What to do if you are currently with a Composite or Managed Company.

[malvolio]

MSCs can still exist, but they will treat you as an employee. Hence, full PAYE/NICs, no travel to work expenses - but also no employee benefits, which is the real injustice. In effect you drop about 40% of your income for no benefit. Can't really see how they will survive, but TBH I could care less.

Umbrellas continue as before, except the "Outside IR35" option no longer applies; you either pay full tax as inside IR35 or you pay full tax as an employee of the umbrella, in both cases also without employment benefits. Same rules for expenses as MSCs of course. On that basis, it's marginally cheaper to be inside IR35...

[tim123]

I wish the Gov would get smart. The average contractor might have revenue of say £60k, and hence pay about £15k tax. If he is forced to go permie, he will prob earn, say £40k, and pay about £11k tax.

Am I being stoopid here? i.e. does the Gov want less tax by forcing us all to become permies?!

Then again, I've always said that only the thickest and least educated people work for government, hence that explains their thinking...

What you are missing here is that HMG (quite reasonably IMHO) sees national corporate expenditure as a zero sum game.

If you are being paid 40K instead of billing 60K, there is still 20K sloshing around somewhere in the system. That 20K is very likely to be paid out to someone else as a taxable payment and HMG will collect their dosh then.

It's all far more complicated than the part that you play.

tim

[tim123]

So I have this right in my mind.

1. Umbrella's - They are going to turn into payroll companies (no expenses no point using them!)
2. If you are outside of IR35 then set up your own, and get a good accountant.
3. Composites and Managed Limited Companies, are in a world of trouble and are effectively shut down as of the 6th April.

In regard to the latter, are they just going to lie down and take it? I doubt it. Won't they just turn into accountants?

One of the things that you are missing here is that this isn't just about 'us' (I.e High paid IT contractors).

Over the past 4 years, the world of people working through Umbrella/MSCs has grown to include: agency nurses, locum doctors, supply teachers, railway
workers, delivery drivers etc, etc, etc. Many of these people charge rates under 20ph and/or only work a few days a week.

These types of workers would previously have been employed directly by the agency and few of them will earn enough to justify the Ltd Co route. By moving to the MSC they are able to take advantage of the lax 'expense'
regime that was previously closed to them. Gordon wants to stop this.

tim

[malvolio]

Absolutely. Whatever we do individually or people like the PCG do for us collectively, we have to bear in mind that the people most at risk are the low-paid temps and day workers who could be royally screwed by unscrupulous use of the rules. That is why some are pushing for a statutory right to be self-employed (which has all sorts of ramificaions, mind!) where you can exchange employment rights for freelance status, subject to meeting certain qualifying conditions.

That said, the best way for us to help oursleves at the high-end contractor market, is to campaign for proper B2B contracts and to be treated as suppliers not temporary employees (and don't start that one again...).

[punkie]

Because, my deluded friend, MyCo is run by me, I take the commercial decisions, I sign the cheques, I pay the bills, I keep the profits, I own the shares.

For an MSC, someone else does all that decison making, takes a lump out of the profits and gives me some shares that are only a small part of the total via an articificial use of classes of shares, so on what basis would (or should!) I be able to claim business taxes and dividends?

So if I'd start a limited co. business with 2 more people, having 20% of the shares and not beeing the director, the company couldn't claim expenses incured by me working full time for the customer, because I'm not in the control of the company? However, for the director having 60%, this would be ok??

[malvolio]

Potentially yes, but (a) it's a damn silly way to set up your own company and (b) why would you work for someone who refused to pay you legitimate expenses?

The differentiator is that the typical comp-aka-MSC takes away all business responsibility from the "owner", so HMG has said the "owner" don't deserve to get the benefits of businesses and should be paid like any other employee.

[Newby]

No one seems to have mentioned the reference to the third party tax liability thats mentioned?

I am right in saying that If we don't pay the correct tax and then dissolve the company then hmrc are going to go after the pimp first then the end client? I would have thought that this would have caused mass panic in pimp world.

[tim123]

No one seems to have mentioned the reference to the third party tax liability thats mentioned?

I am right in saying that If we don't pay the correct tax and then dissolve the company then hmrc are going to go after the pimp first then the end client? I would have thought that this would have caused mass panic in pimp world.

No, they are going to go after the people complicit in the illegal act. I.e the person who decided to desolve the company having not conformed to the appropriate rules.

tim

[Parasol_Service]

So I have this right in my mind.

1. Umbrella's - They are going to turn into payroll companies (no expenses no point using them!)
2. If you are outside of IR35 then set up your own, and get a good accountant.
3. Composites and Managed Limited Companies, are in a world of trouble and are effectively shut down as of the 6th April.

In regard to the latter, are they just going to lie down and take it? I doubt it. Won't they just turn into accountants?

Thought it was high time we responded to some of the stuff being posted and this seemed like a good quote.

1. "Umbrellas" that fit the MSC definition will have problems with expenses (as per the draft legislation) - Expenses will be allowed on specific models but the days of P4 and the rest selling via expenses are limited. Parasol whilst being viewed as a PAYE Umbrella is about as far away as you can get from the MSC definition and not like ContractorUmbrella (as an example) at a detailed level.

2. Or if you don't want the hassle, a professional employment service like ours will allow you to operate with sensible returns.

3. Agreed - Composites are dead but I know for a fact that many are preparing to reconstitute as PSC variants. The Limited Co operators are going to have a lot of competition very soon!

The good will always rise to the top and we have had a tough few years competing with "composites", "IR35 insurance schemes" and other variants.

We are excited about a possible "level playing field" but it will be naive to imagine MSC operators will simply lie down and die. MSC's and others are too used to sitting on bank interest from all the Corp Tax payments they hold, flat rate VAT schemes and charges on expenses.

Will be an interesting few months ahead!

Lesley Sweetman
Service Delivery & Compliance Manager

[simondolan]

Thought it was high time we responded to some of the stuff being posted and this seemed like a good quote.

1. "Umbrellas" that fit the MSC definition will have problems with expenses (as per the draft legislation) - Expenses will be allowed on specific models but the days of P4 and the rest selling via expenses are limited. Parasol whilst being viewed as a PAYE Umbrella is about as far away as you can get from the MSC definition and not like ContractorUmbrella (as an example) at a detailed level.


Will be an interesting few months ahead!

Lesley Sweetman
Serice Delivery & Compliance Manager

Interesting. What then do you perceive the difference to be between Parasol and for eg Contractor Umbrella?