Originally posted by TheFaQQer
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Newbie to Ltd contracting - if you have salary at under £12k you are more likely to..
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Originally posted by northernladuk View PostTo be fair SJD also advised me to pay a little tax. They admitted there isn't strong evidence for it but if anything changes i.e. HMRC start looking at people under the threshold you're covered so am happy to go with it. I understand there risk levels are pretty damn low but still, sounds like good advice to me.
EDIT : From an HMRC investigation I mean. I dunno why IR35 is factoring in the this thread to be fair.
Is the salary that you pay yourself anywhere close to the market rate for a permanent employee doing the same kind of work? If it isn't, then I can't see how paying that little bit of tax is meant to keep HMRC at bay - if anything, it sounds like you deliberately chose a salary level to try to keep HMRC away, which may open up other questions.Leave a comment:
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Originally posted by TheFaQQer View PostBased on what evidence? There is none that I've seen - sounds like it's from someone who doesn't understand IR35.
EDIT : From an HMRC investigation I mean. I dunno why IR35 is factoring in the this thread to be fair.Leave a comment:
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Originally posted by boulderman View Post..be investigated...as it is this type of company that is trying to beat IR35.
As many (from research on here) opt for minimum way or maybe the optimum £10,000 (for maximum tax savings) this could be a backward approach due to the risk of IR35 costs.Leave a comment:
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Presumably £12,001 p.a. would be the highest risk because it looks like you've got something to hide.Leave a comment:
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Originally posted by boulderman View PostNewbie to Ltd contracting - if you have salary at under £12k you are more likely to..
..be investigated...as it is this type of company that is trying to beat IR35.
sounds like a load of bollocks from someone who doesn't understand IR35 to me.
Originally posted by boulderman View PostAs many (from research on here) opt for minimum way or maybe the optimum £10,000 (for maximum tax savings) this could be a backward approach due to the risk of IR35 costs.
Originally posted by boulderman View PostAn accountant mentioned £12-13k reduces your noticability
Originally posted by boulderman View Postand my friend has his accountant opt for £16-20k salary as the tax on the extra isn't "major" (he's been on £450 a day for a decade so he can afford it).
Originally posted by boulderman View PostMy question is:
Is £12,000 optimum in terms of low tax (20% on the £2,000 [above the £10,000 tax free threshold]) and low risk from IR35 (my contract is via an agency who said I wouldn't be at risk going via them).
What did the professionals say when you had the contract and working practices reviewed, or did you just trust that the agent knows exactly how you work with respect to IR35?
Originally posted by boulderman View PostQuarterly dividends apparently draw the least attention from the tax man too.
Originally posted by boulderman View PostMy plan was going to be:
£12,000 Annual Salary
~£7,905 Expenses (extra rent @£5pd, food @£10pd, 10,000 miles) Assuming 227 working days a year
Of reminder of my rate, *.8 to leave corporation tax and then pay the remainder of what is left quarterly to me (however I've heard you should leave say 30% in the business bank account so was going to do this?)
Thanks for any help on any points.Leave a comment:
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Originally posted by boulderman View Post..be investigated...as it is this type of company that is trying to beat IR35.
As many (from research on here) opt for minimum way or maybe the optimum £10,000 (for maximum tax savings) this could be a backward approach due to the risk of IR35 costs.
An accountant mentioned £12-13k reduces your noticability and my friend has his accountant opt for £16-20k salary as the tax on the extra isn't "major" (he's been on £450 a day for a decade so he can afford it).
My question is:
Is £12,000 optimum in terms of low tax (20% on the £2,000 [above the £10,000 tax free threshold])
and low risk from IR35 (my contract is via an agency who said I wouldn't be at risk going via them).
Quarterly dividends apparently draw the least attention from the tax man too.
My plan was going to be:
£12,000 Annual Salary
~£7,905 Expenses (extra rent @£5pd, food @£10pd, 10,000 miles) Assuming 227 working days a year
Of reminder of my rate, *.8 to leave corporation tax and then pay the remainder of what is left quarterly to me (however I've heard you should leave say 30% in the business bank account so was going to do this?)
Thanks for any help on any points.
Never believe what an agent says without checking it out. The validity of their claim is more or less entirely dependant upon a sensible contract that protects both parties, addresses the 3 pillars of IR35 and that your working conditions mirror that contract.
Oh and WCS.Leave a comment:
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I'm afraid your agency do not understand IR35 if they say you will be free of risk by going with them. Your IR35 status is determined by what you do on a daily basis for your client in terms of Control, requirement for Personal Service and Mutuality of Obligation. A good contract is worth nothing if it doesn't match what actually happens.
HMRC have no visibility on how often you pay dividends unless they investigate as they simply see a single figure on your tax return. Provided you have dividend vouchers and you've made an effort to separate the transfers from salary and expenses then I see no issue at all with paying as often as you like. Most people pay monthly for cashflow reasons.
There is no evidence I'm aware of to show that a salary of £12,000 will lead to an investigation, I've certainly not seen one that had any direct connection to the level of pay (although £12,000 is in line with national minimum wage, so could, in theory, be seen as more commercially realistic than the bare minimum NI level salary). Paying an extra £3,000 a year would not offer any greater protection either in my view. Anyway, if you're outside IR35 it doesn't matter as you can take what you like. You're much more likely to get an investigation if you file returns late or pay taxes late.
£10,000 is more tax efficient this year due to it being in line with the personal allowance. Then take dividends up to the higher rate limit and leave the rest in the company. Dividends in higher rates are taxed at 25% whereas you can get the tax rate down to 10% if you take a longer term view and save the funds to withdraw them when you finally close the company down.
In terms of expenses, avoid claiming a flat rate unless you have a dispensation from HMRC. Base your claims of what you actually spend, or what it costs you, and keep receipts for 7 years.Leave a comment:
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Newbie to Ltd contracting - if you have salary at under £12k you are more likely to..
..be investigated...as it is this type of company that is trying to beat IR35.
As many (from research on here) opt for minimum way or maybe the optimum £10,000 (for maximum tax savings) this could be a backward approach due to the risk of IR35 costs.
An accountant mentioned £12-13k reduces your noticability and my friend has his accountant opt for £16-20k salary as the tax on the extra isn't "major" (he's been on £450 a day for a decade so he can afford it).
My question is:
Is £12,000 optimum in terms of low tax (20% on the £2,000 [above the £10,000 tax free threshold])
and low risk from IR35 (my contract is via an agency who said I wouldn't be at risk going via them).
Quarterly dividends apparently draw the least attention from the tax man too.
My plan was going to be:
£12,000 Annual Salary
~£7,905 Expenses (extra rent @£5pd, food @£10pd, 10,000 miles) Assuming 227 working days a year
Of reminder of my rate, *.8 to leave corporation tax and then pay the remainder of what is left quarterly to me (however I've heard you should leave say 30% in the business bank account so was going to do this?)
Thanks for any help on any points.
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