Death of Composite Co's?

[Darren@UptonAccountants]

Limited Companies

As expected, they're trying to come up with "son of IR35"...should be interesting! In the meantime, limited company route seems to be the best way to go!

More will come out when the legislation is digested over the next couple of days.

[deforce]

In other words, get out of the managed service companies now and then we'll get you when you form your own company.

Indeed!
As above, you are no longer running a limited company, you are now a PSC, a company that provides 'personal services' and as such should be taxed as a person would, i.e PAYE and NI....
Believe me, this is the first step to replacing IR35.
And yes, as we have long acknowledged we are no different to wh*res, the IR have just confirmed it....

[Pondlife]

I don't like this at all

4.26 Information about the application of the Intermediaries legislation is currently
obtained through the end of year return completed by employers (the P35). Two
questions on the P35 form will be revised. These currently ask:

- Are any of your contracts caught by IR35?; and
- If so, have you paid your tax by attaching it to a P14?



4.37 These questions will be revised to ask:

- Are you a service company? (with a clear definition of “service company” to
enable a judgment to be made readily); and
- If yes, have you operated the Intermediaries legislation or the new MSC
legislation?

4.28 The changes will be made to the P35 form covering the tax year 2007-08.

4.29 Two additional questions will also be asked on the Income Tax Self Assessment
(ITSA) return asking if any income (of whatever nature) in the return is derived from the
taxpayer’s provision of their services via a service company and, if so, the amount.

These changes will be introduced to the ITSA return form for 2007-08.

The wording seems to cover all 'service' companies!

[tim123]

In the Pre-Budget Report proper I came across this little nugget:


In other words, get out of the managed service companies now and then we'll get you when you form your own company.

At least someone has a fighting chance with an own Ltd.

The MSC rule appears to be saying that: working through one always equals the equivilent of inside IR35 (and TBH, not before time)

tim

[Bradley]

Psc

At least someone has a fighting chance with an own Ltd.

The MSC rule appears to be saying that: working through one always equals the equivilent of inside IR35 (and TBH, not before time)

tim

True enough Tim but I'll be waiting for Ed Balls (the next chancellor - add your own punchline) to be "shocked" when the number of PSC registrations starts going up in the next six months. This will be clear evidence of tax motivated incorporation which = more tax.

[dude69]

The wording seems to cover all 'service' companies!

It does. However I think the intent is to *identify* us. They will ask us, so it makes them easier to investigate us. No change in the law. It's perfectly legal - you're just more susceptible to be investigated.

Hope you have your investigation insurance.

[Robot]

Interesting...

Fairness and certainty for taxpayers
Managed Service Company Schemes

The Government is taking action to tackle Managed Service Company (MSC) schemes which are used to avoid paying employed levels of tax and NICs. Income received by workers in MSCs in relation to services provided through the MSC will be subject to employed levels of tax and NICs, with the MSC obliged to operate Pay As You Earn (PAYE) and deduct tax and Class 1 NICs on that income - and the rules for tax relief for travel expenses will be the same as for other employed workers.

The Government will also address the problem of MSCs escaping payment of tax and NICs due by allowing the recovery of these debts from appropriate third parties.


This will protect the Exchequer and ensure a level playing field for compliant businesses and workers. The Intermediaries legislation will remain in place for Personal Service Companies.

The Government is consulting on the draft legislation to implement this measure. The draft legislation and questions for consultation are set out in the consultation document Tackling Managed Service Companies, published alongside the Pre-Budget Report today.

[Pondlife]

It does. However I think the intent is to *identify* us. They will ask us, so it makes them easier to investigate us. No change in the law. It's perfectly legal - you're just more susceptible to be investigated.

Hope you have your investigation insurance.

My point is that 'we' are defined as personal service companies and although we are differentiated from MSCs we generally provide a service to our clients and therefore are more inclined to tick the 'stupid' box - not because of the way we operate or whether we're IBOYOA but because of what our business does. To my mind it's the thin end of the wedge.

[mjonesuk]

Damn, signed up to Giant.....

2 weeks into first ever contracting job, stupidly fell for the Giant blurb. Intended to use Umbrella to test waters of contracting, as this contract is (currently) for 3 months.

I wold appreciate any suggestions from you guys as to my next move - Giant haven't paid me anything yet as I've only just started, should I (can I?) jump ship now (go LTD?), stay on the Giant Powerhouse scheme for this contract (aren't I penalised under IR35 rules if I only use them for one contract?) or switch to their Strongbox package (which they claim is unaffected) or another Umbrella?

Thanks!

[simondolan]

2 weeks into first ever contracting job, stupidly fell for the Giant blurb. Intended to use Umbrella to test waters of contracting, as this contract is (currently) for 3 months.

I wold appreciate any suggestions from you guys as to my next move - Giant haven't paid me anything yet as I've only just started, should I (can I?) jump ship now (go LTD?), stay on the Giant Powerhouse scheme for this contract (aren't I penalised under IR35 rules if I only use them for one contract?) or switch to their Strongbox package (which they claim is unaffected) or another Umbrella?

Thanks!

Go Limited, or if worried that contracting may not be for you, use an umbrella.

All umbrellas now will give you the same return on income so look for decent service and a good price. Not sure what Giant charge for their umbrella, but plenty to choose from.