Tax avoiders to be deliberately bankrupted.....?..
Discussion
Dr Jekyll said:
98elise said:
turbobloke said:
Gecko1978 said:
HMRC don't want to stop contracting they just want more cash from it. My experience tells me they want a fair share, not all of it or even the same as PAYE employee just a share.
What's the definition of 'fair share'? If it exists is it HMRC's definition? Yours? Mine? The person or company paying the tax?The big loss to HMRC is the employers NI which is a saving to the employing company.
For the last 10 years I've been quite structured in that I put aside 30% of my company earnings each time an invoice is paid. This has generally been enough to cover the company and personal tax bills as they've come in. That strikes me as a fair level of tax considering that I have to cover my pension provisions, time off, sick and down time between contracts from the remanining 70%.
How much would a permie see of their money after tax? Based on an online calculator a permie on 100k would take home £65k, so just 5% less than I do as a contractor. But then he's getting 25 days a year holiday and sick pay which I'm not.
It's swings and roundabouts.
Piersman2 said:
Yes, but let's be honest, as contractors we minimise that hit by taking minimal PAYE and most as dividend. However... we do still pay corporation tax on company profits so the tax man gets his money one way or another at various rates. What contractors get is a bit more cash in hand to do with as they feel free to do, and for this get no holiday pay, sick pay, pensions, etc...
For the last 10 years I've been quite structured in that I put aside 30% of my company earnings each time an invoice is paid. This has generally been enough to cover the company and personal tax bills as they've come in. That strikes me as a fair level of tax considering that I have to cover my pension provisions, time off, sick and down time between contracts from the remanining 70%.
How much would a permie see of their money after tax? Based on an online calculator a permie on 100k would take home £65k, so just 5% less than I do as a contractor. But then he's getting 25 days a year holiday and sick pay which I'm not.
It's swings and roundabouts.
If deemed to be inside IR35 would the above not be enough - you would be required to take the fee and pay 100% of it out as employers NI, employees NI and PAYE?For the last 10 years I've been quite structured in that I put aside 30% of my company earnings each time an invoice is paid. This has generally been enough to cover the company and personal tax bills as they've come in. That strikes me as a fair level of tax considering that I have to cover my pension provisions, time off, sick and down time between contracts from the remanining 70%.
How much would a permie see of their money after tax? Based on an online calculator a permie on 100k would take home £65k, so just 5% less than I do as a contractor. But then he's getting 25 days a year holiday and sick pay which I'm not.
It's swings and roundabouts.
Yes IF deemed to be within IR35. HMRC's probvlem was that most contractors decided that they were outside IR35. The criteria were too vague and difficult to interpret so contractors (naturally) came to the conclusion that they were outside.
HMRC has changed the goalposts in that it is now the hirer rather than the hiree who conducts the assessment as to whether IR35 applies or not.
HMRC has changed the goalposts in that it is now the hirer rather than the hiree who conducts the assessment as to whether IR35 applies or not.
WhiskyDisco said:
Piersman2 said:
Yes, but let's be honest, as contractors we minimise that hit by taking minimal PAYE and most as dividend. However... we do still pay corporation tax on company profits so the tax man gets his money one way or another at various rates. What contractors get is a bit more cash in hand to do with as they feel free to do, and for this get no holiday pay, sick pay, pensions, etc...
For the last 10 years I've been quite structured in that I put aside 30% of my company earnings each time an invoice is paid. This has generally been enough to cover the company and personal tax bills as they've come in. That strikes me as a fair level of tax considering that I have to cover my pension provisions, time off, sick and down time between contracts from the remanining 70%.
How much would a permie see of their money after tax? Based on an online calculator a permie on 100k would take home £65k, so just 5% less than I do as a contractor. But then he's getting 25 days a year holiday and sick pay which I'm not.
It's swings and roundabouts.
If deemed to be inside IR35 would the above not be enough - you would be required to take the fee and pay 100% of it out as employers NI, employees NI and PAYE?For the last 10 years I've been quite structured in that I put aside 30% of my company earnings each time an invoice is paid. This has generally been enough to cover the company and personal tax bills as they've come in. That strikes me as a fair level of tax considering that I have to cover my pension provisions, time off, sick and down time between contracts from the remanining 70%.
How much would a permie see of their money after tax? Based on an online calculator a permie on 100k would take home £65k, so just 5% less than I do as a contractor. But then he's getting 25 days a year holiday and sick pay which I'm not.
It's swings and roundabouts.
Also, it's worth noting that IR35 treats 95% of IR35 contract income as taxable, the tax man kindly allows you the 5% to cover the cost of company admin , training, downtime, etc...
Also as Eric mentioned more companies are starting to define the contract as being in IR35 because they deem it to be so and don't want to be on the hook if the tax man decides it is at some time in the future. I've been looking for my next contract since well before Xmas and I steer clear of any role being declared inside IR35 as either I think the company is being mislead and/or I don't want to be put in a position where the work I do could be considered that of an normal employee. Additionally, if I wanted to be working and taxed as an employee, I'd also be wanting the perks: holiday, sick, pension, etc...
alfaman said:
Am aware of that.
basically fictitious / overstated ‘mngt fees’ ... can HMRC show only purpose of overseas entity is to shift taxable earnings away from UK? ... and would that count as some form of evasion .... from a practical economic perspective .. it’s the UK biz which drives an economic return to the Group.
... not sure how that works from a tax law angle ... PRC seem to find a way round it
( I imagine the prospect of some time in a PRC jail helps get the tax filed and collected )
Transfer pricing. basically fictitious / overstated ‘mngt fees’ ... can HMRC show only purpose of overseas entity is to shift taxable earnings away from UK? ... and would that count as some form of evasion .... from a practical economic perspective .. it’s the UK biz which drives an economic return to the Group.
... not sure how that works from a tax law angle ... PRC seem to find a way round it
( I imagine the prospect of some time in a PRC jail helps get the tax filed and collected
)ATAD
BEPS.
Piersman2 said:
What contractors get is a bit more cash in hand to do with as they feel free to do, and for this get no holiday pay, sick pay, pensions, etc...
That is absolute rubbish. You are running a limited company and as a director of the employing company you could quite easily pay your employee (yourself) all those things. That you don't is entirely your choice. The fact that your limited company may only have one source of income which dries up when the sole employee cannot work is just further proof that it really isn't a proper company and should be taxed accordingly.
Ean218 said:
Piersman2 said:
What contractors get is a bit more cash in hand to do with as they feel free to do, and for this get no holiday pay, sick pay, pensions, etc...
That is absolute rubbish. You are running a limited company and as a director of the employing company you could quite easily pay your employee (yourself) all those things. That you don't is entirely your choice. The fact that your limited company may only have one source of income which dries up when the sole employee cannot work is just further proof that it really isn't a proper company and should be taxed accordingly.
desolate said:
HMRC certainly seem to have an issue if the work comes from one source exclusively.
This is the core issue they have.
It is ONE measure they use when deciding whether IR35 applies. It is an indicator that MAYBE IR35 could be applicable - but on its own, it actually doesn't mean a lot.This is the core issue they have.
Eric Mc said:
It is ONE measure they use when deciding whether IR35 applies. It is an indicator that MAYBE IR35 could be applicable - but on its own, it actually doesn't mean a lot.
That's true but to say "there is no issue" isn't true.All against the backdrop that as I understand it they still have not been successful in enforcing IR35 legally.
Ean218 said:
The fact that your limited company may only have one source of income which dries up when the sole employee cannot work is just further proof that it really isn't a proper company and should be taxed accordingly.
Pretty sure HMRC have no issue keeping the VAT/corp/cap gains tax from these "fake" companies. It's a funny old world.roachcoach said:
Ean218 said:
The fact that your limited company may only have one source of income which dries up when the sole employee cannot work is just further proof that it really isn't a proper company and should be taxed accordingly.
Pretty sure HMRC have no issue keeping the VAT/corp/cap gains tax from these "fake" companies. It's a funny old world.Eric Mc said:
Yes IF deemed to be within IR35. HMRC's probvlem was that most contractors decided that they were outside IR35. The criteria were too vague and difficult to interpret so contractors (naturally) came to the conclusion that they were outside.
HMRC has changed the goalposts in that it is now the hirer rather than the hiree who conducts the assessment as to whether IR35 applies or not.
Out of interest if the hirer gets the IR35 status wrong, who is liable for any under collected taxes ?HMRC has changed the goalposts in that it is now the hirer rather than the hiree who conducts the assessment as to whether IR35 applies or not.
snowy said:
Eric Mc said:
Yes IF deemed to be within IR35. HMRC's probvlem was that most contractors decided that they were outside IR35. The criteria were too vague and difficult to interpret so contractors (naturally) came to the conclusion that they were outside.
HMRC has changed the goalposts in that it is now the hirer rather than the hiree who conducts the assessment as to whether IR35 applies or not.
Out of interest if the hirer gets the IR35 status wrong, who is liable for any under collected taxes ?HMRC has changed the goalposts in that it is now the hirer rather than the hiree who conducts the assessment as to whether IR35 applies or not.
In the scenario above, assume that the Govt dept deems the role to be off-payroll. The PSC is then paid gross by the Agency. If the PSC then has an IR35 enquiry and the role is then deemed caught by IR35 then the PSC has to pay the HMRC and back date it.
In the scenario above the role is deemed off-payroll and then say 6 months down the line there is a challenge to the status by HMRC (or others) and the role is then deemed caught then the Govt dept is responsible for payments backdated and then the Agency will be advised to deduct PAYE ongoing.
I dont think there has yet been a case of the last scenario ....
arf
snowy said:
Out of interest if the hirer gets the IR35 status wrong, who is liable for any under collected taxes ?
Originally, it was the contractor.Since 6 April 2017, if the contractor was working for a government department or agency, that government department or agency has the primary liability to collect and pay the required taxes.
This new approach is going to applied to the private sector soon.
snowy said:
Eric Mc said:
Yes IF deemed to be within IR35. HMRC's probvlem was that most contractors decided that they were outside IR35. The criteria were too vague and difficult to interpret so contractors (naturally) came to the conclusion that they were outside.
HMRC has changed the goalposts in that it is now the hirer rather than the hiree who conducts the assessment as to whether IR35 applies or not.
Out of interest if the hirer gets the IR35 status wrong, who is liable for any under collected taxes ?HMRC has changed the goalposts in that it is now the hirer rather than the hiree who conducts the assessment as to whether IR35 applies or not.
Eric Mc said:
snowy said:
Out of interest if the hirer gets the IR35 status wrong, who is liable for any under collected taxes ?
Originally, it was the contractor.Since 6 April 2017, if the contractor was working for a government department or agency, that government department or agency has the primary liability to collect and pay the required taxes.
This new approach is going to applied to the private sector soon.
The payor of the worker's intermediary has the requirement to withhold PAYE and NI, and pay employer NI.
If the payor is not the end client (e.g. if an agency is interposed in the supply chain) and the end client fails to communicate status to the payor, the payroll responsibilities, and related penalties, fall back to the end client.
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