How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask bigduckontax Your Own Question

bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3609
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

Is it acceptable to pay a senior employee a dividend? The

Resolved Question:

Is it acceptable to pay a senior employee a dividend?
The employee concerned is heavily involved in the commercial management of the business, driving profits and brings with him a client bank.
The shares issues would be Income & voting B shares, with no right to equity and not be grater in value than the clients he is introducing.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Here is a quick summary of shares and classes from the Company Law Club: 'Most companies have only one class of shares, ordinary shares, but it is increasingly common for even very small private companies to have different share classes. This may be done for various reasons, such as to be able to vary the dividends paid to different shareholders, to create non-voting shares, shares for employees or family members, etc. A company can have what classes of shares it likes and can call any class of shares by whatever name it chooses.' So your proposal is perfectly acceptable, but the creation of the new class of shares will require shareholder approval in general meeting. I do hope that you find my reply of assistance.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3609
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Thank you KeithWould the saving in PAYE tax and Employee/Employer National insurance be an issue - could it be seen as tax avoidance despite the commercial intention between the company owner and employee
Customer: replied 1 year ago.
As a slightly variation with same commercially based employee, but with an intention to buy into the company.From a PAYE/Nic point of view, would it be acceptable for the employer and employee to agree that the employee will permanently sacrifice his salary and an equivalent amount be put to one side for the payment of dividend to the owner of the company, as part payment for equity in the company.If the owner and employee could not reach terms for the purchase of equity, would it be acceptable (from a PAYE/Nic point of view) for that employee (having worked in the company on a commercial basis) to receive those monies as a dividend. - (No need to consider share values - Just salary vs. Dividend)Thank you in advance of your help
Expert:  bigduckontax replied 1 year ago.
Not as it stands, many companies pay by means of dividends instead of salaries, but this has an the effect of increasing the company's profits for Corporation Tax (CT) as dividends do not count against CT in the computation. You have to balance one against the other from the company's point of view. There remains one further problem, dividends can only be declared from 'free' funds ie available from the companies resources without resort to not paying bills etc. Just a small point. Thank you for your support.

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.co.uk/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.co.uk/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    2333
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.co.uk/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.co.uk/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    270
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.co.uk/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions