Contractors - You still think it is worth it?
Discussion
Welshbeef said:
If you pay yourself Divi every single it's effectively salary and not dividends. I'd be wary of that personally
Assuming you missed out the word ‘month’, there is nothing in legislation, or any indication from HMRC, that suggests dividend frequency is any kind of indicator or trigger for investigation. Every quarter is equally as regular as every ‘insert time period here’. You can do them daily if you want... so long as the paperwork is done and they’re legal.bigandclever said:
Assuming you missed out the word ‘month’, there is nothing in legislation, or any indication from HMRC, that suggests dividend frequency is any kind of indicator or trigger for investigation. Every quarter is equally as regular as every ‘insert time period here’. You can do them daily if you want... so long as the paperwork is done and they’re legal.
True, But there's nothing in any legislation to say that for Fred Bloggs to call his company Fred Bloggs ltd with the only shareholders Fred and Freda Bloggs is any kind of trigger. But when they are looking for a company to do a spot check on certain types of arrangements tend to catch their eye.Dr Jekyll said:
bigandclever said:
Assuming you missed out the word ‘month’, there is nothing in legislation, or any indication from HMRC, that suggests dividend frequency is any kind of indicator or trigger for investigation. Every quarter is equally as regular as every ‘insert time period here’. You can do them daily if you want... so long as the paperwork is done and they’re legal.
True, But there's nothing in any legislation to say that for Fred Bloggs to call his company Fred Bloggs ltd with the only shareholders Fred and Freda Bloggs is any kind of trigger. But when they are looking for a company to do a spot check on certain types of arrangements tend to catch their eye.The trick to not triggering an investigation is to keep things in the mid 80% (out of the bottom 10% and top 10%) of any data metrix likely to be generated based on your return and keep things relatively consistent from one year to the next.
Oh, and use a 'proper' accountancy firm, not some one man band, or mate from the pub, or umbrella setup offshore, etc...
Welshbeef said:
CaptainSlow said:
Why does this trigger it? I'm currently considering going contracting and will do the books myself.
Accountancy firms charge £180 to do your books for the year. Spend the time you'd use doing this on generating the growth of your company instead. CaptainSlow said:
Welshbeef said:
CaptainSlow said:
Why does this trigger it? I'm currently considering going contracting and will do the books myself.
Accountancy firms charge £180 to do your books for the year. Spend the time you'd use doing this on generating the growth of your company instead. 
Countdown said:
CaptainSlow said:
That seems very low. Doing my own books wouldn't take me much time either.
It depends on how complicated your accounts are. £180 is at the low end and is roughly a half-day for a qualified accountant.Btw I thought you were ACCA?
CaptainSlow said:
FCCA if you don't mind, so capable for sure. I just wasn't aware that the submitter would be a trigger...and wanted clarification why.
It wouldn't. I've been submitting my accounts for years (as well as Mrs C's, and umpteen family/friends). As long as your accounts are legit you've got nothing to worry about. You won't even need a practising certificate 
Welshbeef said:
CaptainSlow said:
Why does this trigger it? I'm currently considering going contracting and will do the books myself.
Accountancy firms charge £180 to do your books for the year. Spend the time you'd use doing this on generating the growth of your company instead. FWIW - I think remaining a contractor is very much a factor of how your run your own personal finances. If you can afford to work on the minimum wage+dividend approach then it becomes very tax efficient paying yourself, but some (many) people need a higher ongoing income and that defeats some of the advantages. If you have a partner/wife/husband on a low/non-existent wage that can also be used to your benefit.
I also quite like the option of being a short term member of staff - get in - fix a load of mistakes - get out - without becoming the incumbent owner of something. Being an incumbent is where the drudgery begins.
I've been (IT) contracting for 11+ years and 4+ of them via my own ltd co. The ltd co yields less cash and it stays in the company, but makes me feel more secure and in control of what's getting spent on what, despite the increase in overheads on accountancy and insurances, etc.
Does the 'entrepreneur's tax relief' exit route still exist ? I hear stories of people executing that year on year on year and I thought they would be limiting how often it can be invoked.
gavsdavs said:
Welshbeef said:
CaptainSlow said:
Why does this trigger it? I'm currently considering going contracting and will do the books myself.
Accountancy firms charge £180 to do your books for the year. Spend the time you'd use doing this on generating the growth of your company instead. FWIW - I think remaining a contractor is very much a factor of how your run your own personal finances. If you can afford to work on the minimum wage+dividend approach then it becomes very tax efficient paying yourself, but some (many) people need a higher ongoing income and that defeats some of the advantages. If you have a partner/wife/husband on a low/non-existent wage that can also be used to your benefit.
I also quite like the option of being a short term member of staff - get in - fix a load of mistakes - get out - without becoming the incumbent owner of something. Being an incumbent is where the drudgery begins.
I've been (IT) contracting for 11+ years and 4+ of them via my own ltd co. The ltd co yields less cash and it stays in the company, but makes me feel more secure and in control of what's getting spent on what, despite the increase in overheads on accountancy and insurances, etc.
Does the 'entrepreneur's tax relief' exit route still exist ? I hear stories of people executing that year on year on year and I thought they would be limiting how often it can be invoked.
Shaoxter said:
PostHeads123 said:
I contracted for many years, I would only go back to it for life style not £ and would operate inside IR35, as Ive seen to many ex contractors lifes wrecked by HMRC.
Really? How many contractors' lives have you seen wrecked by HMRC? I've never heard of anyone who's got any kind of letter from HMRC.Its a risk contracting, I would like to do it again but HMRC have got so many powers now that it doesn't matter whats fair and logical they ignore that its there own rules. HMRC don't have a duty of care legally to tax payers, there is now APN's, also HMRC is flexing its muscle with retrospective application of tax law. My point is HMRC are b*stards and don't play fair so you take a risk and just hope they don't get you in there sites.
Also it doesn't mater how you pay yourself really divs etc, agencies now legally have to inform HMRC who they have on there books and placed in contract, agencies are more aware of it now as there was a push to put any £ owed a liability of the agency if you failed IR35, they prefer to keep them happy and not you the contractor.
Best approach IMO is stash the extra £ you make operating outside of IR35 into another account, if HMRC come a knocking you have it there, if they don't give it a few years close company down take the cash and run
Edited by PostHeads123 on Thursday 12th October 13:53
PostHeads123 said:
Ok not loads but 4 cases, the issue is the investigations went on years in one case 8 years, all lost and had to pay up, most had to sell the houses and 2 of them ended up divorced because of the stress of it all.
Its a risk contracting, I would like to do it again but HMRC have got so many powers now that it doesn't matter whats fair and logical they ignore that its there own rules. HMRC don't have a duty of care legally to tax payers, there is now APN's, also HMRC is flexing its muscle with retrospective application of tax law. My point is HMRC are b*stards and don't play fair so you take a risk and just hope they don't get you in there sites.
Also it doesn't mater how you pay yourself really divs etc, agencies now legally have to inform HMRC who they have on there books and placed in contract, agencies are more aware of it now as there was a push to put any £ owed a liability of the agency if you failed IR35, they prefer to keep them happy and not you the contractor.
Best approach IMO is stash the extra £ you make operating outside of IR35 into another account, if HMRC come a knocking you have it there, if they don't give it a few years close company down take the cash and run
If you find yourself occupying a job which is really a permanent position, you're inside IR-35 and you should be honest enough with yourself to acknowledge that. As a contractor, you shouldn't be rolling the same contract over for years on end.Its a risk contracting, I would like to do it again but HMRC have got so many powers now that it doesn't matter whats fair and logical they ignore that its there own rules. HMRC don't have a duty of care legally to tax payers, there is now APN's, also HMRC is flexing its muscle with retrospective application of tax law. My point is HMRC are b*stards and don't play fair so you take a risk and just hope they don't get you in there sites.
Also it doesn't mater how you pay yourself really divs etc, agencies now legally have to inform HMRC who they have on there books and placed in contract, agencies are more aware of it now as there was a push to put any £ owed a liability of the agency if you failed IR35, they prefer to keep them happy and not you the contractor.
Best approach IMO is stash the extra £ you make operating outside of IR35 into another account, if HMRC come a knocking you have it there, if they don't give it a few years close company down take the cash and run
My personal view is that a contract is a fixed quantity of work or a fixed list of tasks, or a fixed period of time. You're there to do a specific job not just occupy a desk for as long as you can spin it.
That is the role of the contractor, you're supplying a service for a fee, not replacing a permie. (I think HMRC were right to bring that truth out)
With regards to falling foul of the revenue and their tactics for reclaiming tax whenever the hell they feel like it, yes, they do this and they're not above changing, or completely ignoring their own rules to get what they want. They will change rules and snag people for 10 years worth of income because they changed the rules and said "it applies retrospectively". (Spit)
I would not opt for the 'tax the money and run' strategy - they're not above tapping up foreign governments for people who they think owe them money and who now don't live here any more.
(Yes, I'm a contractor who HMRC caught up with and would like to take a large amount of cash back off. Not without a fight, I say)
Derek Chevalier said:
Autopilot said:
My main benefits of being a contractor are.......Pension! I have the full amount going in to a private pension. It's one of the only tax breaks you'll get so use it.
Why can't you do that as a permie?Stolen from SJD's website:
As a Limited company contractor working outside of IR35 for every £100 that your company earns you must pay 20% corporation tax, which brings the amount down to £80. You will then need to take this money out of your company, to do this most contractors take their income through a mixture of salary and dividends. If you were to take this £80 as a dividend you will incur dividend tax of 32.5% (FY 2016/17) which brings the amount down to £54.
However, if you were to invest the £100 in a pension you can contribute the whole amount and once in the pension this amount could grow
wombleh said:
You can get insurance against losing an ir35 case for about a days rate. Worth it for the peace of mind IMO
In the very early days of IR35 a well known provider of this cover offered a 'free' contract review service, as part of its IR35 insurance offer.I answered their questions with total honesty, it said I was in IR35
Bloke I at next to (same job/same role/been there 10yrs longer than me) answered how he wanted to answer the questions, it said he was outside IR35.
I took the view that, in the event of a claim, your first hurdle would be getting any insurer to cough up, that they might try to wiggle off the hook "because you didn't properly describe your working arrangement when you took out the cover
That said, I've since heard a few people say that an IR35 investigation has been known to be dropped once HMRC know you've got insurance. It's easier for them to go after those that don't. Don't know how much truth there is in this.
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