Dragonfly

[Jubber]

It's not, there are rules around folding a co. and removing the assets and doing it repeatedly can easily been seen to be evasion.

I personally don't think that is the solution. Draw the money in salary and divis (as is perfectly legal to do) and spend it. Run the business as a business, keep all your paperwork in tip top condition. If you are unlucky enough to be suddenly thrown 'inside' IR35 and are presented with a 100k bill, present them with an empty bank account and the office stapler. To come after a director they have to prove negligence. Very hard to do if you have everything in place as it should have been to operate outside of IR35.

 

[wurzel]

3 contracts investigated initially then 2 contracts became included as the investigation dragged on for over three years.

During an investigation, can the IR place any restrictions on any financial activities such as selling your house?

Supposing you think you are going to be facing a hefty bill (e.g something on the scale of Dragonfly's) and that you are going to be personally liable for it so you decide to sell up, bank the money in an offshore account (or stick it under the mattress, whatever) and p**s off abroad where the IR can't touch you. If I knew I was in that situation and the IR came sniffing around, I'd definitely consider it.

 

[Fred Bloggs]

I personally don't think that is the solution. Draw the money in salary and divis (as is perfectly legal to do) and spend it. Run the business as a business, keep all your paperwork in tip top condition. If you are unlucky enough to be suddenly thrown 'inside' IR35 and are presented with a 100k bill, present them with an empty bank account and the office stapler. To come after a director they have to prove negligence. Very hard to do if you have everything in place as it should have been to operate outside of IR35.

That is the essence of my strategy.

 

[IR35 Avoider]

I think IR35 was originally bought out to stop a trend that meant a lot of IT managers and consultants were leaving work as an employee on Friday and returning to work on Monday to the same desk doing the same job but as a Ltd company with all of the tax savings this offered.

People often say this, with the subtext being that since that's not what they did so IR35 ought not to apply to them. However if you read the original press release carefully, it's the fact that it is possible for this to happen that is the problem. Whether anyone actually did it is irrelevant. The Inland Revenue were right to think that a tax system that allowed a tax-bill to be halved in this way was deeply flawed.

IR35 was a very untidy solution to the anomaly that the "friday to monday" thought experiment described. A simpler and more elegant solution would have been a 40% Corporation tax rate for small or Close companies. This differs from the IR35 in that it doesn't try to preserve the practice of taxing business profits at half the rate of employment.

I don't see why any two people with the same income should be taxed at different rates. In particular, I don't see why someone with 40K of taxable income should effectively be taxed at 40% if income was from employment, 30% if from self-employment, 20% if dividend income from a small company, or 15% if from a pension. There should be one number that applies in all scenarios. (Though I'm glad there isn't, as nearly all my contractor fees are currently taking the 15% route.)

 

[original PM]

I think that trying to cpmpare against builders is probably misleading.

In that if you ask a builder to do some work for you you could not employee him as you are not an employer registered for PAYE (I think?)

In addition to this building projects often have a very defined end point and that is what a builder is engaged to do - it is very clear that once the project is finsihed the builder would not continue to come to your house and sit around drinking tea and expect to be paid.

In the Dragonfly case the guy had been at the company for a number of years and while he initially may have been hired to test a specific software piece for a specific project they then let him continue to come in, drink tea and be paid - thus his term of engagement seemed to change from being for a specific deliverable to non specific work on different projects as required.

Probably

 

[ASB]

or 15% if from a pension.

What's this 15% on pension? I though pension income was still just assessed as income under PAYE and charged accordingly at 0 20 or 40%.

 

[Lewis]

It's not, there are rules around folding a co. and removing the assets and doing it repeatedly can easily been seen to be evasion.

You don't have to use the reliefs. Just take all as dividends.

 

[Lewis]

This is interesting http://www.contractoruk.com/003950.html apologies if you have read already.

 

[Fred Bloggs]

You don't have to use the reliefs. Just take all as dividends.

Correct, that's why I'm "income shifting" as much as possible the last year or two.

 

[ratewhore]

That's has been my strategy to date (and to put as much as possible into a Ltd Co funded SIPP). However, the current gig is a long term infrastructure project that could run to 2012 +. I actually rate the gig a marginal pass/fail. I have taken out the insurance based on the risk assessment form that you are required to fill in by one of the insurers out there. They accepted my risk.

I think that is sage advice. I'll be taking a closer look at TLC35 as my current gig could drag on for a bit...