Autumn Statement 2016
Discussion
It's not something that has become an issue "all of a sudden". It has been a topic of great concern for at least 30 years. They have been thinking on this topic for many years and every so often come up with new ideas to curtail the use of intermediaries to disguise employment.
The introduction of IR35 almost 20 years ago was the first real attempt by the tax authorities to create a tax approach that would remove the most blatant examples of "hiding" behind "intermediary" constructs - such as limited companies, partnerships etc.
It has to be said that IR35 has only been marginally successful for them.
The introduction of IR35 almost 20 years ago was the first real attempt by the tax authorities to create a tax approach that would remove the most blatant examples of "hiding" behind "intermediary" constructs - such as limited companies, partnerships etc.
It has to be said that IR35 has only been marginally successful for them.
Eric Mc said:
It's not something that has become an issue "all of a sudden". It has been a topic of great concern for at least 30 years. They have been thinking on this topic for many years and every so often come up with new ideas to curtail the use of intermediaries to disguise employment.
The introduction of IR35 almost 20 years ago was the first real attempt by the tax authorities to create a tax approach that would remove the most blatant examples of "hiding" behind "intermediary" constructs - such as limited companies, partnerships etc.
It has to be said that IR35 has only been marginally successful for them.
Ok so who does this 30 year witch hunt benefit? I can understand there will be some abusers of the system but all the contractors I know aren't in it to abuse the tax system, it's the only way agencies and companies will allow them to work freelance. Trust me if I could operate as a sole trader I would and avoid all this BS but I can't as no one would want to work with me without the proper legal framework a Ltd company offers. The introduction of IR35 almost 20 years ago was the first real attempt by the tax authorities to create a tax approach that would remove the most blatant examples of "hiding" behind "intermediary" constructs - such as limited companies, partnerships etc.
It has to be said that IR35 has only been marginally successful for them.
Also if they want to call it disguised employment why doesn't a freelancer get all the perks of a full employee like sick pay, health benefits, holidays etc? It seems the government want the full tax income of taxing everyone under PAYE without offering the benefits of a full time employee, who is getting shafted in that scenario? Working practices and employment have changed massively in the last 20 years, contractors and freelance workers are a very real requirement for a huge number of businesses and that requirement isn't going away any time soon. If the current Ltd company rules don't fit that requirement, come up with something else rather than trying to fit everyone into a little PAYE box that isn't fit for the purpose.
I can understand them being a bit miffed when you get people who work "freelance" at the same place for 10 years+ but there is a genuine need for ad hoc employees in many businesses. No need to complicate the issue with PSC checks and all kinds of rules that are basically either unenforceable or far too punitive when they are. The solution - if you work at the same company for more than 2 years as a contractor you are deemed an employee and will be treated as such under tax laws, no if's but's or maybe's. Seems simple enough to implement and avoids lots of BS.
Guvernator said:
I can understand them being a bit miffed when you get people who work "freelance" at the same place for 10 years+ but there is a genuine need for ad hoc employees in many businesses. No need to complicate the issue with PSC checks and all kinds of rules that are basically either unenforceable or far too punitive when they are. The solution - if you work at the same company for more than 2 years as a contractor you are deemed an employee and will be treated as such under tax laws, no if's but's or maybe's. Seems simple enough to implement and avoids lots of BS.
And HMRC will argue that the PAYE system adequately caters for "ad hoc" employees. Being a temp does not turn what you do into a trading activity. Eric Mc said:
And HMRC will argue that the PAYE system adequately caters for "ad hoc" employees. Being a temp does not turn what you do into a trading activity.
Except companies don't like putting temps on their PAYE payroll for lots of various reasons, getting around headcount restrictions, flexibility, not having to go through all HR BS of a perm employee hence why so many contractors get work. If they don't put you on the payroll then we are talking about IR35, all the hassle and tax of being a PAYE employee with none of the benefits which is just stupid so why would you bother? Temp workers are a genuine business need, government should be enabling that, not putting barriers in the way.Exactly. However, HMRC is not of a mind to care what companies like or don't like to do. What they want is companies to apply the rules properly.
The first thing you will see if you go to the HMRC website advice on employment/self employment status is a comment by them stating that "Employment or Self Employment Status is not a matter of "choice", it is a matter of "fact" ". So what employers/companies "like" is, to HMRC, of no consequence.
The first thing you will see if you go to the HMRC website advice on employment/self employment status is a comment by them stating that "Employment or Self Employment Status is not a matter of "choice", it is a matter of "fact" ". So what employers/companies "like" is, to HMRC, of no consequence.
Guvernator said:
Eric Mc said:
The problem is that many people who have been taking advantage of the tax breaks are not really "running their own business" in the normal meaning of the expression.
Of course that's the case for a lot of people but it always has been, why has it become an issue all of a sudden? Yes I know there have been rules around Ltd companies which are supposed to prevent misuse but why all the focus on this area all of a sudden. It's a legally accepted way for people to freelance which gives some protection to both parties in a contract so either accept that or come up with some other structure that does the same thing. Forcing loads of contractors out of the market "on principle" won't make it any easier to pay our 1 trillion and counting tax hole.Those still doing it fine they have had the upside for a long time & possibly living a lifestyle used to the effective under taxed net income. They will have a squeeze fair enough take it on the chin.
Not sure if this is the place, but here goes:
My company has amassed a war chest, some of which we intended to invest in some new build resi investments this year. We haven't done it because we have doubts about the current government's competence with regard to housing. This doubt has arisen after some bizarre policy aimed at the private rented sector, which we think may undermine the value of our new developments.
This afternoon I was having my hair cut by the owner of an up and coming local salon. He was telling me how he has put expansion plans on hold because he feels that he is being taxed to death.
I have heard numerous other, "what's the point, I may as well remain where I am, rather than expand" elsewhere.
I know everyone moans about the incumbent government and taxes, but more than ever at the moment I am losing the will to do anything other than retire and I am not seeing a lot of positivity elsewhere either.
It seems to me that government is stunting enterprise whilst claiming to champion it.
Or am I just having a mardy week?
My company has amassed a war chest, some of which we intended to invest in some new build resi investments this year. We haven't done it because we have doubts about the current government's competence with regard to housing. This doubt has arisen after some bizarre policy aimed at the private rented sector, which we think may undermine the value of our new developments.
This afternoon I was having my hair cut by the owner of an up and coming local salon. He was telling me how he has put expansion plans on hold because he feels that he is being taxed to death.
I have heard numerous other, "what's the point, I may as well remain where I am, rather than expand" elsewhere.
I know everyone moans about the incumbent government and taxes, but more than ever at the moment I am losing the will to do anything other than retire and I am not seeing a lot of positivity elsewhere either.
It seems to me that government is stunting enterprise whilst claiming to champion it.
Or am I just having a mardy week?
Welshbeef said:
Eric Mc said:
And it will always be legal - provided the necessary conditions are met.
All that ever happens is that the conditions are scrutinised more carefully.
When I did it from memory c125k I had an effective all up tax rate of 12% which I thought was good going then a friend who earned a fair bit more somehow was merely paying 5%. All that ever happens is that the conditions are scrutinised more carefully.
God knows how but way way over 7 years ago.
Welshbeef said:
Eric Mc said:
Depends on what he's calculating the 12% on. If you are looking at "Sales" or "Gross Fees", you could well come out with an effective rate of 12%.
Exactly Or do Sales or Gross Fees rake into account corporation tax?
Corporation Tax is charged at 20% of NET Profit.
An example of how it might work -
Sales £100,000
Costs £40,000
Profit £60,000
Corporation Tax at 20% of Net Profit - £12,000
However, if you expressed the Corporation Tax amount of £12,000 as a percentage of Sales - then it would be 12% of sales.
An example of how it might work -
Sales £100,000
Costs £40,000
Profit £60,000
Corporation Tax at 20% of Net Profit - £12,000
However, if you expressed the Corporation Tax amount of £12,000 as a percentage of Sales - then it would be 12% of sales.
Eric Mc said:
Corporation Tax is charged at 20% of NET Profit.
An example of how it might work -
Sales £100,000
Costs £40,000
Profit £60,000
Corporation Tax at 20% of Net Profit - £12,000
However, if you expressed the Corporation Tax amount of £12,000 as a percentage of Sales - then it would be 12% of sales.
An example of how it might work -
Sales £100,000
Costs £40,000
Profit £60,000
Corporation Tax at 20% of Net Profit - £12,000
However, if you expressed the Corporation Tax amount of £12,000 as a percentage of Sales - then it would be 12% of sales.
Welshbeef said:
Eric Mc said:
Corporation Tax is charged at 20% of NET Profit.
An example of how it might work -
Sales £125,,000
Costs £50,000
Profit £75,000
Corporation Tax at 20% of Net Profit - £15,000
However, if you expressed the Corporation Tax amount of £15,000 as a percentage of Sales - then it would be 12% of sales.
An example of how it might work -
Sales £125,,000
Costs £50,000
Profit £75,000
Corporation Tax at 20% of Net Profit - £15,000
However, if you expressed the Corporation Tax amount of £15,000 as a percentage of Sales - then it would be 12% of sales.
50k of costs seems high for a contractor, without a large pension contribution.
I would still be interested to know how this tax rate of 12% occurs, there's seems to be more than the original statement suggests is going on...
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