Composite structure

[BoredBloke]

"In the EDS case when the employee leaves they continue to get dividends.
If you leave your composite you dont get dividends anymore."

Only if the EDS person keeps their shares. They are free to sell their shares.

The only difference I can see if the purchasing of shares.

As for the capital costs - what are my capital costs running my ltd? Not much. What are the capital costs for Accenture when compared to say BP - probably not much either since they are trading the things inside people heads.

[simondolan]

In the light of what was stated in the PBR by Fat Boy Brown, can somebody tell me how the structure of a composite is different to that of a bodyshop?

Both generate money off the skills/work of their employees.
Both pay their employes a PAYE salary.
Both have shareholders who get dividend payments.
In both cases their employees are free to leave their employment.

The only difference I can see is that in the composite, the employees are the shareholders - but it is not uncommon for say EDS staff to own shares in their comapny.

The big difference is that EDS is a consulting Company that finds and then allocates work to its employees. The primary activity of the Company is that of consultancy. Any shares that are given to certain employees will be under approved share schemes.

How the composite differs is that the contractor finds the work, then goes to the composite to administer his/her pay. The composite has no other function other than to process the pay. Also, the income the contractor receives is directly and very closely related to the income he/she brings into the composite.

In short, EDS has a commercial purposes. The composites had none.

[expat]

...
As for the capital costs - what are my capital costs running my ltd? Not much.

And that is why it is also wrong to pay dividends from your Ltd.

[Rantor]

And that is why it is also wrong to pay dividends from your Ltd.

What??????

[expat]

What??????

Dividends are capitalism's reward for investing capital that is needed for a commercial enterprise. Companies are the way to organise this enterprise, and shares in the company represent the capital that was invested.

Put in capital that is needed for a business; get back a share of the profits.

If, like mine, your Ltd Co does not need any capital to run its business, it would be dishonest to pay dividends on the so-called capital, when the capital did not make the profit in the first place. In such a case it is not Dividend Return on Capital Invested, it is merely disbursement of money earned by work, to the person who did that work, i.e. Wages.

Paying wages in the form of so-called dividends is nothing more than a ruse to avoid tax. And I'm afraid that I don't agree that it is legitimate tax avoidance. It may be legal, I am not qualified to judge. But I do know the difference between right and wrong, and disguising your wages as share dividends is wrong.

Or do you think that everything is a game with no right and wrong, where getting caught is the only mistake?

[hattra]

Dividends are capitalism's reward for investing capital that is needed for a commercial enterprise. Companies are the way to organise this enterprise, and shares in the company represent the capital that was invested.

Put in capital that is needed for a business; get back a share of the profits.

If, like mine, your Ltd Co does not need any capital to run its business, it would be dishonest to pay dividends on the so-called capital, when the capital did not make the profit in the first place. In such a case it is not Dividend Return on Capital Invested, it is merely disbursement of money earned by work, to the person who did that work, i.e. Wages.

Paying wages in the form of so-called dividends is nothing more than a ruse to avoid tax. And I'm afraid that I don't agree that it is legitimate tax avoidance. It may be legal, I am not qualified to judge. But I do know the difference between right and wrong, and disguising your wages as share dividends is wrong.

Or do you think that everything is a game with no right and wrong, where getting caught is the only mistake?

I take it you've realised you should be operating through an umbrella company? Using a Ltd is just a waste of time for you.

[IR35 Avoider]

In the light of what was stated in the PBR by Fat Boy Brown, can somebody tell me how the structure of a composite is different to that of a bodyshop?

Both generate money off the skills/work of their employees.
Both pay their employes a PAYE salary.
Both have shareholders who get dividend payments.
In both cases their employees are free to leave their employment.

The only difference I can see is that in the composite, the employees are the shareholders - but it is not uncommon for say EDS staff to own shares in their comapny.

You raise an important question. You could also have asked why IR35 doesn't apply to your hypothetical EDS employee, when he is in an IR35-fail relationship with a client. In this context, the difference between a composite and a body-shop is that the dividend income in a body-shop cannot reasonably be attributed to work at a particular client.

[expat]

I take it you've realised you should be operating through an umbrella company? Using a Ltd is just a waste of time for you.

I know what my position is, I'm arguing about other people's position

[sasguru]

Dividends are capitalism's reward for investing capital that is needed for a commercial enterprise. Companies are the way to organise this enterprise, and shares in the company represent the capital that was invested.

Put in capital that is needed for a business; get back a share of the profits.

If, like mine, your Ltd Co does not need any capital to run its business, it would be dishonest to pay dividends on the so-called capital, when the capital did not make the profit in the first place. In such a case it is not Dividend Return on Capital Invested, it is merely disbursement of money earned by work, to the person who did that work, i.e. Wages.

Paying wages in the form of so-called dividends is nothing more than a ruse to avoid tax. And I'm afraid that I don't agree that it is legitimate tax avoidance. It may be legal, I am not qualified to judge. But I do know the difference between right and wrong, and disguising your wages as share dividends is wrong.

Or do you think that everything is a game with no right and wrong, where getting caught is the only mistake?

Anyone want to respond to the above or are all of you lot just a bunch of whining, greedy, cheating code monkeys, eh?

sg in <<get the popcorn and hope for a good show>> mode.

[BoredBloke]

"difference between a composite and a body-shop is that the dividend income in a body-shop cannot reasonably be attributed to work at a particular client."

Does that matter if the shares held reflect the contractors rate. All the money from the work done by various contractors would go into a central account and paid out in line with the share ownership.

I'm not trying to argue for this position I just think it is unfair for the govt to decide that certain companies can pay divis to their shareholders, but while others cannot.