Problem has been sorted. He agreed to pay more money and we sorted it without CMS. Thanks
CMS will contact HMRC but it's an uphill struggle. I would discuss it with them when you open a case with them, and see what they suggest.
thanks you for response.
will he get away with it? as I'm struggling to manage all my payments right now and really need the child maintenance money.
It's difficult for the CMS to prove. It's a shame for the children if it means they will miss out.
So is there anything that can be done do resolve this issue?
You can search for him as a company director on Companies House to know/prove he has a Ltd Company.
Plus if he is paying himself tax efficiently (8k or 11k a year) then he will need to withdraw dividends from the company to get the money out. Dividends are still income and have to be declared on HMRC Self Assessment which he will be doing.
The figure that CMS get from HMRC is total income - not specifically wages from one specific job.
Long term it makes no difference once he takes dividends and declares them CMS will see those earnings in the next yearly review.
The problem is that if done to specifically avoid CMS then you can start Ltd company and pay yourself on specific dates and submit tax returns at the last possible minute to extend the period of hidden income to about 18 months.
CMS are supposed to be getting better at reviewing this data and it has been part of the parliamentary reports, also the Government wants to bring in quarterly / monthly reporting for all aspects of business - something that would help solve these self employed and Ltd company issues a lot for the CMS.
To DavidChannon,
Are dividends taxable? If so, at what amount paid to a director do they become so?
Are there varying thresholds of liability for tax according to the amount of dividend paid?
Even If I can prove he is director od limited How does that Help me?
His income still will be at low level as thats what he has done.
What If he does't pay himself any dividends?
To DavidChannon,
Are dividends taxable? If so, at what amount paid to a director do they become so?
Are there varying thresholds of liability for tax according to the amount of dividend paid?
ALL income is taxable.
- PAYE income
- Cash in hand
- Rental income
- Dividends from any type of share
- Interest on bank accounts
- Capital gains on sales of certain assets
The first £5000 of ALL dividends received is tax free ( thats from ALL shares held - not per company shares are held in ).
After the first £5k of dividends they are then taxed as per normal income. e.g.
Personal Allowance Up to £11,500 0%
Basic rate £11,501 to £45,000 20%
Higher rate £45,001 to £150,000 40%
Additional rate over £150,000 45%
An individuals tax is calculated upon those levels after everything has been added together - those tax rates are NOT per job.
Apart from the initial first£5k of dividends being tax free there are no other variations.
There are in theory other more complex things people can do - but that applies to very high net worth individuals in which case solicitors and accountants sort this stuff out.
Even If I can prove he is director od limited How does that Help me?
His income still will be at low level as thats what he has done.
What If he does't pay himself any dividends?
Well proving he is a director of a company because it is publically recorded you can tell CMS that and they can investigate further.
Do not confuse "income" with "wages". A pay or wage slip is a specific payment on a regular basis that is a specific amount. Income covers everything a person receives as money - from any source. ( See previous post in thread ).
He HAS to submit tax returns each year.
If he IS a director of a company he HAS to declare that on his tax return even if it is for £0 pay in wages and/or dividends.
You can get money from a company in 3 ways:
1) wages
2) dividends
3) loans
4) expenses
All 4 are specific legally defined things that have rules - and have to be declared in some way.
You can try and "cheat" the system and withdraw money from the business NOT as dividends - but (1) it will show up eventually in tax submissions and (2) its quite simply fraud and tax avoidance - and HMRC take it very seriously.
If he does NOT pay himself any dividends - then he is living from less money and leaving money in his company ( which is all legal ). However at some point he will HAVE to withdraw that money from the company if he wants to use it legally.
e.g. he could live of his basic wage for x years and take it in dividends in future years - this may be applicable if he thinks he can do this until the child in question is to old to cause a CMS payment to be awarded.
People do try various things - and succeed with some of them - however fraud is fraud - and fraud of HMRC is a [censored] stupid idea because in a lot of cases they have more powers than the police to do things ( shut companies down, seize property etc ).
From his perspective whilst avoiding tax/cms can seem attractive - it actually takes quite a lot of effort and stress and money if a dodgy accountant is involved. Unless there is "spite" involved then avoidance is quite often not worth it within the big picture.
The more information that the CMS has the better they can deal with it - they may not be able to deal with it perfectly or get all of the money you should be awarded, but the more information they have they more than can potentially do.
If the CMS are not told ( and thus HMRC ) then at least there is a chance of something being done.
Thanks for all info. Hope I would be able to do something with it.
@DavidChannon, just want to clarify, the first £5000 of dividends are tax free, but presumably taxable income, in the same way that if you earn less than £11k, it's tax free (because of personal allowance) but is still taxable, ie it still counts towards the tax calculation, even if no tax is actually due. Is that correct, and if so, even if he takes only £5k in dividend and minimum wage (which he is still legally obliged to pay himself), it's going to count towards the CMS calculation - or have I got that wrong?