Originally posted by Lance
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IR35 and Corporation Tax
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Originally posted by elsergiovolador View PostLTD is just passing money through. I would think that LTD cannot make any deductions from secondary employment wage. Why do you think LTD can get hold of any of it?
and the LTD does not need to make any tax deductions. But it may choose to not pay all of the money. That would be a bit daft IMO, but could be used to reduce a DLA for example.See You Next TuesdayComment
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Originally posted by Lance View Posterrrr..... cos that's the example you posted about.....
and the LTD does not need to make any tax deductions. But it may choose to not pay all of the money. That would be a bit daft IMO, but could be used to reduce a DLA for example.Comment
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Originally posted by elsergiovolador View PostI think the example is missing the fact that Rebecca's company is borrowing the remaining £1200 or something else that's why I posted my comment. I've been looking for quite some time and I can't find any legal text that would support the idea that LTD can grab any of this money without agreeing a loan with the director (except DLA). If a company has running costs and gets paid worker's salary, surely it cannot just take this money to cover its liabilities, but rather borrow it from the director and then pay it back from future profits?
The fact it's in HMRC's example should tell you something. Surely???? No????See You Next TuesdayComment
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Originally posted by Lance View Postof course it can. It's just down to how it's accounted for in the book-keeping. I'm no an accountant hence I used DLA as an example of accounting, but it could be a capital investment.
The fact it's in HMRC's example should tell you something. Surely???? No????Comment
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This is my reading of the example, and my understanding of HMRC's point of view:
The eeNic and Tax deductions made by the client are legally offsetable against the worker's tax and eeNIC liability. The erNic paid by the client is also legally offset against any salary payment the ltd co might make, related to this contract.
You seem to think because of this, it's the worker's money. That's wrong. The fee from the client is remitted to the ltdco, less the IR35 deductions. After that, any money paid by salary to the worker (from that company income) is paid gross.
I.e. company accounts look something like
Invoice £7200Receive £5400
Account for the £1200 VAT
Book £1400 against tax (paid for your company by the nice client, but from accounting perspective it's not far of them remitting to your company and then passing it on to HMRC)
Book £800 against eeNic (paid for your company)
The company can now pay the worker salary of up to £4200 without making any further deductions, and without accruing any employer NI liability.
At no point (until the company makes a salary payment) does any of the money belong to the worker.
There may well be other legal and accounting issues with HMRC's interpretation the money not being the company's is not one of them.Down with racism. Long live miscegenation!Comment
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Originally posted by NotAllThere View PostThis is my reading of the example, and my understanding of HMRC's point of view:
The eeNic and Tax deductions made by the client are legally offsetable against the worker's tax and eeNIC liability. The erNic paid by the client is also legally offset against any salary payment the ltd co might make, related to this contract.
You seem to think because of this, it's the worker's money. That's wrong. The fee from the client is remitted to the ltdco, less the IR35 deductions. After that, any money paid by salary to the worker (from that company income) is paid gross.
I.e. company accounts look something like
Invoice £7200Receive £5400
Account for the £1200 VAT
Book £1400 against tax (paid for your company by the nice client, but from accounting perspective it's not far of them remitting to your company and then passing it on to HMRC)
Book £800 against eeNic (paid for your company)
The company can now pay the worker salary of up to £4200 without making any further deductions, and without accruing any employer NI liability.
At no point (until the company makes a salary payment) does any of the money belong to the worker.
There may well be other legal and accounting issues with HMRC's interpretation the money not being the company's is not one of them.Comment
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Originally posted by elsergiovolador View PostIf the worker takes all the money and makes a loan to cover company liabilities, is that going to be viewed as a form of tax avoidance?
If the company chooses to pay the worker a higher salary than the deemed payment, whether out of a DL or out of retained funds, there will obviously be tax due (ERNI, EENI, IT) on that extra payment. Similarly if the company chooses to pay a dividend in excess of the deemed payment, there will be dividend tax due.Comment
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Originally posted by elsergiovolador View PostIf the worker takes all the money and makes a loan to cover company liabilities, is that going to be viewed as a form of tax avoidance?'CUK forum personality of 2011 - Winner - Yes really!!!!Comment
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Originally posted by elsergiovolador View PostIf the worker takes all the money and makes a loan to cover company liabilities, is that going to be viewed as a form of tax avoidance?Down with racism. Long live miscegenation!Comment
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