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

[simondolan]

Thought it might be useful to sum up the changes:

What is a Composite Company?

A Composite Company is one which administers a large number of individuals under one Limited Company. The individual will be allocated a particular class of share in the Company, but will not be involved in the running or administration of the Company, will usually not be a director, and will not have access to the bank account. They are usually paid either weekly or monthly in the form of a small salary and large dividend and expense payments.

What is a Managed Company?

A Managed Company is in most respects the same as a Composite Company but rather than there being several individuals using the same Company, the Managed Company will just have one individual running through it.

What does the new legislation mean to me?

The new legislation, which will come into force on 6th April 2007, means that individuals using either a Composite or Managed Company will no longer be able to receive either dividends or expenses. What this means in effect is that you will take a massive cut in take home pay – we estimate around a 40% cut.

What should I do now?

The best option from a financial point of view is most certainly to open your own Limited Company. These are quick, cheap and easy to set up, and with the right accountant, simple and straightforward to run. Your take home pay using your own Limited Company is usually in excess of 80%, and you can continue to claim all work related expenses.

If you are a short term, low paid contractor, or you simply don’t want to do any admin, then an Umbrella Company is still the way to go, but bear in mind you will no longer be able to claim high levels of expenses because of the new legislation.

[Lucy]

Thanks Simon.

[gravesendboy]

Simon

Thanks for this but could you just clarify 'you will no longer be able to claim high levels of expenses because of the new legislation'
I presume this would apply to the 'high artificial expenses' as opposed to genuine high levels of expenses

[simondolan]

Simon

Thanks for this but could you just clarify 'you will no longer be able to claim high levels of expenses because of the new legislation'
I presume this would apply to the 'high artificial expenses' as opposed to genuine high levels of expenses

At the moment they are saying that you will only be able to claim expenses that would be allowable as a normal employee, so in many cases this will be next to nothing.

What is certain is that the days of unethical companies pushing the whole expense policy nonsense as a selling point are well and truly over.

[freshblue]

At the moment they are saying that you will only be able to claim expenses that would be allowable as a normal employee, so in many cases this will be next to nothing.

What is certain is that the days of unethical companies pushing the whole expense policy nonsense as a selling point are well and truly over.

Isn't there also a case that nearly ALL expenses will be disallowed?

[tim123]

Simon

Thanks for this but could you just clarify 'you will no longer be able to claim high levels of expenses because of the new legislation'
I presume this would apply to the 'high artificial expenses' as opposed to genuine high levels of expenses

Wrong. It means no expenses.

Without an (expensive) auidt, HMIT is incapable of differentiating between Johny who claims 20 quid for genuine meals and 20 quid for genuine travel expense and Jimmy who claims 40 quid for walking 20 yards down the street each day.

So Jimmy and Johny will now both get to claim zero.

HTH

tim

[Waldorf]

Bugger, this is what I've fallen for, I need to start a company asap, I did have one but fell for the "unlimited" expenses line.......

[Cowboy Bob]

Bugger, this is what I've fallen for, I need to start a company asap, I did have one but fell for the "unlimited" expenses line.......

In which case you're already in trouble for fraud. If you don't have receipts to back up your expenses then the IR is going to shaft you good and proper when they come calling...

[Darren@UptonAccountants]

Limited Companies

But best to minimise the risk by moving asap.

[Money Money Money]

Thought it might be useful to sum up the changes:

What is a Composite Company?

A Composite Company is one which administers a large number of individuals under one Limited Company. The individual will be allocated a particular class of share in the Company, but will not be involved in the running or administration of the Company, will usually not be a director, and will not have access to the bank account. They are usually paid either weekly or monthly in the form of a small salary and large dividend and expense payments.

What is a Managed Company?

A Managed Company is in most respects the same as a Composite Company but rather than there being several individuals using the same Company, the Managed Company will just have one individual running through it.

What does the new legislation mean to me?

The new legislation, which will come into force on 6th April 2007, means that individuals using either a Composite or Managed Company will no longer be able to receive either dividends or expenses. What this means in effect is that you will take a massive cut in take home pay – we estimate around a 40% cut.

What should I do now?

The best option from a financial point of view is most certainly to open your own Limited Company. These are quick, cheap and easy to set up, and with the right accountant, simple and straightforward to run. Your take home pay using your own Limited Company is usually in excess of 80%, and you can continue to claim all work related expenses.

If you are a short term, low paid contractor, or you simply don’t want to do any admin, then an Umbrella Company is still the way to go, but bear in mind you will no longer be able to claim high levels of expenses because of the new legislation.

Simon,

I have previously seen you as very knowledgeable and very helpful to myself and other members of the site, BUT it seems that you are just becoming one of the all to familiar ers. Advertising for business!

You have made a huge point on your website about "Giant, Brooksons, Parasol IT or Prosperity 4" and how nobody should use them, but you haven't mentioned "Contractor Umbrella". I'm sure I read on here that they are owned by yourself, I may be wrong.

Please enlighten me as to why you left that one off the list?!?!