Mom&Pop IT Company - UK taxman threat

[z109]

http://news.bbc.co.uk/1/hi/business/6721575.stm
Anyone seen this?

The gist is that her majesties tax men are taking a dim view of Ltd. companies set up with low salaries/high dividends, where one of the directors (the wife or husband) does little or none of the work.

Where the UK taxman goes, the revenue follow? Or is that already the case here?

 

[CCOVICH]

Aren't dividends and salary taxed very similarly in Ireland (therefore there may be no advantage in taking dividends in lieu of salary)? Are the rates different in the UK?

 

[z109]

From when I used to have a limited company in the UK, if your spouse was not working, but was a director, then you could make use of their full tax allowances (tax free, intro rate and basic rate) on the dividend payments. Basically what the tax man wants is for the earner to pay all the tax, so the savings from 42% could no longer be made (as far as I can see, they want everyone to go back to being a sole trader!!).

 

[ubiquitous]

If you ever resent the fact that the Irish tax system is unfair (which admittedly it can be, in certain respects), cheer yourself up by taking a look at the UK system, which is riddled with anomalies and injustices, 90% of which would have been thrown out by the courts over there had the UK a rights-based, written constitution.