Limited Company-Pay structure

[karthik_nk]

Hello all,

I have taken up a contracting role from last month as a consultant. I have been a permanent employee for the last 3 years in the UK.

The question is regarding my pay structure. My accountant told me that as I have paid enough taxes for this year from April to October( from permanent employment) there is no need to take salary from my limited company and pay taxes on it. He advised me to take £xxx as dividends with no extra tax to pay until March next year and he can setup a salary from April.

I am going in for an extension of my Tier1 visa and do you think that this might be problem of not taking salary and tax free dividends, kindly advise?

Thanks in advance,
Karthik

[ram72]

No tax to pay untill march next year does not mean 'dividend without tax'.
at the end of the financial year your tax liabilities are calculated based on all income - income from employment (prev company), income from rent received, bank interests, dividends - and the self-assesement is prepared based on that and usually have time upto following january to pay the personal income tax.

so what your accountant says is right and you don't have to worry.

I'm not sure though if a director of a company can work without salary for a few months - its technical/legal stuff..some specialist can comment

[mk357]

I think the last line referred to by Ram needs some thought. You need to check your company constitution or memorandum of articles of association. What does it say about the directors pay? there must be a procedure and guidelines for that. And as Ram stated, if you have to pay taxes at end of the day then you should get salary instead of dividends as it might give a wrong impression on the immigration people that yo tried to avoid taxes. Without salalry... i would not recommend specially when you have to pay taxes on the dividends you receive.

[John]

It would be a very strange set of company documents that insists that the Director(s) take remuneration from the company. Effectively all these matters are within the control of the Board of Directors of the company, and if they decide not to pay remuneration to the Directors, that means that the company will make more profit (or a smaller loss).

If a profit then more Corporation Tax will be payable by the company than would have been the case, and after taking that CT liability into account, then the Directors are well able to declare a dividend, if they wish.

[karthik_nk]

Any seniors input on this please?