Budget - Composite Companies Dead!

[John Galt]

I don't get this at all. I understand that composites are doing something dodgy as you have lots of contractors all under one company but if you have one contractor and one limited company but it is managed by a service provider where's the problem - surely the Government would get the same amount of tax as long as the contractor's outside of IR35???????

[Mordac]

I don't get this at all. I understand that composites are doing something dodgy as you have lots of contractors all under one company but if you have one contractor and one limited company but it is managed by a service provider where's the problem - surely the Government would get the same amount of tax as long as the contractor's outside of IR35???????

I may have read this wrong, but I suspect what Gordo is doing (by excluding MSCs from IR35) is preventing contractors from using the "but I was outside IR35" defence. So even if you were outside IR35, the very fact you were using a MSC makes you now liable for all the backdated NI. Ouch. And to think he was on R5 singing the praises of the "knowledge economy". Yeah, right. Knowledge from Poland, and an economy in India.
On the plus side, the compo fodder should keep Hector busy for at least the next couple of years.

[Ivor1]

I may have read this wrong, but I suspect what Gordo is doing (by excluding MSCs from IR35) is preventing contractors from using the "but I was outside IR35" defence. So even if you were outside IR35, the very fact you were using a MSC makes you now liable for all the backdated NI. Ouch.

Thats what I thought nasty mothers , and it was them who forced alot people into MSC. When I first came into contracting I wasnt sure if it was for me so went the composite route, as to a newbie it took a while to get my head around IR35, as it went against what I thought was logical. I think the government should say hands up we made a mistake just give us what you owe us and we will forget about the interest, highly unlikely though. And it will take a while for them to come knocking and during that time again interest is still accruing. So alot of people did something they thought was ok at the time, government realises they were partly to blain, and then joe public pays for the mistake with interest while they sort it<sigh> Dont mind paying what I owe but do mind the interest part of it.

[donaldduke]

I dont think its a clear cut case of them applying this retrospectively.

Every case is different, they will have to go after each MSC individually and each MSC will get its day in court.

Some MSCs are more legit than others.

Some are total scams. Some of the better ones have strong case that they were legal.

[hattra]

I dont think its a clear cut case of them applying this retrospectively.

Every case is different, they will have to go after each MSC individually and each MSC will get its day in court.

Some MSCs are more legit than others.

Some are total scams. Some of the better ones have strong case that they were legal.

Err...... they are legal - they just may have misinterpreted the tax rules that hadn't yet been published

[Pondlife]

Not sure if I read it correctly but this seemed to come into effect in Apr 07, there was no mention of backdating and although effectively the same as IR35 was differerent to 'intermediatry legislation' and was a new initative. That is, he cannot go back to 04 as it's a different rule. IANAL etc.

[hattra]

The Giant portal says nothing, of course - time to go back to my own Ltd, I guess.

Curious though - the only difference between having a Giant Powerhouse Ltd. company, and my own Ltd. is that I'm not a director of the Giant company. Puts me in the same position of every other employee shareholder in a company - I wonder if they are going to start having to pay NI on their dividends?

[donaldduke]

This is the email i got from giant:

"During the Chancellors pre budget speech today he referred to some potential changes to the legislation concerning Managed Service Companies.

These potential changes affects the Giant Powerhouse product from April 2007 onwards, however the Giant Strongbox product appears unaffected.

Giant is conducting a review of the papers issued by HM Treasury and intends to participate in the consultation requested by them. Following this consultation we will update everyone on any changes required for April 2007. We will ensure that any changes introduced are implemented with the minimum of disruption to you. "

[MobileCheese]

Not sure if I read it correctly but this seemed to come into effect in Apr 07, there was no mention of backdating and although effectively the same as IR35 was differerent to 'intermediatry legislation' and was a new initative. That is, he cannot go back to 04 as it's a different rule. IANAL etc.

I hope your right

The published document though does detail the amount of additional revenue they expect to pull in from the changes though over a 2007-2008, 2008-2009 and 2009-2010 period. The figure was around £250mil first period, second period £450mil then decrease tp £150mil or something. I can't workout how they got these figures if their not planing to back date, as it increases in the second period then goes down. Plus they mention of debts, if the law comes into effect April 2007 and from that period you cant run a MSC as currently is where is the debt going to come from ? Hopefully they may meet people affected somewhere in the middle, but I suppose thats wishful thinking based on the previous sh*tty decisions

[donaldduke]

I hope your right

The published document though does detail the amount of additional revenue they expect to pull in rom the changes though over a 2007-2008, 2008-2009 and 2009-2010 period. The figure was around £250mil first period, second period £450mil then decrease tp £150mil or something. I can't workout how they got these figures if their not planing to back date, as it increases in the second period then goes down. Plus they mention of debts, if the law comes into effect April 2007 and from that period you cant run a MSC as currently is where is the debt going to come from ? Hopefully they may meet people affected somewhere in the middle, but I suppose thats wishful thinking based on the previous sh*tty decisions

Do you have link to the published document.