Income falling by £70k - how do I claim tax credits?

dmg24

meester wrote: »

That's true.

But my point is if I don't pay myself any dividends, there's nothing to declare on that box.

So you're trying to play the system?

Scarlett1

meester I dont understand why you dont want to pay yourself the 70k and deny yourself a cosy lifestyle just to get 8k off the government, it dont make sense unless you are thinking of paying it to yourself at a later date ?

bestpud

Well, if that is allowed then the system is in a much bigger mess than I thought! :mad:

I don't understand why you are doing it either? Unless you are going to gain more in the long run?

pennypuppy

Maybe his company has been hit by the recession,maybe his accountant ran off with everything, maybe everything has been frozen due to litigation. Whatever the case if he has just had a small baby I am sure its not the ideal time for him to have this happen. Give the guy a break there are many perfectly valid reasons for something like this happening.
All too often when someone who comes on this board has previously enjoyed an affluent life people jump down their throats by saying "well what did you do with the £x'000000 ." Jeez it just sounds like jealousy.
As for avoiding tax - if it's legal can we really blame the man?
From the people I've known people tend to live according to their means (in my case admittedly beyond) regardless of income. Daft I know but this board has helped people awaken from this 'condition'.

Scarlett1

pennypuppy wrote: »

Maybe his company has been hit by the recession,maybe his accountant ran off with everything, maybe everything has been frozen due to litigation. Whatever the case if he has just had a small baby I am sure its not the ideal time for him to have this happen. Give the guy a break there are many perfectly valid reasons for something like this happening.
All too often when someone who comes on this board has previously enjoyed an affluent life people jump down their throats by saying "well what did you do with the £x'000000 ." Jeez it just sounds like jealousy.
As for avoiding tax - if it's legal can we really blame the man?
From the people I've known people tend to live according to their means (in my case admittedly beyond) regardless of income. Daft I know but this board has helped people awaken from this 'condition'.

maybe you should read the op again as he is saying he isnt going to pay himself any dividents, not that he is in trouble with his business, he has also asked about depriviation of capital which mean hiding money with a view of claiming a benefit, and yes we can blame him as fraud is fraud.

bestpud

pennypuppy wrote: »

Maybe his company has been hit by the recession,maybe his accountant ran off with everything, maybe everything has been frozen due to litigation. Whatever the case if he has just had a small baby I am sure its not the ideal time for him to have this happen. Give the guy a break there are many perfectly valid reasons for something like this happening.
All too often when someone who comes on this board has previously enjoyed an affluent life people jump down their throats by saying "well what did you do with the £x'000000 ." Jeez it just sounds like jealousy.
As for avoiding tax - if it's legal can we really blame the man?
From the people I've known people tend to live according to their means (in my case admittedly beyond) regardless of income. Daft I know but this board has helped people awaken from this 'condition'.

I think most people would point out that there was a reason - even if they didn't want to say what it was.

This site is not about helping people milk [defraud ] the system so the comments and questions are reasonable imo.

Avoiding tax is different (many would argue) to claiming state welfare (designed for people with low incomes) just for the hell of it.

pennypuppy

Scarlett1 wrote: »

maybe you should read the op again as he is saying he isnt going to pay himself any dividents, not that he is in trouble with his business, he has also asked about depriviation of capital which mean hiding money with a view of claiming a benefit, and yes we can blame him as fraud is fraud.

I do not know much about tax affairs but I do think people cannot explain everything about their finances on a forum. Sometimes a shortened version can be misleading. I wouldn't condemn someone as a fraud without having full knowledge and understanding of his/her affairs.

pennypuppy

bestpud wrote: »

I think most people would point out that there was a reason - even if they didn't want to say what it was.

This site is not about helping people milk [defraud ] the system so the comments and questions are reasonable imo.

Avoiding tax is different (many would argue) to claiming state welfare (designed for people with low incomes) just for the hell of it.

I think tax avoidance is done by two main kinds of people. Those who have worked really hard all their lives and paid tax and don't want to loose most of it to a tax man on their death bed and those like many politicians financial backers who pay £10 in tax even though they earn £50m by living in Monte Carlo for so many days a year.

As for the welfare state, it has been creamed for years by certain people who deserve nothing but a kick up the backside. The sad thing is that the people who really do deserve help from the state often do not get it because the system has been so abused (eg people using disability cars to taxi).

I fervently believe in the NHS and a decent standard of education for all, that takes money and taxes. I would not support anyone trying to defraud it.

I just don't think people should be so judgmental.

meester

Scarlett1 wrote: »

maybe you should read the op again as he is saying he isnt going to pay himself any dividends

There's nothing illegal about that. If a company doesn't want to pay dividends it doesn't have to. A company is a distinct legal entity from an individual. Sainsburys is a different entity from Lord Sainsbury (who might own a part of the company). Sainsburys decisions on dividends are up to Sainsburys.

not that he is in trouble with his business, he has also asked about depriviation of capital which mean hiding money with a view of claiming a benefit, and yes we can blame him as fraud is fraud.

Not deprivation of capital, deprivation of income. In the tax credit legislation it says:

"Claimants depriving themselves of income in order to secure entitlement
15. If a claimant has deprived himself of income for the purpose of securing entitlement to, or increasing the amount of, a tax credit, he is treated as having that income."

http://www.opsi.gov.uk/si/si2002/20022006.htm

Now I don't know, because I am not an expert, what 'deprived himself of income' means. Because I can't see how you can be treated as having THAT income, when the dividend payout from a limited company is totally variable, so it's impossible to determine what THAT income would be. If you earn £30k a year, but work for free and paid the £30k income to a family member, it would be fairly obvious what THAT income means. But in my case I have no idea, hence I come in search of advice.

I don't know why anybody is talking about fraud, I am ASKING what the rules are. I have no intention of committing fraud. I do however want to minimise tax. My company tax bill is going up by about £2k due to increases in corporation tax, and my wife is no longer allowed to receive dividends, an effective £7.5k tax increase, so my circumstances have changed, and I would like to evaluate all my options.I am not hiding anything either, I am running my company in the best way that I can.

You might see it as immoral that I can claim benefits, when I have so much money in the bank, but that was the government's choice when it opted to not have a capital test for receipt of tax credits. The morality of it is not really relevant to this board, providing it is LEGAL.

meester

Scarlett1 wrote: »

meester I dont understand why you dont want to pay yourself the 70k and deny yourself a cosy lifestyle just to get 8k off the government, it dont make sense unless you are thinking of paying it to yourself at a later date ?

Yes,that's the plan. Defer the dividends for now, and retire to Bali in a few years and pay out the money then when I would no longer be a tax-payer, and no longer entitled to benefits. In the mean time it would be invested within the company, growing for the future. Or the other option is to close down the company at some point, and the money then comes out as a capital gain, which is not income.

And my lifestyle will be plenty cosy, living off my savings of £100k+.