5% expense allowance

[pod]

Under IR35, when keeping track of my 5% expense allowance. Do I include accountancy fees with or without VAT?. I do reclaim VAT back.

Pod

[malvolio]

You have an accountant and you're asking questions like that? I should get a new one...

VAT money is not yours, so keep it out of your calculations. Accountants fees are one of the few allowable business expenses you can take off outside the 5% - but as I say, these are basics that accountants should be advising you on.

And I suppose asking why you are inside IR35 in the first place would be a really dumb question?

[Bigbird]

He's been 'facilitated and promoted' that's why.

But surely that would take him away from the whole IR35 debate anyway? MSC legislation quite clearly states that intermediares legislation is irrelevant to those caught by it, and only applies if you are a "proper" Ltd not a "managed" one........

My brain hurts!

[Bright Spark]

Nah! You dozy clot, it's like this:

Because we've managed to become limited and managed to avoid MSCs under the original definition that was too clear and understandable for the iR's purposes we're being managed, by default simply because we've managed to achieve this. Therefore, our company directors who own 100 per cent of our shares, are our MSCs, facilitated and promoted by the setting up of our PSCs by our accountants, who may not be accountants after all, since 6th April even if they are clearly ICA members, but really a delegated MSC because the've benefitted financially from giving our director's their advice on tax planning matters, which is really tax avoidance, to keep our managed limiteds going when we're fee earning as de facto employees, even if we do control the bank account which is really being managed by the accountant, who isn't really an accountant, but an MSC, because they passed us the details of the banks they recommended.

Clear now?

[This should be on general]

Are you saying that all accoutants who do work for 'one-man' ltd companies
are now acting as potential MSC's since 6th April 2007?

If that is the case then that would affect a lot of people not just
IT contractors, ie Building Contractors, Architects, Surveryors,Dentists,
Plumbers....................

My head is hurting as well.

[Euro-commuter]

Accountants fees are one of the few allowable business expenses you can take off outside the 5%

I thought the 5% was to allow for legitimate expenses that would not be available under Schedule E, i.e. that an employee could not claim; accountant's fees being precisely the example specifically mentioned by HMG?

[malvolio]

I thought the 5% was to allow for legitimate expenses that would not be available under Schedule E, i.e. that an employee could not claim; accountant's fees being precisely the example specifically mentioned by HMG?

Don't apply logic to IR35. 5% is HMG's estimate of the cost of a one-man company providing the kind of employee benefits that full-time employees get - you know, SSP, health care, holidays, that kind of trivia - and demonstrates just how well thought out the whole thing was.

As regards accountants, there are four criteria in the rules, all of which have to be met if a company is to fall under the definition of an MSC. HMG is well aware that various providers are claiming to be accountancy firms in order to escape the MSC rules: what's happening is the FUD that results has been seized upon to put people like SJD into the MSC box. It's bollocks, the rules are quite clear and you can use any real accountant you like, small or large, without fear.

The full definition is at http://www.hmrc.gov.uk/employment-st...ftchapter9.pdf if you're really interested, and you would need to meet all four of the main criteria to fail the MSC test. Unless you're stupid enough to be running with an ex-MSC's scheme, you won't.

[Euro-commuter]

Don't apply logic to IR35. 5% is HMG's estimate of the cost of a one-man company providing the kind of employee benefits that full-time employees get - you know, SSP, health care, holidays, that kind of trivia - and demonstrates just how well thought out the whole thing was.

Well, no, it's for things that they do accept that even IR35 contractors need but employees do not. Like an acocuntant.

[Red 7]

acocuntant.

Deliberate typo ?

[ittony]

What is this 5% allowance anyway?

[malvolio]

Thud...thud...thud....


It's the grant HMG give you for not being in business.