Employment status

Mikerobot4

I am starting a small business. I am the only director and the majority shareholder (75%). The business has only just begun and in the first couple of months there may not be enough money to pay me a regular salary, which I intend to do once the profits are high enough. In the meantime, I will pay myself through dividends from any profits made after the other overheads are covered. My question is how I determine my employment status. Am I self employed? Should I register as self employed? I am to give myself a director's contract so technically I would be an employee. Additionally, would I have to register for self assessment? The HMRC website is very confusing on these issues and I can't work out what I am supposed to do. Any advice would be greatly appreciated.

WillowCat

You don't specifically say, but I assume you have incorporated a Ltd Company based on your terminology of being a director and majority shareholder.

If your company does not have the profit to pay you a salary, on what basis can you pay yourself a dividend? It is actually illegal to pay a dividend in excess of your profits. You can pay yourself a salary regardless of profit status, and if you don't have enough cash in the bank you can simply lend the company the money to do so. (so you don't actually receive any cash but your salary is a permitted expense of the company. As soon as the company does have the cash it repays the directors loan to you).

Yes as a director you need to register for self assessment, this is for your personal taxation and is entirely separate to your companies tax returns to HMRC and its accounts to companies house.

You would be considered employed.

If you're unsure of these things I strongly recommend you take the advice of an accountant.

[Deleted User]

Yes as a director you need to register for self assessment, this is for your personal taxation and is entirely separate to your companies tax returns to HMRC and its accounts to companies house.

There is NO requirement to register for self-assessment for a company director. This is a common belief that is simply not true.The HMRC website also indicates that this is the case - it is incorrect.

https://www.accountingweb.co.uk/any-answers/should-a-director-register-for-self-assessment

Therefore, if a director of a company has no further tax liability for a tax year AND no self assessment tax return has been issued by HMRC, then there is NO requirement for the director to notify chargeability OR file a tax return with HMRC for the year in question

fishybusiness

There is NO requirement to register for self-assessment for a company director. This is a common belief that is simply not true.The HMRC website also indicates that this is the case - it is incorrect.

Wouldn't it be the case here that if OP is thinking of taking dividends SA would be the correct way forward?

WillowCat

https://www.gov.uk/check-if-you-need-a-tax-return/y/director-of-a-company

[Deleted User]

WillowCat wrote: »

https://www.gov.uk/check-if-you-need-a-tax-return/y/director-of-a-company

I did say that it was incorrect! Try suggesting that directors require a tax return on the cutting tax board and see if you get out alive! :rotfl:

Try this thread - HMRC do not know tax law! (dori20 is a current HMRC employee and knows their stuff!)

https://forums.moneysavingexpert.com/discussion/5666734