Reply to: Managing expenses efficiently

[youngguy]

Useful thread this. Maybe it should be a sticky?

If there is one guarantee it's that every single Q on here gets some useful answers, peppered inbetween a whole load of ill founded assumption, irrelevance and keyboard warrior/ego building action.

Still keeps us all out of (too much) trouble and entertained, so it's all good! [emoji6]

Now let's all get out there and enjoy the sun!

[northernladuk]

Useful thread this. Maybe it should be a sticky?

[youngguy]

It really does. The rule looks forward.

https://www.gov.uk/hmrc-internal-man...anual/eim32080



The fact you are financially planning for it to last more than 24 months also removes the 'plausible deniability' excuse.
Being anonymous helps, and you can do what you want as it's difficult to prove.

But your gig is likely to last, or you expect it to last, more than 2 years as your original post suggest so the rule applies now.

Indeed...but the word there is LIKELY. There is nothing to suggest I will receive an extension offer,or if I do....I will take it. This curiosity came from a conversation with someone else.

BTW, In the last week I walked into a jewellers and had a look on rightmove, as well as muttering a nasty name about someone. Doesn't mean I am getting a watch, moving house and about to commit assault!

But if you say so, [emoji106]

[Lance]

It really doesn't

It really does. The rule looks forward.

https://www.gov.uk/hmrc-internal-man...anual/eim32080

prevents a workplace from being a temporary workplace where an employee attends it in the course of a period of continuous work that lasts, or is likely to last, more than 24 months

The fact you are financially planning for it to last more than 24 months also removes the 'plausible deniability' excuse.
Being anonymous helps, and you can do what you want as it's difficult to prove.

But your gig is likely to last, or you expect it to last, more than 2 years as your original post suggest so the rule applies now.

[youngguy]

You realise that means you can’t claim any more expenses from now don’t you?

It really doesn't

[Lance]

See 1st post [emoji16]

You realise that means you can’t claim any more expenses from now don’t you?

[youngguy]

So you expect to be renewed beyond 2 years?
You know what that means don’t you?

See 1st post [emoji16]

[Lance]

They are exactly the options. My Q was whether anyone had modeled the impact for option 2.

I'm actually not anywhere near 24months, hence the consideration now.

So you expect to be renewed beyond 2 years?
You know what that means don’t you?

[Old Greg]

They are exactly the options. My Q was whether anyone had modeled the impact for option 2.

I'm actually not anywhere near 24months, hence the consideration now.

If you want a rate increase, you should be modelling what you can get away with, not your cost base.

[youngguy]

Definitely has its appeal, but for potential clients it is unlikely to instill great confidence in your skills and professionalism. If you are good enough to get away with it, go for it. I'll waive my name-recommendation consultancy fee for you this time.

I'm happy to pay the fee, it's an expense right???

I just need a little hand calculating ........ [emoji13]

[WordIsBond]

Ps: really wish I had called my company Young Whippersnapper!

Definitely has its appeal, but for potential clients it is unlikely to instill great confidence in your skills and professionalism. If you are good enough to get away with it, go for it. I'll waive my name-recommendation consultancy fee for you this time.

[WTFH]

Ps: really wish I had called my company Young Whippersnapper!

You still could, there isn't another UK company with that name:

https://beta.companieshouse.gov.uk/s...Whippersnapper

[youngguy]

If the question were difficult I'd understand not getting an answer. I'll explain how to go about it so you will all be smarter next time.

Higher rate tax on dividends is 32.5%. So if this is paid as dividends the following applies.

Watch carefully, children and youngguys. I'll do this on a per 100 basis.

X is the amount of dividend our friend must receive to clear £100. X * 0.325 is the tax he must pay on any dividends he must receive. Basic maths tells us, then:

X - X * (0.325) = £100
or
X * (1-0.325) = £100 (if you aren't still with me, you aren't fit to run a Ltd so go permie or umbrella)
or
X * 0.675 = £100
or
X = £100 / 0.675
or
X = £148.15

For £500, that's £740 extra dividends a month.

If our young friend is able to absorb this below the higher rate threshold, his per £100 required dividend is £108.11 (using the above formula but with 0.925 to reflect the 7.5% dividend tax). For £500, that would be £540 in extra dividends a month. If it's going to be partly below and partly above, do a pro-rata calc between £540 and £740 and you have your answer.

How much extra revenue would Young Whippersnapper Ltd need to generate to provide these dividends? We'll use the £740 / month. Corporate tax rate is 19%.

Using the exact same logic as above to derive a final formula, and using 19% instead of 32.5% for the tax rate, YW Ltd needs £740 / 0.81, or £914 / month. If the sole fee earner from YW Ltd, Mr YG, works 18 days a month, he will need to generate fees of an extra £50 / day to generate that kind of revenue. If he keeps this in basic rate territory, he will need an extra £37 / day.

Thankyou - much appreciated.

My figures were not actually far off. Honest.


Ps: really wish I had called my company Young Whippersnapper!

[northernladuk]

And now you're waiting for me to tell you what it is, right? Just to see if I really know, of course.

Of course I hate these numbers threads, they always go on and on so not for me to jump in and steal anyone's thunder!

He needs those amounts minus what he's already paying, which means about £22 / day (higher rate) or £10 / day (basic rate). So the suggestion above to ask for £20 / day more to cover the expenses is pretty close. I'd ask for a little more rather than a little less, personally.

I fankoo

[WordIsBond]

I was just waiting to see if you'd spot your mistake and correct it later.. Honest.

And now you're waiting for me to tell you what it is, right? Just to see if I really know, of course.

The factor that is left out of the equation is that YW Ltd is already paying £500 / month, or at 18 days / month, £27.78 / day.

So he doesn't need £50 / day (higher rate) or £37 / day (basic rate). He needs those amounts minus what he's already paying, which means about £22 / day (higher rate) or £10 / day (basic rate). So the suggestion above to ask for £20 / day more to cover the expenses is pretty close. I'd ask for a little more rather than a little less, personally.

OP, if you are on an £8.4K salary and the rest dividends, consider treating the first £3.4K (up to the personal allowance) as a BIK (as long as you don't have any other Benefits in Kind). I'm pretty sure this will save you a little bit, since it won't mean any normal income tax and it won't change your dividend tax, so personal tax difference is nil. It will cost your Ltd some on Employer NI but save more on CT. The difference nets out to about 8% which on £3.4K is not enough to make you rich but probably worth doing. I'm too lazy to run precise numbers today.