Contractor calculator with MVL option?

[Olly]

Thinking about dipping a toe back into contracting.
I can’t quite remember what I did last time. Either I didn’t take dividends or if it did it was only up to some tax threshold but ultimately there was a chunk of cash left. I closed the company via MVL and the overall cost of everything inc taxes was pretty favourable.
The thing is contract rates don’t seem to have kept pace with my perm income so even with an outside IR35 contract I am not sure it’s worth it. All the online calculators I’ve found don’t seem to accommodate folks who want to minimise tax by going that route. Does anyone know of one please?

[jamesbrown]

That’s because it isn’t a sane calculation for contracting, only for ending contracting by retiring or going permie or whatever. With the TAAR, you are looking at 2+ years before you can do the same or a similar trade or activity if you don’t want your capital distribution to be reclassified as a dividend. I assume you received your last distribution from the MVL more than two years ago but, even if you did, this is not a sane calculation to make. Who knows whether BADR will be around in two years, for example?

[Maslins]

Afraid you're being very optimistic here.

The calculators out there are already stretched. Ie they'll have to make lots of assumptions, ignore lots of possibilities. Tax is complicated.

Just do contracting, perhaps restrict dividends to basic rates (or £100k), some threshold you're comfortable you can live off that leaves a buffer. As/when the time comes, you'll have options.

[Olly]

That’s because it isn’t a sane calculation for contracting, only for ending contracting by retiring or going permie or whatever…[snip]. Who knows whether BADR will be around in two years, for example?

Yes, I plan to return to perm sooner rather than later. I work in vendor tech pre-sales in the IT security space, the salary’s and commission are good. There isn’t an equivalent contractor role.
I appreciate there’s a chance BADR may not be around for ever but I would be basing my dividend withdrawals on that premise, why not base the whole calculation on it.

[Olly]

Afraid you're being very optimistic here.

The calculators out there are already stretched. Ie they'll have to make lots of assumptions, ignore lots of possibilities. Tax is complicated.

Just do contracting, perhaps restrict dividends to basic rates (or £100k), some threshold you're comfortable you can live off that leaves a buffer. As/when the time comes, you'll have options.

I will have a bash at my own calculations then. My circumstances aren’t complex. I need to make the decision whether to ‘just do’ contracting or whether or hold out for a perm role and that decision is largely a financial one.

[jamesbrown]

Yes, I plan to return to perm sooner rather than later. I work in vendor tech pre-sales in the IT security space, the salary’s and commission are good. There isn’t an equivalent contractor role.
I appreciate there’s a chance BADR may not be around for ever but I would be basing my dividend withdrawals on that premise, why not base the whole calculation on it.

You seem to be very mixed up. If there aren't any contracting roles and the permie positions are good, then be a permie. Again, you cannot compare net income over a short-ish period of time on the basis of being able to MVL. Even if BADR is still around and CGT rates are the same when you want to dispose of the company, an MVL is currently taking 12+ months to complete, perhaps up to 24 months. As an aside, the lifetime limit for BADR is now much reduced, £1m. Running a business comes with responsibilities that are not comparable to being a permie. You're trying to decide between apples and pears on the basis of how far you can throw an orange.

[Olly]

You seem to be very mixed up. If there aren't any contracting roles and the permie positions are good, then be a permie. Again, you cannot compare net income over a short-ish period of time on the basis of being able to MVL. Even if BADR is still around and CGT rates are the same when you want to dispose of the company, an MVL is currently taking 12+ months to complete, perhaps up to 24 months. As an aside, the lifetime limit for BADR is now much reduced, £1m. Running a business comes with responsibilities that are not comparable to being a permie. You're trying to decide between apples and pears on the basis of how far you can throw an orange.

It looks like there isn’t a perm job out there for me just now. A contract role has been offered but not doing the same job as I'd do as perm, like I said, such a thing doesn’t exist. It would be a good experience to spend time back on the “customer” side of the fence plus it’s immediate start….bird in hand and all that.
I don’t want to take the contract role though and then jack it in after 3 months because a perm position comes up which basically means I need it to be “paying” a good chunk more.
You say MVL takes some time, do you mention that because that will impact when I can get the cash. For me tax efficiency is paramount, I have savings that should last a considerable time.
I will be within the million limit.
I ran my own business for 10 years - some of the technicalities of the responsibilities may have changed in the last 6 or since I liquidated the company. That’s one of the things I am reading up on here on the forum.

[malvolio]

Things have changed quite a bit. Not so much the role of running a company, that's pretty much settled, but all the various rules that directly affect the financials and the market in which yo are working. Financially the gap between permie and contract is narrowing rapidly and the tax advantages have mainly been eroded anyway. For the market side a contract for a role in which you only have indirect knowledge is a bit of a gamble, and thinking any contract is likely to last more than three months and still be outside IR35 is problematic. And inside IR35 you will earning the same as a permie anyway...

If you have the reserves, keep looking for a permie role. If you are that niche, they must be out there. Taking a gig to fill in the time and earn a pile of cash (that you won't get for another year or two anyway, by the sounds of it) right now is a bit optimistic.

[Olly]

…thinking any contract is likely to last more than three months and still be outside IR35 is problematic.

Thanks for your reply, so far from what I have read, an outside IR35 contract is the same financially as it was 6ish years ago no?
Your comment above caught me…could you expand on that please?

If you have the reserves, keep looking for a permie role. If you are that niche, they must be out there. Taking a gig to fill in the time...

Well it wouldn’t quite be to fill in the time, it would be to gain some more experience client side too but yes, it would be a stop gap given the money side isn’t quite as rosey as it was for me 6 years ago. I think you could be right though. I should hold my nerve. It’s only been 3 weeks, the flip side is I have approached most of the potential employers in that time.

[malvolio]

Thanks for your reply, so far from what I have read, an outside IR35 contract is the same financially as it was 6ish years ago no?
Your comment above caught me…could you expand on that please?

A contract is to supply a specialist service to a client for a given objective. In the current world, a role that you can consider leaving in three months or so should a better or permanent job turn up seems unlikely to be one that is a contract for services as opposed to a contract of service - and that differentiation has hardened considerably in recent years. So yes an outside IR35 role still works the same way (albeit with greatly reduced incentives) but from what you've said this seems unlikely to qualify as one (in reality, not necessarily what the client thinks it is). You would need expert advice from someone like B&C or QDOS to find out.

Well it wouldn’t quite be to fill in the time, it would be to gain some more experience client side too but yes, it would be a stop gap given the money side isn’t quite as rosey as it was for me 6 years ago. I think you could be right though. I should hold my nerve. It’s only been 3 weeks, the flip side is I have approached most of the potential employers in that time.

And again, this may be a mindset thing, but nowadays contractors are not hired to expand their knowledge. If you have the opportunity to do so, you are not supplying a service so you are not outside IR35.

It sounds harsh, but that's the world we live in these days. Six years is a very long time in this market.