small limited business run from home

SteveMally

My limited company has been trading for 20 years. I am the Director and have no other employed staff. We provide online marina guides for yachtsmen and visitors to various harbours and marinas in the UK and Europe. Our revinue comes from businesses that advertise on our guides. Mainly restaurants, bars, shops, marine services etc.  We pay corporation tax, are VAT registered and so have collected VAT for twenty years. I take a small wage and take the rest from dividends. I have been offered 80% of my PAYE, which is much apreciated, obviously I am not getting any percentage of the money I take from didvidends. This is not my main concern though. My company needs around £20,000 per anum just to function, befor I take a wage or dividends. I have to visit all the areas where i produce the online guides to get the advertisers and the relevent information and take the photos etc. Obviously this has all stopped. Although I appreceiate the 80% of my PAYE this does absolutely nothing to help my company survive. Simply because my office is from home. It doesnt seem fair that companies similar to mine that have been trading for so long and contributing via paying corporation taxes, plus keeping a lot of other businesses busy with work they do for us and collecting VAT etc. to receive no help at all. There must be many more companies in the same situation. Is there a petition we can sign to make the government aware of the fact that we have been overlooked.
Thanks 
Steve
[URL removed by Forum Team]

ComicGeek

Most companies are losing income during the shutdown, my own company is no different to yours. While the government can help with some fixed costs, I can't see how the government can be expected to cover all lost income. 

Obviously you're not actually travelling at the moment, so your fixed costs for the current situation must be lower. We're all going to have to tighten our belts, reduce overheads wherever possible and live off savings for a while. Those companies with premises have much larger monthly overheads than those who work at home, seems fair to me that they get more assistance.

jayc197111

I disagree,I run my business from home also, I have 5 members of staff, my running costs are £2200pm before I start, I can reduce these by about £400, businesses that are paying for a premises, some will be only paying a couple of hundred pounds, lot of landlords reducing of freezing rent, yet they receive 10k, if I am unable to work,  my wages will be £525pm, yet self employed can claim up to £2500 and still work???? Why should they need £2500 pm if still working???
we were asked to hold fast and keep staff on, we did, this has cost us. They told us no business would lose out through no fault of their own.
It is nothing short of a scandal and I would say discrimination. 

This needs to be a legal action, maybe under Estoppel.

I will probably lose business, home and a lot more. Staff will lose their jobs. 
It is also a scandal, how media, CBI, FSB
and more, have not represented small LTD Company’s.
I pay tax on wages and corporations.
we are all in this together??????
we are all in this, but certainly not together! 

oldbikebloke

there are winners and losers in everything

for 20 years you have been paying significantly less personal tax than you would have done so had you been a full salary employee. That of course was a perfectly sane position to be in for tax planning purposes.

VAT is irrelevant since it would have been due anyway irrespective of your personal income status.  
Corp tax is higher due to you having a smaller salary, but the overall tax take is till lower, since corp tax is 19% and had you had a higher salary (so less CT payable after deducting the salary cost) that salary would have been taxed at what 20%, 40%, 45%?

morally therefore why should you now be put on the same footing in terms of "support" as one of those employees?

ComicGeek

oldbikebloke said:

there are winners and losers in everything

for 20 years you have been paying significantly less personal tax than you would have done so had you been a full salary employee. That of course was a perfectly sane position to be in for tax planning purposes.

VAT is irrelevant since it would have been due anyway irrespective of your personal income status.  
Corp tax is higher due to you having a smaller salary, but the overall tax take is till lower, since corp tax is 19% and had you had a higher salary (so less CT payable after deducting the salary cost) that salary would have been taxed at what 20%, 40%, 45%?

morally therefore why should you now be put on the same footing in terms of "support" as one of those employees?

Small business owners have absolutely followed the tax regulations and requirements. It is not a tax avoidance scheme, like the ones that some celebs have been caught doing, but a perfectly legal means of reducing tax amounts paid. On a money saving forum like this it is exactly the payment method recommended to follow - perhaps you would suggest that everyone who posts assistance in the cutting tax sub forum is immoral?  

Most small business owners are likely to pay themselves very little and only from what is left over, so really aren't the wealthy immoral tax dodgers they're being made out to be by some on this forum.  

Pennywise

oldbikebloke said:

morally therefore why should you now be put on the same footing in terms of "support" as one of those employees?

Because sole trader businesses ARE getting 80% of their prior years profits and are allowed to continue to work and earn revenue.
Company directors can only get 80% of their wages and aren't allowed to do any revenue earning work.
See the massive difference?
As for differing tax, you ignore the personal dividend tax at 7.5%, 32.5% or 38.1% on dividends, which actually makes the "tax" very similar.  It's NIC which is being saved by paying dividend instead of wages, but why would any sane person opt to pay more NIC (circa 25% of the extra wages) when the rules at the time conveyed no additional benefits by doing so - just like an employee doesn't get a bigger state pension when they get a pay rise and pay more NIC.  NIC is a very binary contribution - get a "credit" for state benefits and you are eligible - the benefits aren't income related - even those with low wages (or stay at home carers) get a "credit" without paying any NIC at all.  In previous years there was no benefit whatsoever in opting to take a higher wage and pay more NIC - why would anyone do that?  The wages v salary split isn't some kind of obscure tax avoidance - it's mainstream and has been ever since Gordon Brown changed the dividend rules back in the late 90s - in fact he encouraged the smallest businesses to be limited companies with his tax breaks in the early noughties which applied ONLY to small limited companies!

sheramber

If taking a small salary and the rest in dividends is not to their benefit why do they  do that?

ComicGeek

There is a benefit in doing it, just not to the scale that some people seem to think. Certainly not to the scale that should mean that they don't get the same financial support as self employed people.

It's picking the most tax efficient structure. It's not like 'cash in hand' jobs that avoid tax entirely, it's more like searching around for the best car insurance price and picking the most cost effective option - why wouldn't you do that, you should, as Martin Lewis and others constantly tell us. It's not immoral, illegal, deceptive or any other terms being banded around on forums at the moment.

I think it's more of an administrative nightmare on how to distinguish between dividend payments for small companies and those for large corporations etc - that's at least what my local MP is claiming.

Pennywise

sheramber said:

If taking a small salary and the rest in dividends is not to their benefit why do they  do that?

But why would anyone pay more for no benefit to themselves?

Lesleynauman

I've run my small business from an office in my home for 20 years.  I'm self employed and pay whatever tax my accountant tells me to pay every July and January  and have operated the business successfully  with no credit issues during that time but like a lot of people I have no income at the moment.  I'm not registered for business rates as such so apparently don't qualify for the business grant.  I've applied for an overdraft and been turned down also for a bank loan with the same result even with an impeccable credit record with a bank I've use for best part of those 20 years.  How can it be fair that a neighbour has just had a £10,000 grant arrive in their bank account without asking and will also qualify for the 80% self employed refund in June and can still continue to trade albeit on a smaller scale than usual.  If I'm missing the point here then I'd love to hear about it.

pleasedelete

sheramber said:

If taking a small salary and the rest in dividends is not to their benefit why do they  do that?

Uneven income especially in the early years. We only earn fees in 9 months of the year and the income varies significantly by month. We started low income high dividend and have adjusted to more monthly income over 10 years but 50% is still dividend. 1 bad July and we would lose 60% of annual profit for example. 
There used to be a tax benefit but that is very negligible now due to change say HMRC.