CT and responsibility

[r0bly0ns]

And don't forget that Corp Tax is going up 1% a year for the next couple of years thanks to Gordon Brown.

[salazie]

Ah I see, sorry - got the wrong end of the stick. Thanks for clearing it up for me!

[NotAllThere]

I'm a little confused by this - I'm all for putting money away 'just in case', but surely if the taxman was going to investigate it could be pretty much at any point in the future (up to 6 years is it?), and so to cover yourself you'd have to keep the money in the company until then. If you pay yourself the full amount in dividends at the end of the year then you're barely better off, although I guess you are covering yourself during that 1 year period... But then the investigation could come in the following year, after you'd paid youself the divi's?

Or does it not work like this?

Ah, you misunderstand. I do not operate my company this way in case of investigation or IR35 liability. I do it to ensure I can pay corp tax and vat and paye and whatever, and I don't declare a dividend out of profits that I don't have.

The opposite end of the spectrum, as has been expressed a few times in this forum, usually with the words "HELP" close by, is to just take money out of the company as and when, and sort out the taxes at year end. At no point during the company year, with this way of working, do you actually know how much dosh you've got. A very risky way of working.

If you know that your company can afford to pay your £40,000 a quarter more than you need to live on, then by all means declare a divvy. The point is we don't always know what our liabilites nro our income will be at year end. So we work like this to avoid a nasty surprise when the vatman comes a knocking cos you can't afford to pay that VAT bill, cos you've spent all the company money on wine, women and song.

[boredsenseless]

I'm being to cautious then. About 50% of my money gets put to one side to cover CT and any periods I'm out of work.

Take just enough each money to live in the manner to which I'm accustomed plus a bit more.

Looking forward to the accountant telling me what we can take from company under Divs at the end of the year.

No you're not, it seems to me that this is a very sensible way for a company to operate. You can hardly gear up for an opportunity that may involve taking on a couple of subbies (who you have to pay before you get paid) if you've taken every penny out of the company.

[salazie]

You're not being too cautious at all. That's exactly the way to operate, IMO, unless you need the extra cash for something. The end of year bonus is always nice.

I'm a little confused by this - I'm all for putting money away 'just in case', but surely if the taxman was going to investigate it could be pretty much at any point in the future (up to 6 years is it?), and so to cover yourself you'd have to keep the money in the company until then. If you pay yourself the full amount in dividends at the end of the year then you're barely better off, although I guess you are covering yourself during that 1 year period... But then the investigation could come in the following year, after you'd paid youself the divi's?

Or does it not work like this?

[NotAllThere]

I'm being to cautious then. About 50% of my money gets put to one side to cover CT and any periods I'm out of work.

Take just enough each money to live in the manner to which I'm accustomed plus a bit more.

Looking forward to the accountant telling me what we can take from company under Divs at the end of the year.

You're not being too cautious at all. That's exactly the way to operate, IMO, unless you need the extra cash for something. The end of year bonus is always nice.

I could post my contract on here if anyone could help??)

You could, or you could ask someone like Bauer & C for an expert opinion.

[VectraMan]

Not necessarily. IR35 was designed to stop the permanent Friday/contractor Monday with no change in working practice. If the OP can demonstrate that the working practices are outside IR35, and his services contract backs that up, why would he be caught?

I agree. It's unlikely you'll ever get investigated anyway, but as long as you're not just continuing your old job (and you're obviously not), then I doubt you have to worry too much. I'm actually doing some part-time work for an ex-employer, but the circumstances mean it would never fail IR35.

[milkybarkid99]

Thanks for the quick responses, my new contract with my ex-employer does sever any links between us, includes substitution clauses and that any work I do is formulated by me and is solely my responsibility.

I had a feeling IR35 would be eeking around the corner and fully expected to be caught by it even though my working practices are now somewhat different so there may be some light at the end of the tunnel, better to be safe than sorry though. ( I could post my contract on here if anyone could help??)

I didnt realise and my accountant didnt inform me that the ISA option was not possible so will probably look at a business high interest account and save the 19-20% to be on the safe side and hope I get something back.

Once again thanks for the responses, my first week is next week on both contracts so just wanted to sort out the questions before the madness begins.

Cheers

Sean

[Crossroads]

No - you WILL be IR35 caught on that contract, since this is what IR35 was designed to stop.

Not necessarily. IR35 was designed to stop the permanent Friday/contractor Monday with no change in working practice. If the OP can demonstrate that the working practices are outside IR35, and his services contract backs that up, why would he be caught?

[Bluebird]

I'm being to cautious then. About 50% of my money gets put to one side to cover CT and any periods I'm out of work.

Take just enough each money to live in the manner to which I'm accustomed plus a bit more.

Looking forward to the accountant telling me what we can take from company under Divs at the end of the year.

you can take out your divis as and when you want, provididing you back it up with paperword - ie Shareholder Meeting Minutes & Tax Vouchers.

Don't foregt the one big thing you have to get your head around is what is the companies money and what is yours personally.

The other thing is divis have to be paid equally to all shareholders.

You need to get an accountant.

[MikeC1408]

I'm being to cautious then. About 50% of my money gets put to one side to cover CT and any periods I'm out of work.

Take just enough each money to live in the manner to which I'm accustomed plus a bit more.

Looking forward to the accountant telling me what we can take from company under Divs at the end of the year.

[VectraMan]

as a new company I know there are start up costs which can be netted off, expenses for mileage and computer equipment which I am hoping to nett off some of my CT where appropriate

Is net now a verb? I must have missed that.

As advised by the accountant, I'd work out divs based on 20% CT (when it was 19% - I'll probably do 21% from now on). Also don't pay any divs in your last month until you get the final figures, then you have pleanty of leeway and aren't going to get it wrong.

Get a business deposit account and put the CT money in there. You don't need to pay it until 9 months after the year end, so you may as well earn the interest.

[NotAllThere]

You should put aside the approximate corp tax each time your company is paid. If you put 19% aside, you're covered, and you've got a nice divvy to pay at the end of the year. If you want to sail closer to the wind, and extract as much as possible, then you'll need to work out your net profit so far, and projected net profit, and ensure by the end of the year, you've enough to pay the tax.

You should also put aside your VAT receipts.

Do not put the money aside into a personal account.

Regarding whether your contract is IR35 caught or not, you should seek a contract review. If your contract is properly written, I see no reason why you should be caught, despite having been an employee on Friday and a contractor on Monday. Anymore than you would continue to be an employee of your client, if you'd gone to work for bigConsultancy plc. under the same arrangement.

[TheFaQQer]

chargeable of course and I am very wary that I may get collared for IR35

No - you WILL be IR35 caught on that contract, since this is what IR35 was designed to stop.

My girlfriend intends to take 19% out each month and move it to an isa or high interest bearing account ready for mr brown when the time comes around

You can't put it in an ISA - an Individual Savings Account. This is company money, nothing to do with your personal finances. I put at least 19% of each invoice away into a high interest business account - then I know that I've got the money put aside to pay the bills. I also put the VAT from each invoice aside into the high interest account, so that is there to pay as well.

(the 19% may be increased in case I get shafted by ir35 on my part time contract however I am hoping the savings my accountant will make will divvy this up)

Not sure what you mean by the savings your accountant will make - you will need to pay full PAYE on the income from your IR35 caught contract, minus allowed expenses minus 5%.

[milkybarkid99]

Hi all

After reading this site for what seems ages I have made the bold leap in contracting and have a question regarding CT.

I will be moving to a new contract from my permie job and in order to facilitate a one week notice period had to agree to provide consultancy from my Ltd Co to my ex-employer for a period of 6 months for 5 days per month (chargeable of course and I am very wary that I may get collared for IR35).

I will also be working full time on another contract and hence want to know how you guys cater for the saving of CT within your business as the deadline for payment is so far away (January 09 after amending my co's financial year start).

I am planning to pay myself the minimal wage and take divi's when appropriate.

My girlfriend intends to take 19% out each month and move it to an isa or high interest bearing account ready for mr brown when the time comes around (the 19% may be increased in case I get shafted by ir35 on my part time contract however I am hoping the savings my accountant will make will divvy this up)

After all of this, I want to know if there is a strict regime you guys adhere to in relation to putting CT away, as a new company I know there are start up costs which can be netted off, expenses for mileage and computer equipment which I am hoping to nett off some of my CT where appropriate, as this is the case would you really be as anal to put the full 19% away from day one or do you guys take a wild guess at how much you think your accountant will save you and just save a little less, i.e. 15-16%?

Any help would be appreciated?

Sean