What happens to my LTD (Car, equipment) when I move to IR35?

[faxfan]

Hi All,

I'll almost certainly be deemed as inside IR35 by April next year, my question is around what happens with my limited company and specifically around -

Contract Hire car - I have contract hire car, leased to the limited company that I use exclusively for business travel, how does that get paid for going forward?
R&D / Self teaching - I do spend a reasonable amount on computer related technology to keep my skills up to date, can I still do this and claim it back when in IR35?
Home office - I work at home, except when travelling to various locations in the UK and EU, is this still an allowable expense in IR35?

I know there is a 5% allowable expense for running a limited company, is that meant to cover the items above?

Thanks for any answers!

[cojak]

This is where things are going to get sticky for contractors I think.

There will be no expenses all post April 2020 for inside IR35 temporary workers . You will no longer be a contractor in today's sense of the word*, and so you will have to pay those things from your salary.

If you use your Ltd, you will have to pay the full amount to yourself and the taxman. Nothing will remain in the company.

My guess is that you will have to keep your Ltd open and pay for the lease from there, provided that you have money in the company.

The only money coming into the company will be via a Director's Loan that you put in which will have to come from your salary.

I can't see any other way to do it.

(*The term 'contractor' will become synonymous with 'outside IR35' in my view.)

[northernladuk]

This is where things are going to get sticky for contractors I think.

Not so sure of that. Pretty straight forward isn't it? He will have to go PAYE or Brolly and he will have 2 options. Using his LTD for the inside gig is not one of them.

One is just to close the company in which case they all go. He'll have to either swap the lease or pay the penalty and give the car back. Everything else he needs he will have to pay for out of his own pocket.

The other is to keep it open in which case he continues to pay for everything as he does now. The company is still trading, he just has no income at this point. I don't think there is a problem it continuing to run as normal, it just has no income so he's going to have to rely on surplus cash.

If the cash runs out then he's either got to loan money to the company to keep it afloat or he just stops paying for everything and the car goes back.

The unknown is how long is he going to be inside. Just a planning exercise really as to when he will be back outside and bringing money in to the company. Could be a long time if it is as bad as people say.

Glad to see the OP put 'updating skills'. I am assuming from that he knows new skills are not claimable.

[faxfan]

From some further reading there is a 5% allowance available - I should have mentioned this is private sector - to allow a LTD company administration to take place. This is intended to cover and I do quote, though I don't know how accurately -

• Premises costs including home as office
• Administration and secretarial support
• Accountancy and tax advice
• Costs of seeking contracts
• Printing, postage and stationery
• Employer’s and Public Liability Insurance
• Training costs
• Computer equipment (if not eligible for capital allowances)
• Bank and overdraft interest
• Hire purchase payments

I also read that section 198 expenses are allowed for travel, subsistence etc. So as long as my mileage (assuming a contract hire won't be allowed a "travel" expense ) covers the costs of the car it should be good.

Does this sound right / wrong / misguided?

[cojak]

I meant sticky where contractors have leases under MyCo’s name.

[northernladuk]

You thought about asking your accountant about this?

I still don't think you are going to be able to use your LTD for inside gigs going forward.

[cojak]

What happens to my LTD (Car, equipment) when I move to IR35?

From some further reading there is a 5% allowance available - I should have mentioned this is private sector - to allow a LTD company administration to take place. This is intended to cover and I do quote, though I don't know how accurately -

• Premises costs including home as office
• Administration and secretarial support
• Accountancy and tax advice
• Costs of seeking contracts
• Printing, postage and stationery
• Employer’s and Public Liability Insurance
• Training costs
• Computer equipment (if not eligible for capital allowances)
• Bank and overdraft interest
• Hire purchase payments

I also read that section 198 expenses are allowed for travel, subsistence etc. So as long as my mileage (assuming a contract hire won't be allowed a "travel" expense [emoji4] ) covers the costs of the car it should be good.

Does this sound right / wrong / misguided?

From now until April 2020 you can claim 5% expenses.

After April 2020 it is wrong , misguided and hopelessly optimistic.

Do you actually know what’s going to happen in April 2020?

[faxfan]

From now until Aril 202 you can claim 5% expenses.

After April 2020 it is wrong , misguided and hopelessly optimistic.

Do you actually know what’s going to happen in April 2020?

Well, that's why I'm asking here for guidance. It sounds like this is valid for now until April 2020 and things will be changing in a yet unknown way?

[GhostofTarbera]

How do you get this 5% if all your money is paid via paye? Same applies for expenses


Sent from my iPhone using Contractor UK Forum

[cojak]

Well, that's why I'm asking here for guidance. It sounds like this is valid for now until April 2020 and things will be changing in a yet unknown way?

Yep, that's about the long and short of it.