Director's salary

Dottie
Dottie Registered Posts: 99 Regular contributor ⭐
in General accounting discussion
Hi

Is there any reason why a director of a limited company involved in the construction industry can't take the minimum personal allowance salary and the rest in dividends? A colleague seems to think that the rules a few years ago meant that he would not be able to do so, but I am unable to find any confirmation of this.

Thanks as always.

Dottie

Comments

  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
    Never heard anything of the sort.
    We have construction industry clients who are remunerated in the normal PA Salary and rest in dividends way, and will continue to do this until the rules change, which I don't believe they have.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
    Unless caught by IR35 perhaps?
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
    deanshepherd wrote: »
    Unless caught by IR35 perhaps?

    Yes there is that. My partner is the IR35 expert so thankfully I know not a lot about it.
    I thought the director/shareholder could still take the standard remuneration and the IR35 tax was paid with/as the CT?

    As I said, I don't know it much at all! :lol:
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
    faerie9 wrote: »
    I thought the director/shareholder could still take the standard remuneration and the IR35 tax was paid with/as the CT?

    It's more a case of all the turnover (minus a few deductions) has to be operated as salary. If the only income is from IR35 contracts then there is likely to be a small loss in the company so no CT at all.

    In fact, if a CIS subbie has only IR35 caught income they would be better off winding up the company and being a sole-trader.
  • Hasan.Ahmet
    Hasan.Ahmet Registered Posts: 87 Regular contributor ⭐
    Ir35

    We may be saying the same thing, beg forgiveness if it's a repeat;
    IR35 legislation applies where, had it not been for the existence of the service company being used as an intermediary, the service provider would have been regarded as an employee.
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
    Hasan.Ahmet wrote: »
    IR35 legislation applies where, had it not been for the existence of the service company being used as an intermediary, the service provider would have been regarded as an employee.

    Yep, that's the gist of it but about as far as my knowledge on it goes! Via my partner, our firm does IR35 contract reviews for clients to see if they are watertight enough or not.

    Dean thanks for the explanation of the tax treatment. :thumbup1: I am sure I will forget it again soon and continue to refer everything to the 'other half' :lol:

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