Following on from yesterday’s update, Westminster was quiet again today on the business front, so there are no additional government updates today. Hopefully, by now, you are well on your way with your HR plan, funding solutions and other cash flow improvement measures. As always we are on hand and ready to assist you, so please contact us to discuss any of the above.
Director pay review
Now that we have reached the last payday of the tax year, this is the best time to review any director/shareholder remuneration, not only for the few months ahead but also for the rest of the year.
The default position for most owner-managers is to pay a small basic salary and then draw the rest of their remuneration as dividends from the company. Although that has significant tax advantages, there may now be other factors to consider, particularly if you are expecting your business to have profitability issues in the foreseeable future. While increases in salary will not help in relation to the job retention scheme payments, it may be the safest course of action for some owners to protect their position if they believe the company’s medium to long term profitability is likely to be reduced.
Each situation is different, and it is important that all aspects are considered when deciding on the company’s policies going forward, so please contact us now to discuss your position.
Director pay and how it interacts with R&D claims
For many SMEs the main part of their R&D claim can be the costs of the directors, as typically the innovation is usually driven by the entrepreneurs at the top of the organisation. Dividends do not count towards qualifying costs for R&D claims, but salaries do, so a swap from dividends to salary can significantly enhance the company’s R&D claim. This often means the business saves more tax from the R&D claim than the extra tax and salary costs.
Yesterday we offered all clients a free R&D consultation, details can be found here. We understand that you have other priorities right now, but it is important that we assess whether you qualify for R&D before advising you on how best to pay yourself moving forward.
Contact us now to discuss your directors’ pay moving forward.
Last week saw a flurry of Government updates and to make sure you were kept in the loop we sent daily emails to ensure you were informed and understood the practical implications of each measure. We will continue to update you as things develop, but the Government announcements appear to be slowing down now; nonetheless, we will still be in regular contact via email albeit it might not be every evening. Rest assured we are following the announcements closely and will be in touch again if anything changes or should we believe it to be useful for you to consider.
If you have any questions or concerns, please don’t hesitate to call us on 0330 088 7111.