IR35 investigation less likely?

[gingerjedi]

Yes great advice, thanks.

[kingshuk]

Thanks Denny! Very useful tips.

[gingerjedi]

Judging by the amount of views this thread has had there are a lot of twitching bums out there, including mine!

[Diestl]

I disagree, although GB won't explicitly say IR35 is lame legislation (because he still wants people to worry about it enough to make them pay full PAYE), his small business corp. tax increase is replacing it. I am much less worried now about IR35.

If you have an outside contract and maybe PCG membership, then I think you are safe. Even in the 0.1% chance you get investigated, and then 0.1% chance you get found inside, it only applies to one contract and if they are 3-6 monthers then your talking a small amount to payback.

[mictech]

If increasing CT is going to be a trend for Gordo, Can we have a couple of accountant tell us at which point does CT and Div tax rises become the the same as the tax on paye and NI.

[Ennui]

That's the question that a lot of people are asking.

Anyone know the answer?

[VectraMan]

If increasing CT is going to be a trend for Gordo, Can we have a couple of accountant tell us at which point does CT and Div tax rises become the the same as the tax on paye and NI.

Correct me if I'm wrong (very possibly), but there's no upper limit on employers NI. So inside IR35 is -13% then - 20% = 30% ish , and outside is -22% (assuming you stay out of the upper rate and ignore employee NI and salary).

The upper rate will be -13% - 40% = 48%, and outside will be -22% - 25% = 41.5% ish.

So not even close as yet.

[THEPUMA]

At the moment the marginal tax cost of extracting salary from a company for a higher rate taxpayer is 47.7%. The marginal cost of extracting a dividend has just gone up from 39.25% to 40%.

Assuming PAYE, NIC and tax on dividends remain the same, small companies' CT would have to rise to 30.27% for the same tax burden to arise.

However, this does not account for the fact that there are 2 other major tax savings potentially possible via your company.

Firstly, you can defer or avoid tax by leaving residual profits in the company.

And secondly, you can utilise your spouses' basic rate allowances by splitting dividends.

Following up on a query made earlier in the thread, someone asked how to convince an EB to give you an "IR35 friendly" contract. My usual tactic is gto explain to them the consequences of the Muscat vs Cable & Wireless case.

This was the case where Mr Muscat, who operated via his own limited company, ENuff Limited (he had the hump about being forced to go limited!) sued C&W for unfair dismisaal and won.

The upshot of this case is that all contractors working on non-IR35 friendly contracts have full employment rights. So it is very much in their (the EB and end-client) interests to give you an IR35 friendly contract.