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John Lilburne

The author is incorrect that Company Directors can pay themselves dividends and thus avoid any tax. Dividends are taxed at up to 32.5%.

The reason why Company Directors choose to pay themselves a basic salary and pay the rest in dividends is to avoid National Insurance, which is an entirely different matter. N.I. is supposed to pay for unemployment, sickness and pension benefits. Unemployment and sickness benefits are not available to company directors as, if their company is in receipt of no income, they are not deemed unemployed, if they fall sick the company is responsible for sickness payment, and if they wound up their companies then they would be deemed to have volountarily ceased employment.

The author mentions IR35 as an attempt by the Treasury to get Company Directors, who have only 1 end-client, to pay their fair contribution. IR35 does not do this. If a company director were truly a 'disguised employee' then he should be taxed as an employee would be and pay N.I. as an employee would be. That could be considered moral. IR35, on the other hand demands that the 'disguised employee' also pay the employer N.I. of his 'disguised employer'.

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