I work in this manner too - if your friend's company can claim, then presumably all other companies employing people could too - I haven't seen this happening, so presume it's not practical or practicable.
As an employee having lost a day's wages - if he/she is anything like most IT contractors, then the actual salary for that day will be quite small, possible less than the single person's allowance, pro rata for a day, i.e. £10-20. Most contractors have tiny salaries & big dividends. The dividend is usually decided at financial year end, so this makes any possible claim even more tenuous & difficult prove loss by.
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I think Woodbines has it right here. The downside of having an artificially low salary.
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The employee bit is irrelevant, and that wasn't the question anyway.
I don't see why it shouldn't be possible for the ltd co to claim - I would imagine most companies wouldn't do this as a) they couldn't be bothered, b) it's difficult to attach a daily value to most employees, unless they're in a job as the OP is where their hours are billable.
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I would have thought Phil Dews is right when he says:
>> I would suggest the company cannot claim. The incident involved your friend and the other driver so the company is not party to the accident. I am presuming that the M3 is actually owned and insured by your friend so there is no contractual involvement by the company.>>
The point is where does liability stop?
Flunky's friend has a rear end shunt, he can't fullfill a contract a loses out though the company he is contracted to also loses out because they cannot fulfil a comitment to their customer so they claim, their customer loses out because their supply chain IT system is not up in time so they claim, in turn their customer does not receive their automotive components in time due to the IT problems at the supplier so they claim, their customer does not get there car fixed in time because the components do not arrive so they claim, they cannot get to work and accordingly their employer cannot fulfil a comitment to their customer so they claim ..............................
Surely not.
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The employee bit is irrelevant, and that wasn't the question anyway.
No. Even if that wasn't the question, the question or suppostition on which it was based was flawed.
The employee 'bit' is the only relevant part. The employer has no interest or relationship in/with the 3rd party, i.e. the person who caused or admitted liability for the accident. The employee, however, has, with both employer & 3rd party. The employer one assumes could, if it wanted seek compensation from the employee, since the employee has the contractual obligation to provide service to the employer & 'missed' a day's service for which the employer cannot bill for & suffered loss.
Following on logically from the above, the employee could be pursued for recompense by the employer (although you couldn't imagine any reasonable jurisprudence would support it) for the lost time and consequent financial loss to company. You could then reasonably assume, the employee might seek compensation for this from the third party.
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Your friend is probably paying himself minimum wage. That's probably what he can claim at best from the other insurance company - loss of wages. Other contractors and the project is kind of irrelevant too. If the company wanted to claim lost income it would probably have to claim against your friend - i.e. himself/
If we all tried claiming against someone for loss of dividend (which is paid if there's a profit and other factors will affect that) then this country would be in trouble.
If he "earns" £500 per day but his company charges him out and he takes most as a divident then:
- he's pretty dumb then. If we wants max income then dividends is not the "loophole" to use. He could get majority tax free you know.
- will he miss £500 for the hastle?
And if he missed a days work through illness or family problems who does he sue then?
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And if he missed a days work through illness or family problems who does he sue then?
Nobody, becuase its his personal issue.
Some numpty driving into him becuase they were too busy chatting on the phone should not be.
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- he's pretty dumb then. If we wants max income then dividends is not the "loophole" to use. He could get majority tax free you know.
I know this isn't motoring related [sorry] - out of interest what is the most tax efficient 'loophole' to use? I only ask as this has recently come up as a serious topic of discussion at my work. There are 3 directors [of which I am one] and we are looking at paying ourselves a very low basic wage and then taking the rest as a dividend each month. From what I have been told dividends are taxed at only 10%.
If there are other [better] 'loopholes' it would be interesting to know them.
By all means take this conversation 'offline' by e-mailing me at martin.jaggard [at] blueyonder . co. uk
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You have an accountant? If not you need one. If it looks like wages, it appears monthly like wages, then it may be wages! Dividends from shares appear twice a year IIRC:)
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Ltd Cos can declare dividends at any frequency chosen by the directors/shareholders, Nortones. It makes the accountant's life harder, but it's not impossible to declare a dividend 12 x a year, so long as its trading is predictable and its customers don't go bust owing large amounts, or the co. simply loans the directors a monthly amount which is repaid on declaration/payment of the dividend.
Cats, skin, many ways ....
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Dividends from shares appear twice a year
Quite right, just as 'interim' & 'final' do on consolidated tax info on your general shareholdings (if you have shares of course)
The acct. of the querying poster should provide all the compliance info he needs. Generally a quorum of directors (and company secretary) approve dividend payments & a 'note' is signed and lodged to that effect. The days when small company directors could just draw income, willy-nilly, are pretty much over. On the 'loophole' front - although it may appear like a freebie, many small companies' balance sheets & asymetric turnover profiles (or feast & famine) make the paying of a 'regular' income probelematical. You simply don't know till year end how it panned out, so a conservative salary & varying dividend stops overexuberance.
Sorry Mods, getting a bit non-motoring, so I'll stop.
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There are 3 directors [of which I am one] and we are looking at paying ourselves a very low basic wage and then taking the rest as a dividend each month. From what I have been told dividends are taxed at only 10%.
That's not the case at all. Suggest either several hours reading about tax, or appointing an accountant.
Basically you pay corporation tax on the dividend. This is (will soon be) 22% for companies up to at least £300k, tapering up to 30% at £1.5m If you pay a salary you don't pay CT on that amount.
Income tax is then 20% basic rate/40% higher rate, but you also pay NI of 23.8% (ouch!) up to about £40k, then 13.8% above that.
The purpose of the dividend payment is to avoid this NI.
The 10% is a nominal 'credit', not a tax. So if you are paid £900 dividend (which is out of post-tax profits), then you are deemed to have earned £1000. This is basic-rate tax paid, no further tax is payable: if your income goes above £40k you pay a further 25% (but you'd also pay that anyway if you paid a salary). You can make your spouse a shareholder and pay her the same way, but this is only worthwhile if she has no income.
If there are other [better] 'loopholes' it would be interesting to know them. By all means take this conversation 'offline' by e-mailing me at martin.jaggard [at] blueyonder . co. uk
Best speak to an accountant.
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If the company wanted to claim lost income it would probably have to claim against your friend - i.e. himself/
Hmm, if a person prevents a company's staff getting into work, say he seized a worker and chained him to the railings outside his office, and the company can easily show it has lost £500 as a result (because that worker is charged out at daily rate), it would surely be able to claim against the person.
If he "earns" £500 per day but his company charges him out and he takes most as a divident then: - he's pretty dumb then. If we wants max income then dividends is not the "loophole" to use. He could get majority tax free you know.
You can get over 80% net with dividends if your spouse does not have any other income on £100k gross.
This is considerably better than NOT paying dividends.
Not sure how much you are looking at, and what your scheme is, but I haven't seen anything that costs (either tax or 'admin fees') less than about 15%, and most schemes increase risk of HMRC investigations.
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It's not my scheme since I am full-time employed by an IT company.
But I do know of contractors that take advantage though and get the majority of their income each month without paying tax or NI.... and I think its wrong. They live in this country and benefit from the services provided via the tax system. Maybe not the best but not the worst. But when someone earning over £100k pays very little tax then something is wrong. But I am told some MPs use the same scheme and so it might not get closed any time soon.
So I won't say how they do this as contractors (but they do not work for their own company... that is no longer deemed the best way for them to avoid tax).
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>>So I won't say how they do this as contractors
Oh go on...
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Sounds like either 'Island handshake' or companies that are caught by the new 'provider rules'. Of course they could just be fraudsters!
Despite what everyone says down the pub, it is really difficult for those earning £100,000 a year to avoid paying any UK tax any earnings arising from work in the UK.
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"Of course they could just be fraudsters!"
They are within the law but I think they are fraudsters! They will use the services paid for by the tax they avoid all the time. Maybe if someone earning that much and doesn't pay tax they pay for the service at proper price when used including roads.
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The point is where does liability stop?
Many insurance policies specifically exclude consequential loss for exactly the reason that it could go on for ever, but that doesn't stop a claim being made against the responsible person directly. Consequential loss is a well established principle - it stops where you can no longer prove a link.
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"Consequential loss is a well established principle - it stops where you can no longer prove a link. "
BP, thanks for that very clear explanation, I have always been confused by the term.
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Hmm, if a person prevents a company's staff getting into work, say he seized a worker and chained him to the railings outside his office, and the company can easily show it has lost £500 as a result (because that worker is charged out at daily rate), it would surely be able to claim against the person
Yeah - but that didn't happen did it? Someone simply had a bump, and for his own reasons & priorities did not attend work - he/she wasn't held against their will. Using your general priciple, if I catch a cold from someone, I can sue them for (potential) loss of earnings, if origin is proved - I think the consequential loss principle is veering off into the butterfly effect here.
I don't think (and I stand to be corrected here) you can sue on someone else's 'behalf', as would seem to be the case in your example, either.
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