Financial types out there

[The Fish 8950]

I'm starting the new job and have discovered I'll get an extra £2.50 an hour if I set myself up as a company. The question is, would the extra £2.50 cover the costs of creating/maintaining a company? I include time and effort as a cost by the way.

 

tia

[manc-mag 1]

It's pretty straight forward.

 

Also as far as I'm aware there are companies that basically do it for you and manage the admin of your pay claims/expenses etc (for a small percentage)

 

I think the downside is you dont qualify for holiday pay as a limited company.

[The Fish 8950]

So you're saying it is worthwhile, as long as I don't mind missing out on Holiday pay. As I don't take much holiday time anyway I don't see that as much of a problem. It normally just gets tacked onto the last pay check of what ever I was doing.

 

cheers.

[Rob W 0]

It's pretty straight forward.

 

Also as far as I'm aware there are companies that basically do it for you and manage the admin of your pay claims/expenses etc (for a small percentage)

 

I think the downside is you dont qualify for holiday pay as a limited company.

 

Presumably the £ 2.50 is the NI you would pay as employed as opposed to self employed??

 

Be very very careful - the revenue are in the middle of a big crack down on these sort of companies and the guys who "warehouse" for you - the computer business ran this scam for several years but in the 2008 budget they fell on this like a ton of bricks

 

They can come after you years later and ask for all the tax and NI as they'll just deem you as EMPLOYED

 

There is no simple proof that you ARE self employed - but if you work all the time on their premises, if you work for the same outfit only for more than 6 months, if they set your hours and place of work then the Revenue will have you bang to rights

 

PM me if you need more details

Edited May 24, 2009 by Rob W

[Rob W 0]

running a company is easy but here are returns and paperwork .......................

[Fop 1]

I'm starting the new job and have discovered I'll get an extra £2.50 an hour if I set myself up as a company. The question is, would the extra £2.50 cover the costs of creating/maintaining a company? I include time and effort as a cost by the way.

 

tia

 

 

What do you mean by "company"? You can be a self-employed sole-trader or an effective self-employed limited company. No idea which of the two will be "better" for your situation, but both have positives and negatives.

[The Fish 8950]

I'm starting the new job and have discovered I'll get an extra £2.50 an hour if I set myself up as a company. The question is, would the extra £2.50 cover the costs of creating/maintaining a company? I include time and effort as a cost by the way.

 

tia

 

 

What do you mean by "company"? You can be a self-employed sole-trader or an effective self-employed limited company. No idea which of the two will be "better" for your situation, but both have positives and negatives.

I'd probably be the latter.

 

 

Rob the £2.50 isn't necessarily all going as NI or Tax, it's just the difference in wages they're willing to pay. If they pay me as a company I get £2.50 more than if they pay me as an employee

[Rob W 0]

THEY're saving on the NI

 

They want you to be a "company" as its easier for them to hide - but if the Revenue audit them then they will take a view on your ACTUAL status

 

Go to the revenue website and look at self employed - if you don't qualify don't do it - we know of several people and companies who have been hit later for the cash

 

If you are genuinely going to be Self employed you don't need a company - you just act as a sole trader

 

Whatever you do make sure you have a separate bank account for your Sole trading/self employed status - trying to sort out what is "personal" and what is "employment" a couple of years down the line can be a nightmare if they come and examine the books

 

Actually I'd be worried about joining a company that was willing to suggest a possible tax avoidance deal for £ 2.50 an hour.............

 

This is the advice we had

 

Umbrella Company.

A managed service company who operate PAYE. If operated legally it would be no more than a payroll bureaux that can offer no tax benefit than any other PAYE employer. Some are running expense scams. It remains to be seen if this continues. There remains some debate as to whether these types of Managed Service Company are covered by the new rules. However, given that neither worker or agency can really know if they are operating lawfully (and there is plain evidence that many have not done so in the past) there is no protection against the third party liability for these companies debts should they go bust. Steering clear is probably the most sensible thing.

 

Composite Company

A managed service company who themselves run large numbers of other limited companies from which temp workers are paid in dividends. Illegal from April 6 2007.

 

Managed Service company (MSC)

 The term used by the Government in the legislation to describe the above.

 

Personal Service Company (PSC)

Now the only viable vehicle other than direct PAYE. This is defined as a company in which the individual worker has financial and operational control. In practice they should be a director and majority shareholder. This is the ‘normal’ model used by ‘Ltd’ temps up to 1999.

 

Managed Personal Service Company

Now being touted by many of the former composite providers affected by the new legislation. This format simply will not work, as the element of control required by the temporary worker is absent. Its should be noted that the HMRC does not licence or validate any such provider in late 2007:-

[manc-mag 1]

THEY're saving on the NI

 

They want you to be a "company" as its easier for them to hide - but if the Revenue audit them then they will take a view on your ACTUAL status

 

Go to the revenue website and look at self employed - if you don't qualify don't do it - we know of several people and companies who have been hit later for the cash

 

If you are genuinely going to be Self employed you don't need a company - you just act as a sole trader

 

Whatever you do make sure you have a separate bank account for your Sole trading/self employed status - trying to sort out what is "personal" and what is "employment" a couple of years down the line can be a nightmare if they come and examine the books

 

Actually I'd be worried about joining a company that was willing to suggest a possible tax avoidance deal for £ 2.50 an hour.............

 

This is the advice we had

 

Umbrella Company.

A managed service company who operate PAYE. If operated legally it would be no more than a payroll bureaux that can offer no tax benefit than any other PAYE employer. Some are running expense scams. It remains to be seen if this continues. There remains some debate as to whether these types of Managed Service Company are covered by the new rules. However, given that neither worker or agency can really know if they are operating lawfully (and there is plain evidence that many have not done so in the past) there is no protection against the third party liability for these companies debts should they go bust. Steering clear is probably the most sensible thing.

 

Composite Company

A managed service company who themselves run large numbers of other limited companies from which temp workers are paid in dividends. Illegal from April 6 2007.

 

Managed Service company (MSC)

The term used by the Government in the legislation to describe the above.

 

Personal Service Company (PSC)

Now the only viable vehicle other than direct PAYE. This is defined as a company in which the individual worker has financial and operational control. In practice they should be a director and majority shareholder. This is the 'normal' model used by 'Ltd' temps up to 1999.

 

Managed Personal Service Company

Now being touted by many of the former composite providers affected by the new legislation. This format simply will not work, as the element of control required by the temporary worker is absent. Its should be noted that the HMRC does not licence or validate any such provider in late 2007:-

 

 

Interesting appraisal Rob.

 

On the point of HMRC, I know for a fact that there are dozens of workers in my HMRC building alone who are on very long term 'temporary' contracts who are operating as limited companies for the extra hourly margin. Thing is though, theres no chance of 'the revenue' going after them after the event as you describe, because the continuation of that logic is the inescapable implication that they are effectively direct, permanent employees of HMRC-which is exactly what they are trying to avoid in the first place by employing long term 'temps'. The ones in HMRC are bombproof tbh as the department is desperate to avoid creating direct employment relations (and the attendant public sector benefits/pension situation that comes with it).

 

I would imagine HMRC's enforcement action elsewhere is informed by considerations such as this btw-or it certainly should be if they are well advised. Which they won't be.

Edited May 25, 2009 by manc-mag

[MarkyMark 0]

Something I saw last week which may be of interest.

 

http://www.theregister.co.uk/2009/05/22/ir35_tax_revenues/

 

I've recently gone the ltd comp route. My accountant has advised that rather than taking minimum wage from the company and the rest of dividends (which HMRC will not like) pay a sensible salary and take a dividend once or twice a year.

That way, you're less likely to be investigated.

 

The extra 2.50 an hour will have to go towards paying the extra contributions you make as a ltd company, namely Employers NI contributions and corporation tax.

[Rob W 0]

WHATEVER you do don't get into paying dividends monthly...................... they'll see that as taking the p***

[Rob W 0]

Something I saw last week which may be of interest.

 

http://www.theregister.co.uk/2009/05/22/ir35_tax_revenues/

 

I've recently gone the ltd comp route. My accountant has advised that rather than taking minimum wage from the company and the rest of dividends (which HMRC will not like) pay a sensible salary and take a dividend once or twice a year.

That way, you're less likely to be investigated.

 

The extra 2.50 an hour will have to go towards paying the extra contributions you make as a ltd company, namely Employers NI contributions and corporation tax.

 

 

very interesting - tho' I know of several companies that have paid up in the oil business

 

The problem of course is not that the Govt will abolish IR35 but that they will STRENGTHEN it to remove the "loopholes" - many peopel thought this woiuld happen this year but the financial crisis blew them off course

[Rob W 0]

THEY're saving on the NI

 

They want you to be a "company" as its easier for them to hide - but if the Revenue audit them then they will take a view on your ACTUAL status

 

Go to the revenue website and look at self employed - if you don't qualify don't do it - we know of several people and companies who have been hit later for the cash

 

If you are genuinely going to be Self employed you don't need a company - you just act as a sole trader

 

Whatever you do make sure you have a separate bank account for your Sole trading/self employed status - trying to sort out what is "personal" and what is "employment" a couple of years down the line can be a nightmare if they come and examine the books

 

Actually I'd be worried about joining a company that was willing to suggest a possible tax avoidance deal for £ 2.50 an hour.............

 

This is the advice we had

 

Umbrella Company.

A managed service company who operate PAYE. If operated legally it would be no more than a payroll bureaux that can offer no tax benefit than any other PAYE employer. Some are running expense scams. It remains to be seen if this continues. There remains some debate as to whether these types of Managed Service Company are covered by the new rules. However, given that neither worker or agency can really know if they are operating lawfully (and there is plain evidence that many have not done so in the past) there is no protection against the third party liability for these companies debts should they go bust. Steering clear is probably the most sensible thing.

 

Composite Company

A managed service company who themselves run large numbers of other limited companies from which temp workers are paid in dividends. Illegal from April 6 2007.

 

Managed Service company (MSC)

The term used by the Government in the legislation to describe the above.

 

Personal Service Company (PSC)

Now the only viable vehicle other than direct PAYE. This is defined as a company in which the individual worker has financial and operational control. In practice they should be a director and majority shareholder. This is the 'normal' model used by 'Ltd' temps up to 1999.

 

Managed Personal Service Company

Now being touted by many of the former composite providers affected by the new legislation. This format simply will not work, as the element of control required by the temporary worker is absent. Its should be noted that the HMRC does not licence or validate any such provider in late 2007:-

 

 

Interesting appraisal Rob.

 

On the point of HMRC, I know for a fact that there are dozens of workers in my HMRC building alone who are on very long term 'temporary' contracts who are operating as limited companies for the extra hourly margin. Thing is though, theres no chance of 'the revenue' going after them after the event as you describe, because the continuation of that logic is the inescapable implication that they are effectively direct, permanent employees of HMRC-which is exactly what they are trying to avoid in the first place by employing long term 'temps'. The ones in HMRC are bombproof tbh as the department is desperate to avoid creating direct employment relations (and the attendant public sector benefits/pension situation that comes with it).

 

I would imagine HMRC's enforcement action elsewhere is informed by considerations such as this btw-or it certainly should be if they are well advised. Which they won't be.

 

regretfully I can't say I'm at all surprised.................................

[Rob W 0]

From the same website:-

 

An IT contractor has been hit with a £99,000 tax bill after the High Court ruled that he should be taxed as an employee of the company he undertook work for.

 

Jon Bessell, 50 per cent owner and sole director of Dragonfly Consulting, carried out work for motoring organisation AA for three years until 2003.

 

 

Bessell is an IT systems tester and worked almost exclusively for AA in the three year period, providing his services as Dragonfly Consulting via an agency for IT contractors, DPP.

 

A set of rules known as IR35 were introduced by Inland Revenue in 2000 to ensure that individuals were not using a corporate structure to avoid paying tax and national insurance as individual employees.

 

Bessell was deemed by Inland Revenue to be an employee of the AA according to the IR35 rules.

 

The Special Commissioner had looked at the fact that Bessell operated under the control of AA, had only one other client who provided only a little income and was "integrated into the AA's business, and who had a role similar to that of a professional employee".

 

Bessell appealed to the High Court, arguing that the Commissioner had made legal errors in the assumptions made about the notional contract imagined between Bessell and the AA; that the intentions of both parties were not, as the Commissioner deemed them, "irrelevant", and that there exists a status between being in business and being an employee, and that is the state of being "a worker".

 

The High Court found that the relationship was essentially that of an employee and employer. Mr Justice Henderson found that Bessell's work could not be substituted for another's; that the control, appraisal and assessment of his work undertaken by AA manager's was like that undertaken in relation to an employee; that the parties' view of what they wanted the status to be was indeed irrelevant; and that Bessell fell "on the employment side" of the dividing line between employee and non-employee.

 

Mr Justice Henderson upheld the Special Commissioner's view that Bessell should pay the tax and national insurance contributions he would have been due to pay as an employee, which amount to £99,000.