Reply to: Death of Composite Co's?

[monkeygeorge]

IIRC (and please don't rely on what I say), the treasury announcement said the new rules would apply to income after 1st April 2007. Which kind of implies that you're definitely safe until then.

I agree, stick with Giant for now until you know you'll have to leave. That's what I'm gonna do.

You might even give up contracting before April!

[VectraMan]

At least someone has a fighting chance with an own Ltd.

The MSC rule appears to be saying that: working through one always equals the equivilent of inside IR35 (and TBH, not before time)

tim

It's hard to see the composites as anything other than a tax avoidance scam, but as with the argument against IR35, the treasury are the ones that make the rules and so they can't complain when people follow the rules. None of these issues would ever exist if dividends were taxed the same as salary.

I agree we'll probably soon be facing IR35v2, but at least if they manage to be clear on what the rules actually are this time around it'll remove the uncertainty.

[VectraMan]

2 weeks into first ever contracting job, stupidly fell for the Giant blurb. Intended to use Umbrella to test waters of contracting, as this contract is (currently) for 3 months.

IIRC (and please don't rely on what I say), the treasury announcement said the new rules would apply to income after 1st April 2007. Which kind of implies that you're definitely safe until then.

[simondolan]

2 weeks into first ever contracting job, stupidly fell for the Giant blurb. Intended to use Umbrella to test waters of contracting, as this contract is (currently) for 3 months.

I wold appreciate any suggestions from you guys as to my next move - Giant haven't paid me anything yet as I've only just started, should I (can I?) jump ship now (go LTD?), stay on the Giant Powerhouse scheme for this contract (aren't I penalised under IR35 rules if I only use them for one contract?) or switch to their Strongbox package (which they claim is unaffected) or another Umbrella?

Thanks!

Go Limited, or if worried that contracting may not be for you, use an umbrella.

All umbrellas now will give you the same return on income so look for decent service and a good price. Not sure what Giant charge for their umbrella, but plenty to choose from.

[mjonesuk]

Damn, signed up to Giant.....

2 weeks into first ever contracting job, stupidly fell for the Giant blurb. Intended to use Umbrella to test waters of contracting, as this contract is (currently) for 3 months.

I wold appreciate any suggestions from you guys as to my next move - Giant haven't paid me anything yet as I've only just started, should I (can I?) jump ship now (go LTD?), stay on the Giant Powerhouse scheme for this contract (aren't I penalised under IR35 rules if I only use them for one contract?) or switch to their Strongbox package (which they claim is unaffected) or another Umbrella?

Thanks!

[Pondlife]

It does. However I think the intent is to *identify* us. They will ask us, so it makes them easier to investigate us. No change in the law. It's perfectly legal - you're just more susceptible to be investigated.

Hope you have your investigation insurance.

My point is that 'we' are defined as personal service companies and although we are differentiated from MSCs we generally provide a service to our clients and therefore are more inclined to tick the 'stupid' box - not because of the way we operate or whether we're IBOYOA but because of what our business does. To my mind it's the thin end of the wedge.

[Robot]

Interesting...

Fairness and certainty for taxpayers
Managed Service Company Schemes

The Government is taking action to tackle Managed Service Company (MSC) schemes which are used to avoid paying employed levels of tax and NICs. Income received by workers in MSCs in relation to services provided through the MSC will be subject to employed levels of tax and NICs, with the MSC obliged to operate Pay As You Earn (PAYE) and deduct tax and Class 1 NICs on that income - and the rules for tax relief for travel expenses will be the same as for other employed workers.

The Government will also address the problem of MSCs escaping payment of tax and NICs due by allowing the recovery of these debts from appropriate third parties.


This will protect the Exchequer and ensure a level playing field for compliant businesses and workers. The Intermediaries legislation will remain in place for Personal Service Companies.

The Government is consulting on the draft legislation to implement this measure. The draft legislation and questions for consultation are set out in the consultation document Tackling Managed Service Companies, published alongside the Pre-Budget Report today.

[dude69]

The wording seems to cover all 'service' companies!

It does. However I think the intent is to *identify* us. They will ask us, so it makes them easier to investigate us. No change in the law. It's perfectly legal - you're just more susceptible to be investigated.

Hope you have your investigation insurance.

[Bradley]

Psc

At least someone has a fighting chance with an own Ltd.

The MSC rule appears to be saying that: working through one always equals the equivilent of inside IR35 (and TBH, not before time)

tim

True enough Tim but I'll be waiting for Ed Balls (the next chancellor - add your own punchline) to be "shocked" when the number of PSC registrations starts going up in the next six months. This will be clear evidence of tax motivated incorporation which = more tax.

[tim123]

In the Pre-Budget Report proper I came across this little nugget:


In other words, get out of the managed service companies now and then we'll get you when you form your own company.

At least someone has a fighting chance with an own Ltd.

The MSC rule appears to be saying that: working through one always equals the equivilent of inside IR35 (and TBH, not before time)

tim

[Pondlife]

I don't like this at all

4.26 Information about the application of the Intermediaries legislation is currently
obtained through the end of year return completed by employers (the P35). Two
questions on the P35 form will be revised. These currently ask:

- Are any of your contracts caught by IR35?; and
- If so, have you paid your tax by attaching it to a P14?



4.37 These questions will be revised to ask:

- Are you a service company? (with a clear definition of “service company” to
enable a judgment to be made readily); and
- If yes, have you operated the Intermediaries legislation or the new MSC
legislation?

4.28 The changes will be made to the P35 form covering the tax year 2007-08.

4.29 Two additional questions will also be asked on the Income Tax Self Assessment
(ITSA) return asking if any income (of whatever nature) in the return is derived from the
taxpayer’s provision of their services via a service company and, if so, the amount.

These changes will be introduced to the ITSA return form for 2007-08.

The wording seems to cover all 'service' companies!

[deforce]

In other words, get out of the managed service companies now and then we'll get you when you form your own company.

Indeed!
As above, you are no longer running a limited company, you are now a PSC, a company that provides 'personal services' and as such should be taxed as a person would, i.e PAYE and NI....
Believe me, this is the first step to replacing IR35.
And yes, as we have long acknowledged we are no different to wh*res, the IR have just confirmed it....

[Darren@UptonAccountants]

Limited Companies

As expected, they're trying to come up with "son of IR35"...should be interesting! In the meantime, limited company route seems to be the best way to go!

More will come out when the legislation is digested over the next couple of days.

[Bradley]

Tax Motivated Incorporation

In the Pre-Budget Report proper I came across this little nugget:

The Government is committed to ensuring that the small business tax system adapts to the changing business environment and that the UK is the best place in the world to start and grow a business. However, it remains concerned about the tax-motivated incorporation of the self-employed, which involves businesses taking advantage of structural differences in the tax and national insurance contributions (NICs) treatment that applies to companies. The Government will therefore continue to review how the system could be modernised, made simpler, more efficient and more competitive.

In other words, get out of the managed service companies now and then we'll get you when you form your own company.

[DimPrawn]

Since when has my limited company become a PSC?
Don't like the look of this acronym......

Since when you, or some other idiots, voted New Labour.