Cut in pay

rorysdad

Hi

I am General Manager for a company. I have been in that position for three years. I report to the MD who is the owner of the company. I run the business on a daily basis as the MD is semi-retired and comes to work one day a week.

He has now said to me that as the company is not making the amount of money that he thinks it should be that he may 'have to look at different ways of paying people' - and stated that would include me.

I take it from this that he will be wanting to lower my wages. I have a written signed contract of employment. I am paid weekly - on a daily rather than hourly rate.

Last year, when I re-negotiated terms with the MD he agreed to give me a 5% share in the company - and to pay me a weekly 'B' class share dividend - I get this fixed 'dividend' every week - irrrespective of level of sales etc. This dividend is (I am told) not subject to income tax - it is paid weekly to me by BACS and itemised in the books as 'dividend' - the balance of my 'wages' is taxable and appears on my P60.

I have not received any documents confirming my 5% share which is supposed to mean that if the MD sells the company I as a a 5% B class shareholder will get 5% of the proceeds of sale.

If the MD now tells me that my wages/dividend are to be reduced what if anything can I do - I do not want to accept any reduction in the amount I am paid each week.

Thanks.

Rory's Dad

somethingcorporate

I cannot help with your question but I'd certainly seek advice on your theory that you do not need to pay income tax on your dividend income.

Who told you this?

getmore4less

I would chase up the share holding since that dividend needs to be delcared and is potentialy taxable, if you can't satisfy HMC that you are due it as a dividend there could be issues if HMRC don't agree.

Check that type "B" actualy own anything or just get dividend.

If your 5% is giving you £X the other share holders should be getting 19 times that between them.

More importantly what is the situation with the company and what are the goals and objectives of the owner, what are the problems and future.

Your position sounds like you should have a good handle on the business.

so can you stay and fix it or is it time to look at moving on

Short term loss for bigger future/share(if it is realy worth something)

How critical are you to the business

Negotiate what cuts are needed and where they come from

donquine

somethingcorporate wrote: »

I cannot help with your question but I'd certainly seek advice on your theory that you do not need to pay income tax on your dividend income.

Who told you this?

Actually, depends on how much the OP is earning.

Dividends come with a 10% notional tax credit, so if the OP is a basic rate taxpayer and only taxed at 10% on his dividend income, he essentially pays no income tax.

hcb42

I think you will have to wait and see what he offers.

Ultimately, if he makes a change to your Ts and Cs and you dont accept it - it might lead to a parting of the ways - i.e. he could restructure in some way and make you redundant for example. So once you know the actual deal it would be more appropriate to get advice then.