The Official Budget 2016 thread

[northernladuk]

Can someone explain why there is a distinction between private sector and public sector with respect to IR35? Don't hate me for the question, I've never contracted in the public sector.

Your tax bill is going up you know......

[ChimpMaster]

Speaking of ER, one to keep an eye on...

Capital Gains Tax entrepreneurs’ relief: review of the definition of a trading company – The government will review the definition of a trading company for ER purposes to ensure that it operates effectively.

Sheesh they've had months to do this. Can't believe how slow they are at this - no doubt looking for a way to do maximum damage. This could get interesting... and not in a good way for us.

[bobspud]

From the Red Book (p. 43):

Budget 2016 43
Off-payroll engagement in the public sector
1.148 Some individuals who work through their own limited company are undertaking jobs
that would ordinarily mean they are employees of the business that they are working for. In
those circumstances, existing legislation on off-payroll working requires them to pay broadly
the same taxes as employees. However, non-compliance with these rules is costing the taxpayer
around £440 million a year – and these costs are rising.113
1.149 Public sector bodies have a responsibility to taxpayers to ensure that the people working
for them are paying the right tax. From April 2017, where the public sector engages an
off-payroll worker through their own limited company, that body (or the recruiting
agency if the public sector body engages through one) will become responsible
for determining whether the rules should apply, and for paying the right tax. This
strengthens the public sector’s role in ensuring that the workers it engages comply with the
rules.
1.150 The government also recognises that the current rules are seen as complex and can
create uncertainty. It will therefore consult on a simpler set of tests and online tools

And there is nothing wrong with any of that as they have structured the majority of their contracts to be outside IR35 for nearly a decade....

[swamp]

Grace’s PSC invoices the Ministry monthly for £2400, which includes £400 VAT. The
Ministry treats £2000 as Grace’s earnings and deducts £223 tax and £159 employee NICs,
which it pays to HMRC via RTI with £183 employer NICs. The Ministry pays Grace’s
company £1618.

So if the public sector client/agency decide the 'rules' apply they can pay your company less money and not honour the invoice.

[jamesbrown]

Stewart Hosie just raised the opposition of the SNP to the T&S changes FWIW.

[bobspud]

Because ever since the WankPuffin Danny Alexander ballsed up dealing with a single instance of a senior civil service bod operating through a Ltd company, we've been in the cross hairs as filthy tax avoiding scum leeching of the Public Sector.

Plus, it's easier for them to push through stuff like this in the Public Sector before extending it to the private sector.

interestingly enough when that was going on, some nasty little turd in the MOD compiled a spreadsheet of all contractors, removed their names and posted on their website together with post titles. There were three guys that stuck out like a sore thumb and NONE of them were using a LTD company to be paid.

[dundeedude]

Sheesh they've had months to do this. Can't believe how slow they are at this - no doubt looking for a way to do maximum damage. This could get interesting... and not in a good way for us.

What of those who have already started MVL proceedings? The distributions are what are considered for taxation under whatever scheme is in place at the time of distribution of monies. The date of commencing the MVL process is irrelevant! ER Entrepreneur's Relief may not even apply by the time someone who started the MVL process last week actually completed the process on their business.

It'll take about 2 months to get down the first part of the MVL process with a good and prompt accountant, and another 4 to 6 months for the process to close via HMRC.

Therefore whoever is in the MVL process right now is subject to the new capital gains changes and any other changes to be clarified by processes over forthcoming months. This could mean MVL is very much not what the current MVL-Calculators suggest as a distribution outcome at the end of the process!

Anybody in such a situation right now? I was considering MVLing but this has made me reconsider.

[SimonMac]

Grace’s PSC invoices the Ministry monthly for £2400, which includes £400 VAT. The
Ministry treats £2000 as Grace’s earnings and deducts £223 tax and £159 employee NICs,
which it pays to HMRC via RTI with £183 employer NICs. The Ministry pays Grace’s
company £1618.

So if the public sector client/agency decide the 'rules' apply they can pay your company less money and not honour the invoice.

Would that £1618 then be subject to CT?! How can an entity be taxed as both a company (VAT) and a person?!

[LondonManc]

Grace’s PSC invoices the Ministry monthly for £2400, which includes £400 VAT. The
Ministry treats £2000 as Grace’s earnings and deducts £223 tax and £159 employee NICs,
which it pays to HMRC via RTI with £183 employer NICs. The Ministry pays Grace’s
company £1618.

So if the public sector client/agency decide the 'rules' apply they can pay your company less money and not honour the invoice.

I'd say that the above should be the case for disguised employees. That said, it would be easier to test the original contract and declare IR35 status at the start of it, make it clear and force the contractor to account for it as such by confirming with the both the agent and the contractor's accountant. A standard letter declaring contract status would be so simple. Oh, wait, I've just seen the flaw...

[jamesbrown]

Would that £1618 then be subject to CT?! How can an entity be taxed as both a company (VAT) and a person?!

No, because they would extract all income against the allowance for tax already paid (they explicitly mention this allowance). They're nuts, but not that nuts In other words, the company just becomes a pass-through vehicle for distributing income (but you have all the associated costs incurred from running a company, thereby reducing the incentive unless the contract rate greatly exceeds any permie benefits).