Better off beight caught by IR35?

[MPwannadecentincome]

AAAARRRRGGGHHHH!!!!!

FFS when will people get it into their thick heads that expenses are not income. If you make money on them by understating your tax position, you're doing it wrong and potentially commiting evasion.

Also, if you buy something for £10 and expense it, all you're doing is getting back the tax on the original £10 you used to pay for it.

Calm down......I know its not income but it reduces the taxes you pay.

For IR35, if 5% of gross can be treated as expenses, that is a fair sum of tax saved, whether you spent it or not apparently the 5% is allowable, if you haven't spent it then the tax saved is effectively is income.

[Tarquin Farquhar]

Calm down......I know its not income but it reduces the taxes you pay.

Oh, now I see. So if I spend ALL the income on buying stationery, I've saved a TON of tax?

[MPwannadecentincome]

Oh, now I see. So if I spend ALL the income on buying stationery, I've saved a TON of tax?

nooooooooo

If you gross £100K you can offset 5K as expenses EVEN IF YOU DID NOT SPEND ANYTHING

[jetrimby]

NO my understanding (which I am sure is right) is that you can claim UP TO 5% in expenses you do not have an automatic right to the 5% deduction

If someone can prove me wrong I am always happy to stand corrected!

SORRY !!!! TOO long ago in the study manual a quick review of HMRC says 5% is okay I stand corrected !

[MPwannadecentincome]

NO my understanding (which I am sure is right) is that you can claim UP TO 5% in expenses you do not have an automatic right to the 5% deduction

If someone can prove me wrong I am always happy to stand corrected!

I'm no expert, and its complex:

In granting the 5% allowance, HMRC do not require proof of expenditure and the full 5% is granted, even if there is no actual expenditure whatsoever.

Other expenses

Note that the 5% allowance is only for "administration" and is to cover the ten points above. In addition to the 5% for administration costs, a contractor can also claim direct costs such as travel, computer costs, subsistence, direct training, sub contractors, etc.

Allowances for corporation tax

The 5% is in respect of the deemed salary calculation only and is not taken into account when preparing the company’s accounts and corporation tax computation.

The company accounts will take into account the actual expenses only, which may be higher or lower than the 5% allowance.

hmmmm I've just noticed that this is from the same site as the calculator, so maybe the calculator allows for this already?

Anyway reading it again it does still look odd if any calculator gives a result claiming you are better off inside IR35 - I'm prepared to admit I could be wrong on what I said earlier.

[malvolio]

I'm getting a headache...

Which bit of "the money you are claiming back is for something paid for out of taxed income" did you not understand?

And the 5% in IR35 is nothing to do with expenses. Take your gross, deduct allowable business expenses such as pension, travel, accomodation, accountancy fees and the like (but not training) and you get a balance. Take 95% of that balance. That's what you pay PAYE and NICs on regardless of how much you actually take out of the company.

Seriously if you don't understand the basics, go with an umbrella and stop wasting everyone's time. This is not a game for amateurs.

[OrangeHopper]

I'm getting a headache...

Which bit of "the money you are claiming back is for something paid for out of taxed income" did you not understand?

And the 5% in IR35 is nothing to do with expenses. Take your gross, deduct allowable business expenses such as pension, travel, accomodation, accountancy fees and the like (but not training) and you get a balance. Take 95% of that balance. That's what you pay PAYE and NICs on regardless of how much you actually take out of the company.

Seriously if you don't understand the basics, go with an umbrella and stop wasting everyone's time. This is not a game for amateurs.

I'm going to regret doing this but I can't help myself.

I have always taken 95% of the sales gross, then deducted allowable expenses before paying the rest as PAYE/NI. I also disagree that accountancy fees are an IR35 allowable expense and they are paid out of the 5%. I do agree that the other expenses you have quoted reduce your deemed payment.

[d000hg]

I have to say that I dont understand this IR35 thing you have in the UK.

Either you are in business on your own account or you are a disguised employee, regardless of Ltd Cos etc.

PZZ

Sssh, HMRC will use this as evidence that contractors are knowingly cheating the system.

The UK doesn't have friendly rules towards sole traders, which is the 'proper' self-employed way to work. So UK contractors set up companies. But it's not fair they then have to pay all the employer taxes as well as employee taxes on their income, hence dividends redress the balance somewhat.

[norrahe]

Speak to an accountant!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[MPwannadecentincome]

I'm getting a headache...

Which bit of "the money you are claiming back is for something paid for out of taxed income" did you not understand?

And the 5% in IR35 is nothing to do with expenses. Take your gross, deduct allowable business expenses such as pension, travel, accomodation, accountancy fees and the like (but not training) and you get a balance. Take 95% of that balance. That's what you pay PAYE and NICs on regardless of how much you actually take out of the company.

Seriously if you don't understand the basics, go with an umbrella and stop wasting everyone's time. This is not a game for amateurs.

OK............ I bow to your superior knowledge on this - I must have been misled under the impression that the 5% was on the gross income and could be used to reduce tax on salary whether the expense was incurred or not.

And if we don't understand the basics - we can learn - sorry to have troubled you but you don't have to treat us all like idiots only fit for brollies - everyone has to start somewhere - the material may be there to read but it is easily misunderstood to those who are new to it.