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limited company
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# 1
john cliff
Old 01-05-2012, 11:07 PM
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Default limited company

Hi There, i am currently working self employed as a builder. I have been considering for a number of years trading as a limited company and opperating as the sole director. This does have pretty good tax benifits and does offer good pension prospects?

What i would like advice on is if i am the sole director, i would be the only person in control of the companies funds. I would be taking a regular weekly wage which would be significantly lower per year to what i am taking just now so this would decrease my annual earnings and therfore reduce my csa payments. Can the csa force me to take money from the company funds as i am the only director? and if so are they likley to do this?

PS i am just in the process of registering with the csa and not sure how they work. Do they ask for your last years tax return and do they do this eavry financial year?

thanks

JC
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# 2
kevin137
Old 02-05-2012, 12:02 AM
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It is my understanding that they can only tax you on earnings, however, dividends are deemed to be earnings as well, so if you failed to submit accounts that showed that, then the money would need to be reinvested or shown as sitting in bank accounts etc.

I may however be wrong, so check on it before taking as gospel.

The only other thing i am aware of is if the PWC applied for lifestyle inconsistent with means, so if you show earning very little, but she proved you where paying excessive payments on mortgage, new cars, 4 holidays a year etc, they could come after you in that way.

Clever accounting and playing by there rules is the best you can hope for.

But do remember, you have a moral as well as legal responsibility to support your child..!
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# 3
john cliff
Old 02-05-2012, 7:34 AM
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Thanks for the info, do you no if the can control or enforce higher payments if i were the only director in the limited company?
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# 4
clearingout
Old 02-05-2012, 7:53 AM
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technically, yes. If you are taking a lower wage, you need to live a lifestyle that is consistent with that wage. No good claiming you earn 100 a week and then taking out a 500k mortgage as you'll end up at a tribunal and a higher assessment will be imposed.

It is well known that the Laws around self employment and child maintenance don't quite fit. You can manipulate your accounts, legally, to reduce your child maintenance if you want to and most probably you will get away with it. If you have a good look at this forum, you will see there are many of us here who are struggling with just this issue and who's children are living a life on the breadline as a result. Unfortunately, there are way too many NRPs who are unable to separate their relationship with their ex from their children. As you will also see, for the majority, it eventually comes back to haunt them when their children grow up.

As a self employed director of a limited company you will have considerable wriggle room other NRPs don't have. Use it to your advantage to build a strong relationship with your children and one of mutual respect with your ex, not as weapon to beat your ex around the head with.
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# 5
john cliff
Old 02-05-2012, 8:27 AM
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Thanks again, my current situation is that i take only what i need from week to week and leave the balance in my buisness account. This is then all put into the pot by the accountant at the end of the tax year and factored into my self assesment. Trading as a limited company will benifit in many ways and will not be to indifferent to the way i am currently trading as i take a minimal wage and leave the rest. My child will benifit form this in years to come as well. I have and hopfully always will take only what i need from the buisness. There will be a good nest egg there for my child one day

I have no problem with providing for my child and am currently doing so privatly via a standing order. i have tried to talk to my ex to ask if we could make this permanent but this is not going to happen.

PS i am just wondering is there a cap on payments that can be made for one child? I thought there would be but having read some of these articles maybee not????
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# 6
HappyMJ
Old 02-05-2012, 8:54 AM
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The CSA payments will be reduced based on your wage. As a company director the optimal wage is 156 a week on which you pay no PAYE tax and pay a small amount of Class 1 national insurance contributions. The CSA figure will initially be based on this. A variation will then be applied for to take into account the dividends. You will need to estimate them at this stage and prove them once final figures are available at the end of the tax year. If you estimate zero you could end up with a underpayment.

There is a cap to only consider 2,000 of weekly net income.
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# 7
clearingout
Old 02-05-2012, 10:23 AM
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bearing in mind that if you were to earn more than 2k a week, your ex can go through the courts for maintenance (at that level, the CSA ceases to have jurisdiction).

John - you sound like you're trying to do your best and if your ex is determined to have the CSA involved and you have a reasonable relationship with her, I suggest you direct her to this site or to the wikivorce site and tell her to put in 'self employment' into the search facility in the child maintenance forums. She'll only read horror stories, believe me! It is far better to keep the CSA out of it whichever side of the fence you sit on. I personally would accept far less in maintenance than the CSA says my ex should pay (he doesn't!) if I could be sure of receiving it regularly and if it helped maintain some kind of equilibrium between the ex and I.

Children are expensive and it's worth remembering that. At the same time, don't get yourself in a situation where you're walked all over 'cos you're trying to do the right thing. There's a balance and it can be very difficult to find but good luck trying!
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# 8
RedSky
Old 02-05-2012, 2:03 PM
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http://forums.moneysavingexpert.com/...3&postcount=25
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# 9
john cliff
Old 02-05-2012, 5:35 PM
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Quote:
Originally Posted by HappyMJ View Post
The CSA payments will be reduced based on your wage. As a company director the optimal wage is 156 a week on which you pay no PAYE tax and pay a small amount of Class 1 national insurance contributions. The CSA figure will initially be based on this. A variation will then be applied for to take into account the dividends. You will need to estimate them at this stage and prove them once final figures are available at the end of the tax year. If you estimate zero you could end up with a underpayment.

There is a cap to only consider 2,000 of weekly net income.
thanks very much for all coments and info. I am wondering as i am only now thinking of going limited can my forthcomming payments be based on this or will they go with last years tax return?

also after reading the link that was posted it appears that they can make you pay more if you are the sole director in a limited company does this change if there are two directors?

thanks again
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# 10
clearingout
Old 02-05-2012, 5:54 PM
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I think it will very much depend on who the second director is. The sole directorship means you control everything and as such, the money is yours to do what you want with. A business partner takes away that sole control. However, if your business partner is your new girlfriend, brother, mum, cousin etc. (and remember that this is public information that your ex can access for 1) it becomes questionable. I am not sure what happens in these situations but I suspect you're opening yourself up again to the possibility of a tribunal and a panel judging that you're evading child maintenance and imposing a higher assessment. You may well struggle to get a straight answer - the CSA itself rarely gives the same answer twice!
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# 11
HappyMJ
Old 02-05-2012, 6:00 PM
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Quote:
Originally Posted by john cliff View Post
thanks very much for all coments and info. I am wondering as i am only now thinking of going limited can my forthcomming payments be based on this or will they go with last years tax return?

also after reading the link that was posted it appears that they can make you pay more if you are the sole director in a limited company does this change if there are two directors?

thanks again
Shouldn't make much difference. They may question it if you take on a partner as an employee on a wage of 156 a week and they hardly really do anything for the business. It's a valid tax minimisation strategy. They should actually be doing a reasonable amount of paperwork, promotions, making appointments etc...and not just there to be on the PAYE books to reduce the joint tax bill.
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# 12
john cliff
Old 02-05-2012, 7:37 PM
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One of the benifits of the limited company is the there are very good tax savings especialy if you pay into a private pension. This is a question that my accountant could probably answer but if i were paying large amounts each year into a pension i am guessing this could not be touched?

PS can my csa payments be based on estimates for my forthcomming year as it willl be my first year trading limited? or will they go back to my last tax return? these would be very differing outcomes.

thanks again
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# 13
john cliff
Old 03-05-2012, 7:19 AM
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Quote:
Originally Posted by john cliff View Post
One of the benifits of the limited company is the there are very good tax savings especialy if you pay into a private pension. This is a question that my accountant could probably answer but if i were paying large amounts each year into a pension i am guessing this could not be touched?

PS can my csa payments be based on estimates for my forthcomming year as it willl be my first year trading limited? or will they go back to my last tax return? these would be very differing outcomes.

thanks again
can anyone shed any light on the above questions???

thanks
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# 14
PreludeForTimeFeelers
Old 03-05-2012, 7:55 AM
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They'll not use your pension for assessment purposes, providing you can show you're making these payments.

As to your current income vs your last tax return, normally they would use the last tax return however in your case you would have to say the tax return wouldn't be representative of your income. Instead it's more likely that you'd have to give estimated earnings or your current profit/loss sheet. They would also ask for your dividends.
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