apples24

iTrader: (1)

a bloke has a business and is set up as a ltd company, he pays himself and his wife the state minimum wage 38hrs £99 per week each

by doing this they are entitled to a reasonable amount of tax credits, dont know how much that is


aparantly at end of year all other cash is devided between the shareholders which is i presume him and his wife, so how does that work? as surely he would have to declare that in the beginning when applying for is tax credits??

or is it a legal loophole? or is he commiting some kind of criminal offence?

maybe he puts the money back into the business ie car or something i dont know

this is a friend of mine who recently started up his business a year ago and has been ticking over happily, hes quite sensible and business minded so i presume he knows exactly what hes doing


is this all true? as i couldnt quite understand it and didnt sound right to me, almost like benefit fraud

Reffro

Benefit fraud, if he doesn't declare the dividends as income.

eClaire

If he doesn't declare the dividends and gets away with it he is no different to the scum who sign on and work at the same time. That pot of money is intended for people who need it!

apples24

iTrader: (1)

thats what i thought but he swares its all legit. obviously hes telling me porkie pies

MattW

From the gov site

As well as social security benefits and earnings from your work, we also take into account other income.

You only need to include other income if it adds up to more than £300 for the tax year. If it does, you only need to enter the amount that exceeds £300 (in the case of a couple, £300 should be deducted from your joint income). However, for Adult Dependant's Grant and miscellaneous income you need to include the full amount.

The different types of other income taken into account are

• Savings, Investments and Dividends
• State Pensions
• Occupational/Personal Pensions
• income from Property
• Trusts and Settlements
• Estates
• Foreign Income
• Notional Income
• Adult Dependant's Grant
• Miscellaneous Taxable Income

Mitchy260

He needs to declare his dividends, otherwise he'll have a fraud investigation at some point in the future and he will have to pay every penny back that he has received up until then.

Not worth the risk.

apples24

iTrader: (1)

yea well ill leave it up to him, if i start asking more questions then one day he gets caught he will start pointing fingers and i certainly dont want to be accused of being a grass.

lee

Fat Boy

Dividends are taxable too so he is in a world of pain if they cotton on , and they will eventually...

Mitchy260

Perhaps a warning or a link to the tax credits site would be the best way to go about it, or a link to this thread?

Surely you would rather your mate nip it in the bud now, than to wait a couple of years before being caught owing 10's of thousands of pounds and him losing his business? Criminal record? Bankruptcy??

If they have children the payments for TC can be quite substantial.

I'd warn him off now, print the leaflet out, link him to the website or this thread in an email. At least then you tried.

Rememeber and come back in a couple of years time to tell us when the shi* hits the fan

orbix

I thought the dividend split thing has more or less ended now after the changes imposed as a result of the Arctic systems court case.

MikeCardiff

iTrader: (2)

Definitely not right what hes doing. When you are self employed, either a sole trader, partnership or director as in his case, ANY income you have needs to be declared for the taxman - this would include wages, dividends, interest, other sources of income outside of your work ( i.e. rental income etc... )

There are various different things ways you can legitimately set things up to minimise your tax bill, but generally it is just moving liabilities from one place to another, and eventually you have to pay tax of some sort on them.

If he is just paying himself and his wife the minimum, and the only shareholders are him and his wife, he is leaving himself wide open for an investigation by the HMRC - the ones who tend to trigger investigations are either those claiming to earn next to nothing, or those earning huge amounts ( as both are more likely to be fiddling than someone in the middle ).