Final Stance on IR35

[shoes]

If you are full-time on £5,035, that would work out below the national minimum wage. The general advice is to pay yourself a director's salary of £10k.

IANAA etc...

Does it matter if you work for below the minimum wage? You aren't about to take your employer (you) to court...

In my opinion, just take the risk. Do a Ltd co set up, pay min salary and the rest as divis. All government departments are ridiculously disorganised places with a staff of lazy numptys, the chances of an investigation are small. If they catch you then you'll just have to pay up plus a bit more, better that than actually volunteering to give these idiots your money in the first place. Chances are you'll get away with it.

As for the moral argument, my take on it is this : they will waste your money on making the country worse because the government are incompetent socialist idiots, the moral obligation is on you to give them as little money as possible to try and limit they damage they can do. It is better spent by you on goods and services supplied by other like minded people with an entrepreneurial spirit.

[pisces]

Does it matter if you work for below the minimum wage? You aren't about to take your employer (you) to court...

In my opinion, just take the risk. Do a Ltd co set up, pay min salary and the rest as divis. All government departments are ridiculously disorganised places with a staff of lazy numptys, the chances of an investigation are small. If they catch you then you'll just have to pay up plus a bit more, better that than actually volunteering to give these idiots your money in the first place. Chances are you'll get away with it.

As for the moral argument, my take on it is this : they will waste your money on making the country worse because the government are incompetent socialist idiots, the moral obligation is on you to give them as little money as possible to try and limit they damage they can do. It is better spent by you on goods and services supplied by other like minded people with an entrepreneurial spirit.

I like the cut of your jib

[THEPUMA]

NewBoy

The only point you may be missing is that if you pay every penny out to yourself as dividend (after salaries, expenses, corporation tax, etc), then that is not as tax efficient as leaving the surplus over £35K (per shareholder with no other income) in the company and eventually drawing it as a capital distribution on the liquidation of the company.

By way of example, let's say you generate surplus (as above after £35K of divis each) retained profits of £200K over a period exceeding 2 years. If you were to pay these out as dividends over the period, you would pay £50K in income tax whereas if you were to pay as a capital distribution at the end of the period, assuming there are 2 shareholders with no other capital disposals in the tax year in question, you would only pay £13K tax.

So the most tax efficient structure is to pay yourself £35K per shareholder per year, accumulate the balance in the company and distribute it as capital after 2 years.

All sorts of caveats, conditions, etc apply but this is very tax-efficient.

[ASB]

All sorts of caveats, conditions, etc apply but this is very tax-efficient.

Essentially there are two ways of doing it. A cheap way and a not so cheap way. The cheap way being to apply for concession C16. This lets you simply distribute the funds as a captial distribtuion to the shareholders and is in the gift of the tax inspector. You get 75% relief on the capital distribution and also get to use your CGT allowance. In round terms you can get out 40k per shareholder with no further tax to pay.

You have to give certain undertakings but it is not an onerous process. The inspector will not normally refuse, however I wouldn't have any idea of what their opinion might be were you applying for a different company every couple of years.

If the inspector should decide not to grant the concession you are left with 2 choices. Pay the remaining funds as a dividend - in which case it is taxed as normal (but you would be no worse off) or go through formal liquidation. The latter being comparatively expensive.

The company buying in its own shares may also be useful in certain circumstances - although we were advised against this (and can't remember why now).

THEPUMA is spot on in describing this at the most tax efficient way. A single person company with 2 shareholders with gross profit of 100k a year can get away with paying only corporation tax (and 2k in cgt 2 years down the line).

We did it in our last year of trading, divis to top of lower rate band and retain the rest. This plust the retained profits we got out with no CGT. Paying it as a dividend would have cost about 20k in higher rate tax.