GB and Ni on dividends again
Discussion
I see the Treasury have issued a 'discussion paper' suggesting they are trying to 'narrow the gap between employed, self employed and company owners who pay themselves dividends'. I think that is policy maker speak for NI on dividends (if they can square the legal issues), with a fall back position of making all company owners pay NI, at least at self employed rate if not on dividends.
Clearly, like the motorist, we are seen as the govt. piggy bank.
I guess our MPs and Chambers of Commerce are likely to be consulted, so I intend to let mine know the implications of this.
Unlike the 'employed' we don't get holidays paid, sick leave, a pension and a guaranteed cheque at the end of the month and benefits when things go wrong. If the gap is narrowed any more we will need his £240 a week child care packages! (which we are probably also excluded from?)
Sorry if thuis sounds like ranting for no purpose, but I wonder which is more likely: NI on dividends or paying NI like the self employed? My experience of working with and for central Govt.(of all colours) is that they suggest one thing which you will die in a ditch to stop (NI on dividend) so you will accept the thing they actually want (more money by a new type of weekly NI contribution).
The point: Just how likely is NI on dividends and what can we all do to prepare for that?
Clearly, like the motorist, we are seen as the govt. piggy bank.
I guess our MPs and Chambers of Commerce are likely to be consulted, so I intend to let mine know the implications of this.
Unlike the 'employed' we don't get holidays paid, sick leave, a pension and a guaranteed cheque at the end of the month and benefits when things go wrong. If the gap is narrowed any more we will need his £240 a week child care packages! (which we are probably also excluded from?)
Sorry if thuis sounds like ranting for no purpose, but I wonder which is more likely: NI on dividends or paying NI like the self employed? My experience of working with and for central Govt.(of all colours) is that they suggest one thing which you will die in a ditch to stop (NI on dividend) so you will accept the thing they actually want (more money by a new type of weekly NI contribution).
The point: Just how likely is NI on dividends and what can we all do to prepare for that?
Going down the route of levying NI on dividends is fraught with legal and tax complications.
The National Insurance rules currently state that NI can only be paid out of earned income - salaries, wages, profits from Self Employment, share of profits from partnerships etc etc.
Dividends are legally NOT earned income - they are returns on investment, the investment being the shares bought and owned by the shareholder in the company.
The Inland Revenue will have to draw up legislation which specifically blocks the drawing of dividends in certain types of companies. For a start, they can't include PLCs in this legislation. There is no doubt that shares bnought in PLCs are definitely investments.
What they will try to do is single out the NI treatment of dividends in "close" companies - usually family owned or single proprietor companies. They already moved in that direction with the advent of IR35 for personal service companies. However, how do you define whether dividend payments from a close company are genuine share outs from a company of the company's profits or are payments to try and minimise tax and NI?
By bringing in charging of NI on dividend payouts - the basic premise of what constitutes limited companies and their legal basis would be saeriously undermined.
Isn't it funny that this topic surfaced exactly one year ago after Brown's 2003 Autumn Statement - only for us to find in his 2004 Budget that he wasn't, after all, going to levy NI on dividends.
>> Edited by Eric Mc on Thursday 9th December 11:31
The National Insurance rules currently state that NI can only be paid out of earned income - salaries, wages, profits from Self Employment, share of profits from partnerships etc etc.
Dividends are legally NOT earned income - they are returns on investment, the investment being the shares bought and owned by the shareholder in the company.
The Inland Revenue will have to draw up legislation which specifically blocks the drawing of dividends in certain types of companies. For a start, they can't include PLCs in this legislation. There is no doubt that shares bnought in PLCs are definitely investments.
What they will try to do is single out the NI treatment of dividends in "close" companies - usually family owned or single proprietor companies. They already moved in that direction with the advent of IR35 for personal service companies. However, how do you define whether dividend payments from a close company are genuine share outs from a company of the company's profits or are payments to try and minimise tax and NI?
By bringing in charging of NI on dividend payouts - the basic premise of what constitutes limited companies and their legal basis would be saeriously undermined.
Isn't it funny that this topic surfaced exactly one year ago after Brown's 2003 Autumn Statement - only for us to find in his 2004 Budget that he wasn't, after all, going to levy NI on dividends.
>> Edited by Eric Mc on Thursday 9th December 11:31
vixpy1 said:So sure are you, young Skywalker?
It won't happen.
Knowledge-based workers operating Personal Service Companies are a thorn in the side of the IR.
If we were permanent employees we'd be paying stacks of Income Tax and NI contributions and the IR are salivating at the thought of getting their hands on it.
They tried with IR35 and it wasn't as successful as they thought as they couldn't go far enough without stepping on the toes of "real" (sic) businesses who carry come political clout.
They will try again. Something will happen, even if it is not NI on dividends.
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