Would they not just get this right? PAYE vs LTD Co.
Discussion
doogz said:
Eric, other than a few cases which have been publicised in the media, the Dragonfly case is the only one i'm actually aware of, do HMRC bother investigating people over IR35?
I've never heard of anyone else being investigated.
There are quite a few more. After all, the legislation has been around 13 years. The broadstream media does not cover such matters diligently.I've never heard of anyone else being investigated.
http://www.tarpon-uk.com/umbrella-company/ir35/cou...
Not being able to use your own computer means you fail the "use your own tools" test - shich is one of the key self employment designators. However, in the IT industry this is a not unusual occurence and HMRC will not fail you on that alone.
Lack of ability to substitute or hire your own people to work on your own company's behalf is definitely a major problem. The mark of a business is its ability to control and determine its own affairs to a large extent. If your business is prohibted from doing a very businesslike activity i.e. hiring its own staff, HMRC will look very carefully at the arrangementr.
Lack of ability to substitute or hire your own people to work on your own company's behalf is definitely a major problem. The mark of a business is its ability to control and determine its own affairs to a large extent. If your business is prohibted from doing a very businesslike activity i.e. hiring its own staff, HMRC will look very carefully at the arrangementr.
STURBO said:
The answer is a flat rate tax.
It should be irrelevant where that money comes from. Pension / Employment / Dividends / Interest / Gifts / Capital Gain / Inheritance etc.
Everyone is on the same tax code.
Scrap NI. Scrap Tax credits.
Dividends could have a tax credit equal to the rate of corporation tax to avoid double taxation.
Say tax free allowance of 10k, next 20k at 35%, the rest at 45%. Or whatever it needs to be to be revenue neutral to the current scheme.
Then you pay the same tax regardless of PAYE / Dividend mix.
When we stop spending money on pointless things and balance the books then the rates can come down.
Oh, and we can then get rid of an army of civil servants / tax advisers / accountants etc who all benefit from the impossible to comprehend system we have and who add no real value to our economy.
But of course that won't happen as it's clearly a mad policy.
Sorry but complete nonsense.It should be irrelevant where that money comes from. Pension / Employment / Dividends / Interest / Gifts / Capital Gain / Inheritance etc.
Everyone is on the same tax code.
Scrap NI. Scrap Tax credits.
Dividends could have a tax credit equal to the rate of corporation tax to avoid double taxation.
Say tax free allowance of 10k, next 20k at 35%, the rest at 45%. Or whatever it needs to be to be revenue neutral to the current scheme.
Then you pay the same tax regardless of PAYE / Dividend mix.
When we stop spending money on pointless things and balance the books then the rates can come down.
Oh, and we can then get rid of an army of civil servants / tax advisers / accountants etc who all benefit from the impossible to comprehend system we have and who add no real value to our economy.
But of course that won't happen as it's clearly a mad policy.
Bring in flat rate tax and I would end up going back to permanent employment and the gov would get less income. Fact.
I don't know why corporation tax is 20% but I welcome it. People that are working in permanent employment do so (in some instances) because it is the safe option. People like me work on the basis that I could be out of work in 7 days time. I work on the basis that I have no holiday, sick, pension, benefits or redundancy. Put in perspective I am glad there isn't flat rate taxation because it would stop people like me from venturing out and starting up a small business.
Even with 20% tax I still pay more than I would if I had an equivalent permanent position. As a Ltd company contractor I pay the following:
PAYE
NI
Employers NI
Corporation tax
Higher rate tax
VAT
As my contracted rate is more than double what my market value is as a permanent employee then I pay substantially more than I would otherwise. This is the reality for almost all contractors but people like you don't see this and think we should pay even more to the gov. The trouble is most 'ignorant' folk just see the bottom line figure i.e. 20% and start b
hing because it's lower than the PAYE tax rate.As ever, s
te, uninformed, biased journalism goes to fuel negative thinking. Nothing new there then 
Eric Mc said:
Not being able to use your own computer means you fail the "use your own tools" test - shich is one of the key self employment designators. However, in the IT industry this is a not unusual occurence and HMRC will not fail you on that alone.
Lack of ability to substitute or hire your own people to work on your own company's behalf is definitely a major problem. The mark of a business is its ability to control and determine its own affairs to a large extent. If your business is prohibted from doing a very businesslike activity i.e. hiring its own staff, HMRC will look very carefully at the arrangementr.
my skills, knowledge and experience are my tools, which luckilly i have with me at all times.Lack of ability to substitute or hire your own people to work on your own company's behalf is definitely a major problem. The mark of a business is its ability to control and determine its own affairs to a large extent. If your business is prohibted from doing a very businesslike activity i.e. hiring its own staff, HMRC will look very carefully at the arrangementr.
With regards the substitution clause, it is vexatious in some regard as even your local plumber may find it hard to get someone in to finish his job to the customers satisfaction at the drop of a hat.
Bottom line is, i consider myself to be self employed contract consultant, client does too, recruitment agency does too, contract is worded in that manner, working practises reflect my autonomy to a reasonable degree. The revenue is going to have an uphill battle imposing their opinion onto this from the outside and it's a f
king cheek to assume they can.Contractors can join pcg for 140 a year, they've never lost a case
STURBO said:
The answer is a flat rate tax.
It should be irrelevant where that money comes from. Pension / Employment / Dividends / Interest / Gifts / Capital Gain / Inheritance etc.
Everyone is on the same tax code.
Scrap NI. Scrap Tax credits.
Dividends could have a tax credit equal to the rate of corporation tax to avoid double taxation.
Say tax free allowance of 10k, next 20k at 35%, the rest at 45%. Or whatever it needs to be to be revenue neutral to the current scheme.
My bold. It should be irrelevant where that money comes from. Pension / Employment / Dividends / Interest / Gifts / Capital Gain / Inheritance etc.
Everyone is on the same tax code.
Scrap NI. Scrap Tax credits.
Dividends could have a tax credit equal to the rate of corporation tax to avoid double taxation.
Say tax free allowance of 10k, next 20k at 35%, the rest at 45%. Or whatever it needs to be to be revenue neutral to the current scheme.
They came very close to introducing flat tax in Australia and realised at a very late stage that "whatever it needs to be to be revenue neutral to the current scheme" meant the vast majority of people would be worse off and high earners would be hugely better off. Not exactly a vote winner.
As someone mentioned earlier, a big proportion of tax is paid by a tiny number of people - drop their tax and it's a lot for everyone else to make up.
The other thing is that countries that have flat income tax still have high rates of NI. In some cases employers NI is very high.
Edited by Deva Link on Wednesday 14th March 11:21
Fatman2 said:
STURBO said:
The answer is a flat rate tax.
It should be irrelevant where that money comes from. Pension / Employment / Dividends / Interest / Gifts / Capital Gain / Inheritance etc.
Everyone is on the same tax code.
Scrap NI. Scrap Tax credits.
Dividends could have a tax credit equal to the rate of corporation tax to avoid double taxation.
Say tax free allowance of 10k, next 20k at 35%, the rest at 45%. Or whatever it needs to be to be revenue neutral to the current scheme.
Then you pay the same tax regardless of PAYE / Dividend mix.
When we stop spending money on pointless things and balance the books then the rates can come down.
Oh, and we can then get rid of an army of civil servants / tax advisers / accountants etc who all benefit from the impossible to comprehend system we have and who add no real value to our economy.
But of course that won't happen as it's clearly a mad policy.
Sorry but complete nonsense.It should be irrelevant where that money comes from. Pension / Employment / Dividends / Interest / Gifts / Capital Gain / Inheritance etc.
Everyone is on the same tax code.
Scrap NI. Scrap Tax credits.
Dividends could have a tax credit equal to the rate of corporation tax to avoid double taxation.
Say tax free allowance of 10k, next 20k at 35%, the rest at 45%. Or whatever it needs to be to be revenue neutral to the current scheme.
Then you pay the same tax regardless of PAYE / Dividend mix.
When we stop spending money on pointless things and balance the books then the rates can come down.
Oh, and we can then get rid of an army of civil servants / tax advisers / accountants etc who all benefit from the impossible to comprehend system we have and who add no real value to our economy.
But of course that won't happen as it's clearly a mad policy.
Bring in flat rate tax and I would end up going back to permanent employment and the gov would get less income. Fact.
I don't know why corporation tax is 20% but I welcome it. People that are working in permanent employment do so (in some instances) because it is the safe option. People like me work on the basis that I could be out of work in 7 days time. I work on the basis that I have no holiday, sick, pension, benefits or redundancy. Put in perspective I am glad there isn't flat rate taxation because it would stop people like me from venturing out and starting up a small business.
Even with 20% tax I still pay more than I would if I had an equivalent permanent position. As a Ltd company contractor I pay the following:
PAYE
NI
Employers NI
Corporation tax
Higher rate tax
VAT
As my contracted rate is more than double what my market value is as a permanent employee then I pay substantially more than I would otherwise. This is the reality for almost all contractors but people like you don't see this and think we should pay even more to the gov. The trouble is most 'ignorant' folk just see the bottom line figure i.e. 20% and start b
hing because it's lower than the PAYE tax rate.As ever, s
te, uninformed, biased journalism goes to fuel negative thinking. Nothing new there then Calm down. I'm coming from the position of a company owner myself who gets most of my income from dividends too. I'm not suggesting you should pay more tax. I'm just suggesting that a simplified taxation system would be better for everyone and we'd all then get to keep a good chunk of our income.
I too pay:
PAYE
NI
Employers NI
Corporation tax
Higher rate tax
VAT
I'm suggesting replacing all of these with one tax, call it whatever you want.
(Except VAT which really your customers pay, you just look after it for a while.)
STURBO said:
Hi Fatman2,
Calm down. I'm coming from the position of a company owner myself who gets most of my income from dividends too. I'm not suggesting you should pay more tax. I'm just suggesting that a simplified taxation system would be better for everyone and we'd all then get to keep a good chunk of our income.
I too pay:
PAYE
NI
Employers NI
Corporation tax
Higher rate tax
VAT
I'm suggesting replacing all of these with one tax, call it whatever you want.
(Except VAT which really your customers pay, you just look after it for a while.)
STURBOCalm down. I'm coming from the position of a company owner myself who gets most of my income from dividends too. I'm not suggesting you should pay more tax. I'm just suggesting that a simplified taxation system would be better for everyone and we'd all then get to keep a good chunk of our income.
I too pay:
PAYE
NI
Employers NI
Corporation tax
Higher rate tax
VAT
I'm suggesting replacing all of these with one tax, call it whatever you want.
(Except VAT which really your customers pay, you just look after it for a while.)
Please accept my sincerest apologies. I must have been having a bad day today
I agree, it is complicated but I don't see any other way round it and actually, I like it as it currently stands (I would wouldn't I).
People that are prepared to stick their necks out should be given a break to encourage independence. If I were no better off than my permanent counterparts (in taxation terms) then what incentive would there be to operate in this manner.
I guess if there were single tax bands and I received a much higher tax code to incentivise working like this then I would agree but then you'd get people unhappy because not all tax codes were the same.
Du1point8 said:
Are you not forgetting that is only up to £43k os so.
Then its 10%, 20%, 30% and so on, that gets charged on the dividends.
Also you have to sort out your own insurance (liability and public), dental, bupa, your own pension.
why do some people think its just pay little wage and then take everything else as dividends... Its not and never has been!!
Because they are not running a limited business and have no idea, explain to me why running a LTD company with all the staff and agro is really easy?? it's not, far from it.Then its 10%, 20%, 30% and so on, that gets charged on the dividends.
Also you have to sort out your own insurance (liability and public), dental, bupa, your own pension.
why do some people think its just pay little wage and then take everything else as dividends... Its not and never has been!!
doogz said:
Eric Mc said:
Not being able to use your own computer means you fail the "use your own tools" test - shich is one of the key self employment designators. However, in the IT industry this is a not unusual occurence and HMRC will not fail you on that alone.
Lack of ability to substitute or hire your own people to work on your own company's behalf is definitely a major problem. The mark of a business is its ability to control and determine its own affairs to a large extent. If your business is prohibted from doing a very businesslike activity i.e. hiring its own staff, HMRC will look very carefully at the arrangementr.
Yeah, the problem is, I work in defence. Anyone on site, even the cleaners, must have the relevant security clearance, and obviously, using your own computer is a big no-no.Lack of ability to substitute or hire your own people to work on your own company's behalf is definitely a major problem. The mark of a business is its ability to control and determine its own affairs to a large extent. If your business is prohibted from doing a very businesslike activity i.e. hiring its own staff, HMRC will look very carefully at the arrangementr.
That's the the type of clause that is needed - although HMRC will look beyond the contract if necessary. In the Dragonfly case, there was a valid substitution clause in the contract. But in three or so years it had never been exercised and HMRC therefore decided that it was not a truly functional clause and were able to ignore it.
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