BN66 - Time to fight back (Chapter 3)

[xantamisch]

I too am nervous of new schemes. However, DG have committed to pay tax due between March and August 08 (when the new scheme started) providing you work through them in their new "interim" scheme through Aug 09 while the mess is sorted out - so I guess they must be confident that it will be...............

overall, I'd rather be out of it but looks like I'm in for the duration now

don't think a CTD applies to me as I haven't yet submitted a tax return when I was paid Trust Income

[ASB]

Indeed - good point. I am now limited and so will probably do that for at least 2/3 years.

But once the montp case is settles and we win - who knows? I might have the appetite for risk again........

BP,

I'm curious here. Assume that your are outside IR35 and income shifting is barred (or it's not appropriate due to your circumstances), the essentially the "optimal" strategy is 5k salary, balance in dividends [potentially retaining funds to pay out with entrepreneurs relief, but assume one intends to max out current income].

In this case on 100k turnover one could pay:-

5k salary
CT on 95k = 19950
75050 dividend.

The dividend will incur more tax of course: 75050 - 6035 - 34800 = 34125 * .25 = 8553

So this gives cash of 80050 - 8553 = 71497. Add in about 3.5k from vat FRS and it is in round figures 75000. [75% retention]

Now, if you had only a 60k turnover:-

5k salary
CT on 55k = 11550
43450 dividend.

The dividend will incur more tax of course: 43450 - 6035 - 34800 = 2600 * .25 = 650

So this gives cash of 48450 - 650 = 47800. Add in about 2.1k from vat FRS and it is in round figures 50000. [83% retention]

-------------------------------------------------

As I understand the schemes they generally talk about a 85-90% retention. In the event of failure handing over about 35% of the scheme income reducing the retention to about 55-60%

If one was billing 60k it seems to me that seems you are "betting" 21k tax bill against an increased income of 1k-4k. For me this seems a bit daft.

If one was billing 100k then it seems the bet is about 30k against an increased income of 10-15k. This seems a much better risk profile, but still for me too high.

Certainly in my case with the ability to income split I could never find any justification for looking seriously at schemes. The rewards just weren't there.

So, I have I missed something or do you just have a completely different view of the level of risk to me?

[Fisherman]

De lurking

Hello All

Thought about time I came out of the wood work

I have been in the scheme since 2001 my current laibility would be about £170k including interest, this is a calculation I have done myself based on Tax and Class 4 Nic's assuming that is how HMRC are calculating it i.e Total income on a self employed basis.

I can raise just over half of this (if they take a charge on the ex wifes house) other than that i am stuffed, not sure if they can/ would take your pension as an asset.

In terms of my confidence level I dont see how one can judge, you have one set of highly qualified lawyers saying we will and another set (the goverments) saying we wont.

So we have paid our money made our choice just got to stick with it let MP do what we have paid them for and hope they are correct.

Well done for the stalwarts of this thread for providing some useful info

[ManureCreek]

BP,

I'm curious here. Assume that your are outside IR35 and income shifting is barred (or it's not appropriate due to your circumstances), the essentially the "optimal" strategy is 5k salary, balance in dividends [potentially retaining funds to pay out with entrepreneurs relief, but assume one intends to max out current income].

In this case on 100k turnover one could pay:-

5k salary
CT on 95k = 19950
75050 dividend.

The dividend will incur more tax of course: 75050 - 6035 - 34800 = 34125 * .25 = 8553

So this gives cash of 80050 - 8553 = 71497. Add in about 3.5k from vat FRS and it is in round figures 75000. [75% retention]

Now, if you had only a 60k turnover:-

5k salary
CT on 55k = 11550
43450 dividend.

The dividend will incur more tax of course: 43450 - 6035 - 34800 = 2600 * .25 = 650

So this gives cash of 48450 - 650 = 47800. Add in about 2.1k from vat FRS and it is in round figures 50000. [83% retention]

-------------------------------------------------

As I understand the schemes they generally talk about a 85-90% retention. In the event of failure handing over about 35% of the scheme income reducing the retention to about 55-60%

If one was billing 60k it seems to me that seems you are "betting" 21k tax bill against an increased income of 1k-4k. For me this seems a bit daft.

If one was billing 100k then it seems the bet is about 30k against an increased income of 10-15k. This seems a much better risk profile, but still for me too high.

Certainly in my case with the ability to income split I could never find any justification for looking seriously at schemes. The rewards just weren't there.

So, I have I missed something or do you just have a completely different view of the level of risk to me?

Hey ASB, why would there be additional tax to pay on the dividend? I understood that if you are not a higher rate tax payer, there is no additional tax to pay on dividends, once corporation tax has been paid by the company?

And on a "salary" of 5K, clearly you wouldnt be a higher rate tax payer.

Or is it me thats missing something?

[BrilloPad]

I too am nervous of new schemes. However, DG have committed to pay tax due between March and August 08 (when the new scheme started) providing you work through them in their new "interim" scheme through Aug 09 while the mess is sorted out - so I guess they must be confident that it will be...............

overall, I'd rather be out of it but looks like I'm in for the duration now

don't think a CTD applies to me as I haven't yet submitted a tax return when I was paid Trust Income

Good point - Until 31st Jan 2009 there is no point.

[DonkeyRhubarb]

So, I have I missed something or do you just have a completely different view of the level of risk to me?

Bear in mind that many people (like me) joined 7 years ago when IR35 had just come in and the landscape was very different. The risk/reward then did seem attractive but I agree it's questionable now.

[BrilloPad]

BP,

I'm curious here. Assume that your are outside IR35 and income shifting is barred (or it's not appropriate due to your circumstances), the essentially the "optimal" strategy is 5k salary, balance in dividends [potentially retaining funds to pay out with entrepreneurs relief, but assume one intends to max out current income].

In this case on 100k turnover one could pay:-

5k salary
CT on 95k = 19950
75050 dividend.

The dividend will incur more tax of course: 75050 - 6035 - 34800 = 34125 * .25 = 8553

So this gives cash of 80050 - 8553 = 71497. Add in about 3.5k from vat FRS and it is in round figures 75000. [75% retention]

Now, if you had only a 60k turnover:-

5k salary
CT on 55k = 11550
43450 dividend.

The dividend will incur more tax of course: 43450 - 6035 - 34800 = 2600 * .25 = 650

So this gives cash of 48450 - 650 = 47800. Add in about 2.1k from vat FRS and it is in round figures 50000. [83% retention]

-------------------------------------------------

As I understand the schemes they generally talk about a 85-90% retention. In the event of failure handing over about 35% of the scheme income reducing the retention to about 55-60%

If one was billing 60k it seems to me that seems you are "betting" 21k tax bill against an increased income of 1k-4k. For me this seems a bit daft.

If one was billing 100k then it seems the bet is about 30k against an increased income of 10-15k. This seems a much better risk profile, but still for me too high.

Certainly in my case with the ability to income split I could never find any justification for looking seriously at schemes. The rewards just weren't there.

So, I have I missed something or do you just have a completely different view of the level of risk to me?

Its a good point - I have not even started working through the figures. In the presentaion montp gave I was quoted on 100k income. £85k if montp win - £65k if montp lose, £55k with IR35. I am 99% sure I am outside IR35. I reckon with careful "income shifting" I can get to £70k+.

But that extra £15k means alot to me! And I love making HMRC lives a misery! I have got used to living life with quite alot of action - makes me feel alive. I love doing things I never thought I would be able to do.

Mrs BP would like me to spend all evening with slippers/hot chocolate/digestive(chocolate if my birthday). But whatever I do I get shouted at anyway - might as well get shouted at for something worthwhile.....

[Jean Grey]

Can we refile a return

Hi

I am curious, if THEY win is it possible to refile a return? I ask because under the MP scheme we had to put in ''reasonable'' expenses to be offset against the salary. If HMRC wins can we refile with every expense we had that year?

BTW my tax return two years ago was late from MP. Not by me, I got my details to them before the deadline and I had to pay the fine myself.

[rosebud]

Hello from "lurker"

thanks for delurking

Have you got a CTD? Do you have spare money to get one? Do you have a mortgage? Are you still in the scheme? Any idea what your liability is? (roughly take a third of trust income).

BP,
No, I do not have a CTD nor have a mortgage (paid it off with the extra savings from the (original) benefits of being in the Scheme).
If it's a third of my income, then I will probably be scraping the 100K mark (7 years in the Scheme).
I could produce half the above sum if I ask nicely to my wife and parents, but nowhere near the 100K (is it still worth getting a CTD for that amount?).
As everyone else, I am counting (and praying) on winning the case.

[ASB]

Hey ASB, why would there be additional tax to pay on the dividend? I understood that if you are not a higher rate tax payer, there is no additional tax to pay on dividends, once corporation tax has been paid by the company?

And on a "salary" of 5K, clearly you wouldnt be a higher rate tax payer.

Or is it me thats missing something?

The dividends themselves make you a higher rate taxpayer. Hence the reduction of the total income by the personal allowance and the base rate band to calculate the amount on which higher rate was payable.