Crackdown on personal service companies could raise £400m in tax

[MrO666]

You're not a contractor then?

Such as who/what? I can think of small business owners and people owning shares as part of their investment portfolio. Most of the latter probably won't be earning enough dividends to start paying tax, it's a reasonably small proportion of people who have 100k+ of shares.

There are plenty of people out there with large (£100k is not large these days) share portfolios and small equity stakes in businesses, most of which will exceed £5k in divi income. I know of 3 pensioners who will be paying more tax due to the dividend taxation changes.

[Bristol]

Just a thought, why not have 12 limited companies all with a one month contract, as long as it's calculsted per year you'll always be outside

[northernladuk]

Just a thought, why not have 12 limited companies all with a one month contract, as long as it's calculsted per year you'll always be outside

Best just keep that as a thought hey...

[Martin Scroatman]

Just a thought, why not have 12 limited companies all with a one month contract, as long as it's calculsted per year you'll always be outside

BURR-ISS-TOL

[d000hg]

Employing staff does not stop the dividend tax changes impacting income; again it's personal towards me instead of focussing on the issue.

You used the term 1-man-band. So you actually meant "micro businesses" not "one man bands"?

You make wild assumptions on the incomes of small business owners and one man bands. Plenty do fairly well, that's why they do it. The little corner shops for example, some of them make very good money.
I find it hilarious that you think this is a negligible impact or market sector. You live in cloud cuckoo land.

You're making equally wild accusations. The majority make a living, not a very good living.

As I've said many times, dividend tax for people making a living from dividends on their own company is entirely reasonable. It merely brings in line the % of your income being taxed with everyone else. It's not like shop-keepers even have IR35 to worry about, so they can take 100% income as dividends probably.

There are plenty of people out there with large (£100k is not large these days) share portfolios and small equity stakes in businesses, most of which will exceed £5k in divi income. I know of 3 pensioners who will be paying more tax due to the dividend taxation changes.

Move to growth-focused stocks rather than dividend-focused stocks?

Also, dividend tax on shares seems like it would then reduce your income and reduce your income tax accordingly, is that how it's going to be implemented? So if you're making say £30k off your portfolio in dividends, what would the actual impact be?

And - what about shares held in SIPP/ISA? Are those dividends exempt or taxed at source somehow?

[MrO666]

seems[/i] like it would then reduce your income and reduce your income tax accordingly, is that how it's going to be implemented? So if you're making say £30k off your portfolio in dividends, what would the actual impact be?

And - what about shares held in SIPP/ISA? Are those dividends exempt or taxed at source somehow?

I confess I don't know the true tax implications of this type of thing myself, I just know the the people I've spoken to to who are affected are people who have built share portfolios over many many years with the view of them funding (or helping to fund) retirement. I do know however that it's not quite that simple to switch to different funds is it. As soon as you sell existing holdings then these people would get smacked with CGT, so it's not viable to sell and then re-buy in a different fund.

As I said, I don't profess to understand how it all works. I was just pointing out there there are probably more people than you would imagine who have large share portfolios and shareholdings which they may have built up over the past 30-40-50 years, many of which will be financially worse off come April next year.

This chancellor has more or less raised tax on everything he believes he can, and I would say he's rapidly running out of things to target. Like anything in life, tax it too harshly and it will cease to exist or people will look for ways (legal or not) to get around it, resulting in no tax at all.

[LucidDementia]

You're making equally wild accusations. The majority make a living, not a very good living.

As I've said many times, dividend tax for people making a living from dividends on their own company is entirely reasonable. It merely brings in line the % of your income being taxed with everyone else. It's not like shop-keepers even have IR35 to worry about, so they can take 100% income as dividends probably.

Listen, I get that you like being pedantic for the sake of it but the bottom line is that you're pretty wide of the mark.

Increasing the tax hit on small businesses, be they one man, two man or even growing SMEs is going to hurt the economy. Spending power reduces, entrepreneurial ventures will dwindle and we all lose. The idea of a dividend tax increase making it "fairer" is utter bunkum I'm afraid. The self-employed should have tax breaks versus employees - they are taking the risks, having the sleepless nights, learning new skills and creating jobs - they earn it.

I'm sure you think you know a lot about this market sector but let's be honest - you're a coder, you opened a Ltd because you thought you could make more money and I hope because you wanted a taste of the freedoms and other rewards self-employment brings. What you've never done is open a business with nothing, off your own bat, and turned it into a solid living. That is what small businesses owners do. They put everything they have and all their time into their little dream and many make excellent livings. Personally I've done it twice. That's why I now live mortgage free at an age when most folk are staring down a decade or two of payments.

I'm not looking to fall out with you but please don't diss the little guy; they're important, always have been and I hope always will be.

Oh and you're right, shop-keepers don't have to worry about IR35. They just have to worry about meeting their wage bill each week, staying on top of their stock, negotiating with suppliers, stacking shelves, merchandising their store, disposing of waste, unloading goods, hooligans breaking their windows, competing with the likes of Tesco, cleaning, security, book-keeping, identifying their sales trends and staying open from 8 till late except Sundays when they knock off at 4, or at least close the door. But yeah, totally reasonable to hit them up for a bit more tax.

[seeourbee]

Directors tax is in by the way

[centurian]

So all this doesn't apply if you invoice multiple clients. To me this seems like a likely candidate to work around this. If you can prove to whoever has the onus for making sure contractor passes test, that you invoice other clients, then that seems like a much more clearer criteria to meet than SDC. This is provided HMRC has the sense to properly define what that means of course. I suppose the criteria could be amount of time spent working for each client within a set amount of time. Typically my clients don't want to share my time as it would be too sensitive (Chinese walls and such), but if the industry is completely separate and time requirements are realistic, it could work for me. I'd happily do some low-paid work on rent-a-coder to maintain my status.

Even under existing IR35 case law, that won't help. Dragonfly claimed he had "multiple clients", but the judge threw that out, on the basis it was effectively "a few hours on the side".

Given HMRC already have this notch on their belt - I can't see HMRC loosening the criteria on that.

[Ned]

This is sufficiently vague

3.87 Disguised remuneration – The government intends to take action against those who
have used or continue to use disguised remuneration schemes and who have not yet paid their
fair share of tax. The government will also consider legislating in a future Finance Bill to close
down any further new schemes intended to avoid tax on earned income, where necessary, with
effect from 25 November 2015.

This is sufficiently vague to be worrying