough. I am on the lookout for a 4th.

 

[Gordon - Commercial Finance]

Check how much your accountant charges for payroll. some charge quite a lot. Furlough must last 3 weeks. It can be renewed. There is nothing to say it cannot last 3 weeks, with 1 days' (or even weeks') work, and then re-furlough for 3 weeks. 4

I have now produced 3 new words. Furloughisation, furloughing and re-furlough. I am on the lookout for a 4th.

Furloughrisation

 

[Ian J]

I’m thinking I will furlough myself a month at a time,

You can't if you are the sole director

 

[Newchodge]

You can't if you are the sole director

You can if you only carry out statutory duties during furlough.

 

[Mr D]

The scheme for the self employed states that it does NOT cover ltd company directors - why should it, they are not self employed.

It states that their PAYE income will be covered under the Job Retention scheme (see here https://www.ukbusinessforums.co.uk/threads/furlough-latest-guidance.404842/#post-2997317) however if you are a sole directo you may struggle to show zero work and not providing a service to the company when you have to run payroll and reclaim job retention money, as that may be seen as providing a service. One solution may be to outsource payroll.

How exactly does a director show zero work?

Is that like showing zero cleaning of the bath and zero washing up?

 

[Ian J]

How exactly does a director show zero work?

By removing his signature from here for starters as that could be deemed advertising for business

 

[Spirconi]

As a director (PAYE + divi) I understand we can furlough and can get 80% of PAYE part. Feels like a kick in the teeth after all tax paid over the years Corp, personal, employer NI, but it is what it is. It has its rewards for many over longer periods.

However, it seems self employed get up to £7,500 if profits fit in line above 30k but below 50k. Albeit they have to wait for it. They can then also claim universal credit up to 1800 depending on circumstances (more likely 500 at minimum levels assuming no savings).

To top that off, if they (as many do) have a part time job paying PAYE, they are also allowed to furlough and get 80% through employer for that. Then get a job in a supermarket (current guide says a furloughed worker can work for another company. I guess some specific contracts my not allow). This means self employed could actually walk out of this with up to 15k, employees can get up to £7,500 ( can take another key worker job as well)..

All this whilst director / owners with no premises or premises outside of scope have to shut down business and therefore all income, get around £800 if they have PAYE element, have to front up to 80% of salary costs which can run into a significant amount for some, hope they have done the paperwork correctly to reclaim in 2 months earliest, potentially risk personal assets with a loan if they dont have cash flow (some bank dont require personal asset guarantees but I'm sure they arent going to just say dont worry about it if you cant afford to repay).

This doesnt feel like it was thought out well and will not save enough jobs as would have been hoped.

Or have I misinterpreted the info available.

 

[Spirconi]

Edit: I guess they cant get UC if they take another job. So take out that from above equation.

 

[Gordon - Commercial Finance]

None of this money is coming from tax revenue, so it’s a bit of a misstep that everyone is suggesting they should get support because of all the tax they’ve paid over the years.

 

[Spirconi]

That wasnt the point. Merely a poor me part of a wider point.

I'm no socialist but in this circumstance I think the only way this works is a universal income which could have been quick and leaves no one behind.

I even think some kind of student loan option would have worked better. Every working person gets £2,000, paid back if earn over £30k. People that dont need would pay back sooner, people that need are guaranteed the help they need. But then, that might be complete naivety on my part to be an eligible solution.

 

[Mr D]

By removing his signature from here for starters as that could be deemed advertising for business

Would removing existing advertising be classed as work?
Would ignoring the advertising be classed as work?

 

[Mr D]

This doesnt feel like it was thought out well and will not save enough jobs as would have been hoped.

Or have I misinterpreted the info available.

Well thought out would have given us a solution in 3 or 4 years, including feedback and amendment after dozens or hundreds of groups had stuck their fingers into the idea.
A less well thought out solution that is workable now is better. Just leaves some out in the cold.

 

[Mr D]

That wasnt the point. Merely a poor me part of a wider point.

I'm no socialist but in this circumstance I think the only way this works is a universal income which could have been quick and leaves no one behind.

I even think some kind of student loan option would have worked better. Every working person gets £2,000, paid back if earn over £30k. People that dont need would pay back sooner, people that need are guaranteed the help they need. But then, that might be complete naivety on my part to be an eligible solution.

£2k?
That's per month yes?

£2k would penalise those not working. Penalise those not meeting criteria. And annoy everyone that retired recently.

Government have however announced an increase next financial year to universal credit and working tax credits of £1,000. So they took at least part of your idea.
Just doesn't cover much. Two boxes of flour, enough for a loaf and a small cake per week.