Liabilities

[Geoff]

Hi,

I currently work for an IT company on PAYE.
Recently I have been offered a new Directorship.

As part of the package I will now be issued 2500 B Shares
My salary will be restructured and paid as £500 per month PAYE salary
with a monthly paid dividend of approx £3000 pounds
Minimising both the companies and my own Tax liability.

I have been told I can expect to be over £1000 per month better off in
my pay packet! ie taking home in excess of £3000 per month.

Now Im not that stupid, surely my personal tax liabilities will not
change, I will still need to pay the IR a significant amount of cash and
the reduced NI payments will affect the SERPS contributions paid by the
DSS in response to the reduced NI paid.

I really am doubting the legality and/or efficiency of this pay
structure? By accepting it am I heading for a run in with the revenue?

Any comments.

Regards

Geoff

 

[Jonathan Bryce]

Hi,

I currently work for an IT company on PAYE.
Recently I have been offered a new Directorship.

As part of the package I will now be issued 2500 B Shares
My salary will be restructured and paid as £500 per month PAYE salary
with a monthly paid dividend of approx £3000 pounds
Minimising both the companies and my own Tax liability.

I have been told I can expect to be over £1000 per month better off in
my pay packet! ie taking home in excess of £3000 per month.

Now Im not that stupid, surely my personal tax liabilities will not
change, I will still need to pay the IR a significant amount of cash and
the reduced NI payments will affect the SERPS contributions paid by the
DSS in response to the reduced NI paid.

I really am doubting the legality and/or efficiency of this pay
structure? By accepting it am I heading for a run in with the revenue?

Any comments.

Yes. How much will the tax on the shares you are issued be?

They yield a dividend of £36,000.

The Inland Revenue could argue that you could expect a yield of 6% on these
shares, or indeed any other figure that comes into their heads.

If they chose 6%, this would mean the shares were valued at £600,000, and
the tax and NI on these could be around £246,000. There would also be
employers NI of £76,800 and the company could pass that onto you, giving
you a total bill of £322,800.

These figures are only indicative. They could argue a higher or lower
figure.

 

[Peter Saxton]

Hi,

I currently work for an IT company on PAYE.
Recently I have been offered a new Directorship.

As part of the package I will now be issued 2500 B Shares
My salary will be restructured and paid as £500 per month PAYE salary
with a monthly paid dividend of approx £3000 pounds
Minimising both the companies and my own Tax liability.

I have been told I can expect to be over £1000 per month better off in
my pay packet! ie taking home in excess of £3000 per month.

Now Im not that stupid, surely my personal tax liabilities will not
change, I will still need to pay the IR a significant amount of cash and
the reduced NI payments will affect the SERPS contributions paid by the
DSS in response to the reduced NI paid.

I really am doubting the legality and/or efficiency of this pay
structure? By accepting it am I heading for a run in with the revenue?

Any comments.

Regards

Geoff

If you have a contract of employment (written or otherwise) that says
you will receive dividends I would think that the Inland Revenue could
legitimately argue they are not really dividends but remuneration for
employment.

 

[Simon]

Hi,

I currently work for an IT company on PAYE.
Recently I have been offered a new Directorship.

As part of the package I will now be issued 2500 B Shares
My salary will be restructured and paid as £500 per month PAYE salary with
a monthly paid dividend of approx £3000 pounds
Minimising both the companies and my own Tax liability.

I have been told I can expect to be over £1000 per month better off in my
pay packet! ie taking home in excess of £3000 per month.

Now Im not that stupid, surely my personal tax liabilities will not
change, I will still need to pay the IR a significant amount of cash and
the reduced NI payments will affect the SERPS contributions paid by the
DSS in response to the reduced NI paid.

I really am doubting the legality and/or efficiency of this pay structure?
By accepting it am I heading for a run in with the revenue?

Any comments.

Regards

Geoff

If Peter or Jonathan are not correct then it is just as likely that IR35
applies. This is jargon but if you download a leaflet of the same title from
the IR website this should be clearer.

Usually, if something sounds too good to be true, it is.

Simon

 

[Peter Saxton]

If Peter or Jonathan are not correct then it is just as likely that IR35
applies. This is jargon but if you download a leaflet of the same title from
the IR website this should be clearer.

Usually, if something sounds too good to be true, it is.

Simon

This is IR35

http://www.inlandrevenue.gov.uk/ir35/

But it is better to read the following

http://www.inlandrevenue.gov.uk/pdfs/ir175text.pdf