Director/shareholder reward packages: The dynamics have changed
Introduction The introduction of the Employment Allowance (“EA”) allows employers a discount of up to £2,000 off their liability to Employers’ NIC. This has added another factor into the salary vs dividend debate. There is one other complicating factor as well. The level of other taxable, non-dividend, income enjoyed by the director/shareholder. If there’s no other income A salary equivalent to the director’s personal allowance is most efficient. The additional NIC paid by the director (at 12% on the excess over £8,060) is more than compensated by the additional corporation tax saving at 20%. With no other employees, this works for companies with up to 5 directors/ shareholders. What if the director has other income? Many directors own the company premises, and enjoy a rent from that. Where rent (or indeed any other taxable income) is enjoyed by the director, a little more care is needed. The optimal position would…
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Can I avoid a tax investigation?
Introduction So the return is in, and we can breathe a sigh of relief, but is it all over? We are often being asked this question “What chance is there that I get investigated by HMRC?” The truth is that you cannot entirely eliminate the risk of getting investigated, but you can minimise it. Some clarification First we need to tidy up the terminology! The word “investigation” is emotive. It suggests that the person selected is guilty of some misdemeanour, or even a crime! HMRC use various words on their website, and in their literature to describe the same thing. You might have a “check”, an “enquiry” or a “review”. All of these simply mean HMRC want to check that you are paying the correct amount of tax, and at the correct time. Time limits Generally, HMRC have 12 months from the date the return is filed to open an…
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