Tax efficient ? Does this work ?

[Darren@UptonAccountants]

Accounts

The accounts of the company will also fall foul of the related party disclosure requirements, so the IR would know if you've been trading with yourself when the accounts go into the tax office!

[cailin dana]

Too distracting for me to have it in the bedroom.....

[Sockpuppet]

Hard to prove otherwise, if it's rammed full of office stuff... I wouldn't chance it!

My office is in my bedroom.... ok ok i'll satrt looing at over priced crap a.k.a. the housing market

[cailin dana]

Hard to prove otherwise, if it's rammed full of office stuff... I wouldn't chance it!

[simondolan]

But technically, your house which is your pricipal private residence and usually exempt from CGT, could potentially be hit once you sell it, if you claim for use of home as office...

Not quite true - you could only get hit for CGT if the room was used exclusively for business purposes.

[simondolan]

Hi

A close friend of mine has been contracting for some years. She runs her own limited company, for which she is the Director, and her husband the Secretary.

She has created the Company as a 'Holding' Company, and she contracts herself as a supplier to the Company (not an employee of) , working as a Sole Trader. The limited holding company is vat registered, but as a sole trader supplier to the Company, she is not, as she ensures that she does not exceed the VAT threshold.

She reclaims a huge amount of expenses through the Holding Company, including a % of her household utility costs (theoretically for running the office), depreciation on her motor vehicle, environmental allowances (for composting her 'office waste ' and computer eqpt etc.

She claims that she pays no more than about 18-20% Tax overall on the monies she takes home as both a Supplier and Director of the Holding Company.

Does this work ??

I think this works for her simply because she hasn't been caught yet!

The Company accounts will presumable show a large debit for "consultancy fees" paid to her as a sole trader.

At some stage the Revenue will come along and question the deduction. When they see that the payments are being made to herself the Revenue will contend that she should be treated as an employee (difficult to argue because she is a director and presumably the only one working though the Company). Then, all the payments made to her as a "sole trader" will be treated by the Revenue as being net of all PAYE and NI and send the Company a rather large bill going back 6 years.

I won't go into the questionable expense claims - hopefully the above will be sufficient to put off anyone thinking of undertaking such a bad plan.

[Ruprect]

But technically, your house which is your pricipal private residence and usually exempt from CGT, could potentially be hit once you sell it, if you claim for use of home as office...

V true - this is why I don't "rent" my home office to my company.

[cailin dana]

But technically, your house which is your pricipal private residence and usually exempt from CGT, could potentially be hit once you sell it, if you claim for use of home as office...

[Ruprect]

One advantage would be that as a sole trader you could offset your mortgage with the money that the sole trader is paid by the company...

[expat]

I'd like to know too.

I too had thought of being a sole trader, supplying a Ltd Co that I own. That would seem to overcome the usual problem with being a sole trader, that the client company won't contract with you.

But what is the advantage? Is your friend gaining by the arrangement? From what you describe, she is gaining rather by claiming a lot of expenses.


(If it matters, my reason for thinking about this was that I was at that time a sole trader in France, and if I took a contract in the UK I didn't want to be an employee because that would complicate cross-border tax).

[coulsonm]

Hi

A close friend of mine has been contracting for some years. She runs her own limited company, for which she is the Director, and her husband the Secretary.

She has created the Company as a 'Holding' Company, and she contracts herself as a supplier to the Company (not an employee of) , working as a Sole Trader. The limited holding company is vat registered, but as a sole trader supplier to the Company, she is not, as she ensures that she does not exceed the VAT threshold.

She reclaims a huge amount of expenses through the Holding Company, including a % of her household utility costs (theoretically for running the office), depreciation on her motor vehicle, environmental allowances (for composting her 'office waste ' and computer eqpt etc.

She claims that she pays no more than about 18-20% Tax overall on the monies she takes home as both a Supplier and Director of the Holding Company.

Does this work ??