Limited Company Directors? Employed or Self Employed

[Tigereye]

We are trying to see where we might get support as our business has now closed temporarily due to coronavirus. Not through sickness, but we work in people’s homes and it is no longer appropriate.

Background-in December our 8 year old business changed entity from partnership to limited. We have 8 months of self employed income through that this financial year. Since December we are now both 50/50 directors in the new LTD company. We have been told we haven’t been put on payroll as we used our allowance through the partnership, so will take dividends through the limited company until April 1st.

Are we employees or self employed? If Employees, will we be entitled to no support, since as of December we have not had a “salary” or will dividends still be classes as a salary?

Thank you!

 

[Mark Holford]

Hi, I'm in the same position.

I don't know what to do right now. My wife and I live off basic plus monthly dividend plus some expenses. There is nothing at the moment that could help us, as far as I can see.

It's my belief that we are employees as we have a payroll number and pay the associated taxes.

 

[Scalloway]

You are employees.

As far as I am aware to qualify you would need to have submitted RTI payroll information to HMRC at the end of February.

 

[Mr D]

Hi, I'm in the same position.

I don't know what to do right now. My wife and I live off basic plus monthly dividend plus some expenses. There is nothing at the moment that could help us, as far as I can see.

It's my belief that we are employees as we have a payroll number and pay the associated taxes.

The shareholders dividends will be ignored. Government appears not to take it into account when looking to reimburse part of wages. As shareholders you lose out that way.

As directors you are employees and - we think - will be able to get 80 percent of your paye wage reimbursed. But details have not yet been published give it a week or two.

 

[Ian J]

The shareholders dividends will be ignored. Government appears not to take it into account when looking to reimburse part of wages. As shareholders you lose out that way.

And why should the government take dividends into account. I have shares in several companies both in an ISA and held individually but I don't expect the government to take those dividends into account

 

[Mr D]

And why should the government take dividends into account. I have shares in several companies both in an ISA and held individually but I don't expect the government to take those dividends into account

Was not suggesting government should take them into account.

 

[Newchodge]

Your partnership income will be irrelevant for any support purposes - your partnership income did not end because of coronavirus.

You are definitely not self employed. If you aren't being paid through PAYE you are probably not employees either - do you have a contract of employment?

 

[Newchodge]

will dividends still be classes as a salary?

Dividends have NEVER been classed as salary.

 

[topgear13]

I do a self assessment for 2 flats I own so I have 3 years of history self assessments for that.

I have also just completed my first year of a limited company I am sole director and don’t take a salary I took small dividend being first year of business

So where will I stand ?

 

[Newchodge]

Nowhere. The 80% of wages is for employed income, not rental income. there may be other provision for lost rents (if you lose rents) but that seems to be limited to mortgage repayment holidays.

 

[Mr D]

I do a self assessment for 2 flats I own so I have 3 years of history self assessments for that.

I have also just completed my first year of a limited company I am sole director and don’t take a salary I took small dividend being first year of business

So where will I stand ?

Are your flats rented out as at whatever date (say end of last month)?
Maybe the government will consider the income that you have had if your flats aren't rented out now.

The dividend as a shareholder you had? Government not concerned about that, its not your salary.
Your choice not to be PAYE.
More worrying, if your business cannot afford to issue a dividend to cover the payments already made then you could be using a directors loan account. Which needs paying back or declaring at some point.

If your limited company cannot keep going then there's universal credit.
Which is swamped.

 

[topgear13]

Are your flats rented out as at whatever date (say end of last month)?
Maybe the government will consider the income that you have had if your flats aren't rented out now.

The dividend as a shareholder you had? Government not concerned about that, its not your salary.
Your choice not to be PAYE.
More worrying, if your business cannot afford to issue a dividend to cover the payments already made then you could be using a directors loan account. Which needs paying back or declaring at some point.

If your limited company cannot keep going then there's universal credit.
Which is swamped.

Yes 2 flats are rented out and still are as I get money direct from the local housing authority
Accountant advised not advantageous to take the min salary to cover the ni stamp based on the circumstances, most small business only PAYE to minimum I believe and if you work that back say the 80% applies that works out as same as universal credit rate roughly

IMO I reckon that my only route is self assessment return as that will be classed as my self employed income. Although my first year of business of limited company is complete the return is getting filed in June. So more than likely that will not enter the status quo unless I need to.

Leave it up to accountant that’s what he’s paid for.

 

[Mr D]

Yes 2 flats are rented out and still are as I get money direct from the local housing authority
Accountant advised not advantageous to take the min salary to cover the ni stamp based on the circumstances, most small business only PAYE to minimum I believe and if you work that back say the 80% applies that works out as same as universal credit rate roughly

IMO I reckon that my only route is self assessment return as that will be classed as my self employed income. Although my first year of business of limited company is complete the return is getting filed in June. So more than likely that will not enter the status quo unless I need to.

Leave it up to accountant that’s what he’s paid for.

So self employment you have not lost money on.

 

[topgear13]

So self employment you have not lost money on.

Sorry I don’t understand what you mean ? The flats have fallen below the £12500 yearly tax allowance In respect of the limited company it does make money and I will have corporation tax to pay

 

[Mr D]

Sorry I don’t understand what you mean ? The flats have fallen below the £12500 yearly tax allowance In respect of the limited company it does make money and I will have corporation tax to pay

You have no change in self employed income.

Maybe you can claim working tax credit but they will take your current income into account. And massive delays - think 6 figure numbers of new claims.

Nowhere has anyone suggested the annual tax allowance is a figure that income should be topped up to.
Your limited company can continue to pay you. Just do not expect government help - you have no salary.
Take that up with your accountant.

 

[Tigereye]

Dividends have NEVER been classed as salary.

Hello, we have only been Ltd for a few months and don’t know how it all works yet, so just an innocent question. I am just trying to understand where we will stand as the accountant has not added us to payroll. As we have had no salary, we cannot have 80% of nothing, so was just wondering if they would take dividend into account or our partnership which was the first 8 months of the tax year for our self assessment. I cannot find any advice online It seems some how we are not employees or self employed, therefor entitled to no support, (though we pay tax and work extremely hard!) because we are in a cross over period?

 

[Tigereye]

The shareholders dividends will be ignored. Government appears not to take it into account when looking to reimburse part of wages. As shareholders you lose out that way.

As directors you are employees and - we think - will be able to get 80 percent of your paye wage reimbursed. But details have not yet been published give it a week or two.

Dividends have NEVER been classed as salary.

Hello, we have only been Ltd for a few months and don’t know how it all works yet. I am just trying to understand where we will stand as the accountant has not added us to payroll. As we have had no salary, we cannot have 80% of nothing, so was just wondering if they would take dividend into account or our partnership which was the first 8 months of the tax year for our self assessment. I cannot find any advice online It seems some how we are not employees or self employed, therefor entitled to no support, (though we pay tax and work extremely hard!) because we are in a cross over period?

 

[topgear13]

You have no change in self employed income.

Maybe you can claim working tax credit but they will take your current income into account. And massive delays - think 6 figure numbers of new claims.

Nowhere has anyone suggested the annual tax allowance is a figure that income should be topped up to.
Your limited company can continue to pay you. Just do not expect government help - you have no salary.
Take that up with your accountant.

Up until last year the flats were my income and sole earnings apart from a part time self employed job I included in the return so I see that as my wages as could not claim benefits. So basically I have been a self employed landlord

 

[Newchodge]

Up until last year the flats were my income and sole earnings apart from a part time self employed job I included in the return so I see that as my wages as could not claim benefits. So basically I have been a self employed landlord

Support, at some level, may be available for people who have lost out because of Covid 19. It does not appear that you have lost anything, so, naturally, you would not get any support.

 

[Mr D]

Up until last year the flats were my income and sole earnings apart from a part time self employed job I included in the return so I see that as my wages as could not claim benefits. So basically I have been a self employed landlord

So no change in income from self employment.

And as you say your business that is a limited company still makes money.

 

[OMGVape]

As I see it, I was required to register as self employed at Ltd company startup.

HMRC do class my dividends as income when calculating “income tax” on my dividends.

Mortgage suppliers where very insistent that my dividends are “income”.

All will be revealed tomorrow.

 

[Mr D]

As I see it, I was required to register as self employed at Ltd company startup.

HMRC do class my dividends as income when calculating “income tax” on my dividends.

Mortgage suppliers where very insistent that my dividends are “income”.

All will be revealed tomorrow.

You register for self assessment maybe?

A company director is an employee, not a contractor of the business. Paid by wages.
Some are shareholders too and paid also by dividends.

The shareholder's dividends are taxed at a different rate and with a different tax free allowance than employment income.
Something can be income without being salary.

 

[UKSBD]

As I see it, I was required to register as self employed at Ltd company startup.

HMRC do class my dividends as income when calculating “income tax” on my dividends.

Mortgage suppliers where very insistent that my dividends are “income”.

All will be revealed tomorrow.

Income and Salary are not the same things

 

[chicker]

My business is Seasonal and has been badly effected from this being events based. We run from March through to Mid September with our best months being April, May and June. We can no longer legally trade first we lost all our revenue from the events side of the business 75% then from Tuesday our street trading side has been reduced to nil as the councils revoked licenses based on the outbreak.

We have seasonal staff that start March though to Sept and return yearly and sadly I have laid them of. I do not think they could be furlounged as they were not working for us in Feb although we have there payroll data still from last season.

Myself (director) February salary is low £160 a week (£640 a month) based on a the fact we are mainly dormant and work is limited however (I also do another PAYE job from Oct to Jan) from April though to September this would have increased. I wonder if I can claim more based on earnings in April and onwards or if this could even be averaged out with the earning from my winter job as proof that it is fraudulent. Obviously know one really knows yet but any thoughts?

All the support looks like its based at traditional brick and mortar year round businesses when infact there are whole industries that run on seasons.

 

[Mr D]

My business is Seasonal and has been badly effected from this being events based. We run from March through to Mid September with our best months being April, May and June. We can no longer legally trade first we lost all our revenue from the events side of the business 75% then from Tuesday our street trading side has been reduced to nil as the councils revoked licenses based on the outbreak.

We have seasonal staff that start March though to Sept and return yearly and sadly I have laid them of. I do not think they could be furlounged as they were not working for us in Feb although we have there payroll data still from last season.

Myself (director) February salary is low £160 a week (£640 a month) based on a the fact we are mainly dormant and work is limited however (I also do another PAYE job from Oct to Jan) from April though to September this would have increased. I wonder if I can claim more based on earnings in April and onwards or if this could even be averaged out with the earning from my winter job as proof that it is fraudulent. Obviously know one really knows yet but any thoughts?

All the support looks like its based at traditional brick and mortar year round businesses when infact there are whole industries that run on seasons.

Would have thought the February pay would be used to calculate.
Otherwise massively subject to fraud with people wanting the big money.

Pretty much the seaside towns run on seasons and their council spending covers the extra income of the season. This year may well have no season for anyone but the Christmas markets - and even they may be cancelled.
Tourism and service industries are big business. In previous years.