Limited Company and Tax

**planetit** · 3 January 2006, 10:43

What’s the point of the “declare myself bankrupt” plan? Bankrupt means you haven’t enough money to pay your debts. But you will have the money because you will have nicked it from the taxman. It’s like saying “can I get away with robbing a bank if I declare myself bankrupt?” Of course not.

If you want to clear off back to Aus without paying any tax, then just do it. You might well get away with it, but I don’t see what help you need from us.

And when your fellow travellers complain at how difficult it is to open a bank account etc. in the UK, I hope you will explain that it’s all because of people like you.

**aussieItman** · 3 January 2006, 10:58

Well the only people that seem to be paying honest taxes are the permanent people and PAYE contractors. The bankruptcy question was just a query, not really something I want to do. I was quite happy with my Umbrella company prior to this contract, however my new agency said I either had to setup a LTd company or go with one of their Umbrella companies which were not suitable. I didnt mean for my post to sound as though I'm trying to rip anyone off and I dont want to end up with a criminal record or a poster of my face in the tax department. I know lots of people that have Limited comapnies and they all seem to have different ways of avoiding tax or minimising it. Maybe this is legitimate, I dont know. Anyway that is my question, what can I do as a contractor with a limited company to minimise my Tax?

**Mordac** · 3 January 2006, 11:18

>Well the only people that seem to be paying honest taxes are the permanent people and PAYE contractors.

All contractors are PAYE, whether it's with a Ltd co or brolly. If you're looking for a job, I hear Walkabout in Shepherds Bush are looking...

**Rebecca Loos** · 3 January 2006, 11:55

hey Aussie man
you've just got a dose of the Pommie revenge....

there are ways for people like us to minimise tax paid in the UK

One of the solutions is to ue one of these nice offshore schemes that are technically NOT illegal - yet - but might be in the future (hence no UK contractor on this forum will recommend them, which is quite normal)

look for companies that pay in the form of a minimum wage + a foreign currency loan or something similar. The loan is tax free and then written off so you never have to pay it back. The interest you pay every month is in fact the company's fee for handling your contract with the agency.

I am not saying it's not risky and I am not saying it will be legal next year or even next month..... but it works now with some companies.

Rebecca in antipodean dodger mode

**aussieItman** · 3 January 2006, 11:57

Thanks for the constructive reply. I'm not sure I fully understood however. Can I use my limited company with one of these schemes?

**aussieItman** · 3 January 2006, 12:01

I think that loophole has been closed - see below:

Employee Benefit Trusts (EBT)
For many contractors, the Employee Benefit Trust initially seems an extremely attractive option. Individual contractors work under the auspices of a composite company, and are paid a salary – normally worth around 20%-30% of the total contract value. The rest of the money is paid into an offshore trust, from where it is loaned back to the contractor. The loan is in foreign currency so not only avoids IR35 but also all taxation and National Insurance. top

However, the Inland Revenue has already closed the loophole on this scheme. Tax relief is now only permissible on PAYE payments made by the trusts – that is, the lower salary figure – and not on loans. As a result, EBT can no longer operate.

**aussieItman** · 3 January 2006, 12:02

Hmm well I found this other scheme. I guess this is what you meant?

Foreign Currency Loans
These are a way of receiving money whilst avoiding tax and National Insurance. A loan is made to an individual in a foreign currency, which can be repaid at a very low rate, resulting in a tax free gain.

Although this is perfectly legal, it can only work in conjunction with an offshore company that would not be taxed on profits. Offshore companies have been scrutinised by the government and all dealings would be challenged and be taxable as income if received by a resident of the UK.

**malvolio** · 3 January 2006, 12:09

I couldn't possibly suggest a UK contractor goes this route, not because it's risky (which it is) but because our beloved Chancellor has decreed they will be outlawed since they cost him potential tax income. Since you are not a UK contractor, you could care less about that and the only question is how risky it is and how certain you are that you will get the money back.

Personally, anything that pisses off gay Gordon is OK with me - just be aware that there is a mutuality agreement bewtween Oz and Ukland tax authroities, so whatever you do, keep it legal.

**aussieItman** · 3 January 2006, 12:17

There is an agreement between UK and Oz tax authorities? Didn't know that. Well I definitely want to keep it legal. How much tax do you normally have to pay with a limited company? I know this must vary considerably, but roughly what would I be looking at?

Limited Company and Tax