What's changed - FAQ

[teapot418]

Am I right in thinking that "expenses" doesn't just mean those incurred in the performance of the contract but all expenses incurred by YourCo? If YourCo has no income but has expenses (accountant, insurances, mobile phone, broadband, stationery, etc. etc.) they too can't be set off against your fees so YourCo will have a net loss and could potentially reclaim CT, or offset the loss should a gig in the next financial year be private sector?

My understanding is that your expenses would come out of your taxed income, in the same way as an employee who pays for an accountant would pay from taxed income. The 5% allowance has been removed.

[eek]

I do understand how NI works.

There is no evidence. Could you point me at where HMRC have said NI contributions will not be allowed?

The problem is that there is no definitive answer at this point; just educated guesses which, in the most part will be right. My suggestion was that this should be made clear, as the people happening across this thread may well take the posts as 'gospel'. But I won't labour the point - I think the thread is helpful, and the pension situation you have described will likely be the end result, so I don't wish to detract from that.

What do you mean by NI contributions when it comes to personal pension payments?

And if things change I'll update the bits. But the pension section is so far me and 3 experts who have checked it against 2 people with unknown backgrounds claiming I'm wrong...

Now if you want to write the employment options bit or tribunal bits up go ahead. i'll happily copy and paste them in...

[eek]

My understanding is that your expenses would come out of your taxed income, in the same way as an employee who pays for an accountant would pay from taxed income. The 5% allowance has been removed.

Not quite the company would have to pay them out of its reserves or borrow the money from a director. Either way the company will be making a loss until it gets work that is outside IR35... I think the only exception to that would be if a company had no assets and no savings and was in the process of being closed down - in which case yes you could and would be paying accountancy fees from your own pocket...

[teapot418]

What do you mean by NI contributions when it comes to personal pension payments?

And if things change I'll update the bits. But the pension section is so far me and 3 experts who have checked it against 2 people with unknown backgrounds claiming I'm wrong...

I haven't said you're wrong. I've said you're probably right, but, IMO, it is still subject to confirmation as to how employer's and employee's NI will be treated when it comes to pension payments.

You don't know my background, granted, and I'm choosing not to share it. Perhaps you could share your background? Or tell us who your experts who are prepared to commit to it being disallowed are?

At the end of the day, this is an anonymous forum. I am not trying to undermine your advice - I think it is sound, but there are caveats.

[eek]

I haven't said you're wrong. I've said you're probably right, but, IMO, it is still subject to confirmation as to how employer's and employee's NI will be treated when it comes to pension payments.

You don't know my background, granted, and I'm choosing not to share it. Perhaps you could share your background? Or tell us who your experts who are prepared to commit to it being disallowed are?

At the end of the day, this is an anonymous forum. I am not trying to undermine your advice - I think it is sound, but there are caveats.

Surely its handled the way its done for all other pension payments at the moment? Let's be blunt here we aren't going to get special rules just for tax avoiders (which is what HMRC sees us as).... So yes things may change but frankly that's less likely than pigs building a rocket and landing on the moon next week.

[RonBW]

If you are contributing large amounts into a pension your pension contributions will be from your post salary income not direct from your company. That means that all contributions are going to be 15-25% smaller due to National Insurance being deducted prior to it being paid into your pension. If you pay a lot into a pension you need to seriously decide on whether it would be better to use an umbrella company and pay into your pension using Salary Sacrifice.

What level is a large amount? If I pay a smaller amount, how does that work - that comes from the company still?

Sounds like it might be better to make pay an amount that isn't a large amount and not losing the NI in that case, but I guess it depends on how much you want to save and what level a contribution becomes a large amount.

[Fred Bloggs]

Surely its handled the way its done for all other pension payments at the moment? Let's be blunt here we aren't going to get special rules just for tax avoiders (which is what HMRC sees us as).... So yes things may change but frankly that's less likely than pigs building a rocket and landing on the moon next week.

For pension payments with your employer, salary sacrifice is your friend. If they offer it. You can't make the employer do it, IIRC.

[ladymuck]

My understanding is that your expenses would come out of your taxed income, in the same way as an employee who pays for an accountant would pay from taxed income. The 5% allowance has been removed.

I know the 5% allowance has been removed. Whilst an employee might pay for an accountant they wouldn't be expected to provide professional indemnity insurance, for example. So, this either comes out of taxed income or company reserves. Or, does a PS contractor have the requirement to hold various insurances removed, as HMRC seem to think they no longer have any cost of doing business? Similarly, I presume that the PS client will supply all equipment, including pens and cups of tea, so there is no need to purchase this from taxed income?

[eek]

I know the 5% allowance has been removed. Whilst an employee might pay for an accountant they wouldn't be expected to provide professional indemnity insurance, for example. So, this either comes out of taxed income or company reserves. Or, does a PS contractor have the requirement to hold various insurances removed, as HMRC seem to think they no longer have any cost of doing business? Similarly, I presume that the PS client will supply all equipment, including pens and cups of tea, so there is no need to purchase this from taxed income?

Last public sector contract I had, I had to provide my own tea and milk.... But the logic probably is that you are being supervised and therefore surely the responsibility and insurance risk is past up to the person supervising you....

I think the issue here is that the entire purpose of these rules is to make contracting to the public sector via a limited company so unappealing you use one of the other options instead. In fact the only reason for using a limited company would be if you want to push for employment rights

[RonBW]

In fact the only reason for using a limited company would be if you want to push for employment rights

Doesn't every option give you the chance to push for employment right?

Fix term contract will have some, going onto PAYE will give you some, umbrella will give you some. The way I see it, working for your own limited company is one of the most convoluted ways to get those rights because they would come from the other routes to work but not necessarily from your own company.