Reply to: Request for Action

[BoredBloke]

And as I've said before, several times, the reason people incorporate is not to save tax but becuase the agencies that own the jobs don't deal with individuals, only companies, because of S134c and 95% of them will not want to take you on as an agency temp under PAYE when there is a pool of corporates out there who will same job for no hassle. That's simple commercial reality.

Spot on - Try to get a contract over say £25 per hour as an agency PAYE and see how willing they are to take you on. Their costs increase and when pitched against a contractor running a ltd company, see who gets put forward. So the ltd route becomes the only one you can use in order to get work. It's not a tax issue - although it is more tax efficient, it's an issue relating to simply getting put forward for a role.

[malvolio]

Sorry Mal, you're still going around the same circle.

You are not taking this risk because of the incorporation. You are taking the risk because you have decided to freelance, which, as you yourself say, you could do in way that didn't involve incorporation.

The question still remains. Given that *everybody* who has decided to freelance is taking the same risks, why should a tax break only be available to those that decide to incorporate?

But it seems that you're not going to answer it.

I know that you think that there should be tax breaks available to people who take the risk of becoming a freelancer, and I agree with you. But this doesn't explain why there should be a rule making some freelancers more equal than others.

And HMG does see that there is a need for change after 15 years. It's because as another poster pointed out (and I have said before), the number of professions (e.g nursing, teaching) which has seen people incorporating, (often for no other reason than to take advantage of this tax break) has/will sky rocket. The desire to protect future tax revenue is a valid reason, whether you like it or not.

tim

And as I've said before, several times, the reason people incorporate is not to save tax but becuase the agencies that own the jobs don't deal with individuals, only companies, because of S134c and 95% of them will not want to take you on as an agency temp under PAYE when there is a pool of corporates out there who will same job for no hassle. That's simple commercial reality.

Lose S134c and Transfer Taxation liability and we would all work as sole traders. As long as we have to operate a LtdCo, there is no reason we shouldn't have the associated taxation status. MyCo, legally, is no different to Tesco.

[tim123]

Becuase by incorporating - which is not the only option, since we could work as PAYE Temps employed by the agency should we so desire - and choosing to work as a freelance we are deliberately and willfully giving up employement rights and protections, paid leave including bank holidays, sick pay and SSP provisions plus assorted sundries like pensions contributions and training costs.

Sorry Mal, you're still going around the same circle.

You are not taking this risk because of the incorporation. You are taking the risk because you have decided to freelance, which, as you yourself say, you could do in way that didn't involve incorporation.

The question still remains. Given that *everybody* who has decided to freelance is taking the same risks, why should a tax break only be available to those that decide to incorporate?

But it seems that you're not going to answer it.

I know that you think that there should be tax breaks available to people who take the risk of becoming a freelancer, and I agree with you. But this doesn't explain why there should be a rule making some freelancers more equal than others.

And HMG does see that there is a need for change after 15 years. It's because as another poster pointed out (and I have said before), the number of professions (e.g nursing, teaching) which has seen people incorporating, (often for no other reason than to take advantage of this tax break) has/will sky rocket. The desire to protect future tax revenue is a valid reason, whether you like it or not.

tim

[malvolio]

It does nothing to answer the basic question of "why should someone get a tax break merely for incorporating"?

Becuase by incorporating - which is not the only option, since we could work as PAYE Temps employed by the agency should we so desire - and choosing to work as a freelance we are deliberately and willfully giving up employement rights and protections, paid leave including bank holidays, sick pay and SSP provisions plus assorted sundries like pensions contributions and training costs. We have to replace these at some cost and that cost has to come out of earned income. BigCo pays for it out of pre-tax, so why shouldn't we?

More to the point, you don't change laws after 15 years because 15 years have passed, you change them becuase there is a need to do so. There isn't one beyond some theoretical debates among the chattering classes about fairness - "I'm not good enough to work for myself, so you musn't be allowed to" is the basic logic.

As for appealing to JJoe Public, there's an awful lot of them working in corner shops and small building companies who have no idea they are in scope. HMG ain't going to tell them, so someone has to. And to do that, we need to appear on their radar. This is not about IT contractors, it's about anyone with a small business - and that's one in seven of the working population

[tim123]

No the argument is linear and is at the heart of the debate. MyCo could not have existed without Mrs Volio's active support, both personal and financial. The split share arrangement is not only in line with HMG advice, it has been proved at the HoL to be entirely legal and acceptable. Nothing has changed to warrant breaking that arrangement, (beyond the vindictive views of a bigoted, commercially unaware, socialist politcian or two, that is). So the whole approach is wrong and the income to be gained - no more than £7500 per couple max - versus the disruption caused is entirely disproportionate.
.

This is an utterly ridiculous reply to my anser. It the "the rule was like this 15 years ago so it mustn't change " reply.

It does nothing to answer the basic question of "why should someone get a tax break merely for incorporating"?

HMG are entitled to change their mind. When will you guys understand this?

And just to blow your holier-than-thou stance out of the water, it doesn't apply to me since I own 100% of MyCo and Mrs Volio has been on higher rate for years through her own employment. I'm against this in principle, not money.

I know that I'm an argumentative bugger, but I hope that I've made it clear that I not taking a view on this legislation here (as I said, I regard it as inevitable). I'm only discussing the tactics that are being used to deflate it.

ISTM that most of these tactics are based upon falsehoods (and irrelevancies) and that pees me off whichever side of the fence I am sitting on.

I understand that when disusing matters with Tabloid audiences this tactic has some merit, but for this matter the Tabloid reader could not give a monkeys. ISTM that using Tabloid spin when you know that your audience is solely made up of knowledgeable professionals, is insulting their intelegenc.

tim

[malvolio]

I sorry Mal, this arguement is circular.

You are argueing that by giving (selling, whatever) your spouse, half the shares in the company you have given her half the risk.

But technically you haven't. You have given her the risk because you have decided to freelance and she doesn't work (assuming that she doesn't).

If you had decided to freelance as SE you would still have given your spouse half the risk.

So the question remains. Your statement doesn't answer it IMHO.

tim

No the argument is linear and is at the heart of the debate. MyCo could not have existed without Mrs Volio's active support, both personal and financial. The split share arrangement is not only in line with HMG advice, it has been proved at the HoL to be entirely legal and acceptable. Nothing has changed to warrant breaking that arrangement, (beyond the vindictive views of a bigoted, commercially unaware, socialist politcian or two, that is). So the whole approach is wrong and the income to be gained - no more than £7500 per couple max - versus the disruption caused is entirely disproportionate.

And just to blow your holier-than-thou stance out of the water, it doesn't apply to me since I own 100% of MyCo and Mrs Volio has been on higher rate for years through her own employment. I'm against this in principle, not money.

[Sockpuppet]

1 - Doesn't only impact married people - your sister could have shares in the company, or your parents (in lieu of rent, perhaps?)

2 - It's the principle of the matter

3 - It's the thin end of the wedge

HTH

Ok, I'll get writing.

[tim123]

My issue with the propoosed legislation is that you might be penalised, or you might not. There is no clarity on how you value what contribution they have made or not.

I'm not advocating allowing people to shift for the sake of it. But if the spouse / partner makes a contribution to the business, then we need to know how to value that contribution. The current proposals do not allow for this - we seem to be in a similar situation here in not being able to value accurately the contribution made, so can't assess the exact implications.

But they do "allow" for it. What they don't do is "value" it (and I think, BICBW,) that this is the crux of the "it's unclear" arguement.

But come on guys, how the **** could they possibly write legislation so that it did put a value on every one of a million possibilities?

tim

[tim123]

Just going back to that point, at the time I set my company up my other half was sharing the same level of financial risk that I was; that I wouldn't make any money at it and the house went if I got it wrong. You can't separate a couple in the same way that you can a commercial partnership in terms of risk, so why not in terms of reward?

I sorry Mal, this arguement is circular.

You are argueing that by giving (selling, whatever) your spouse, half the shares in the company you have given her half the risk.

But technically you haven't. You have given her the risk because you have decided to freelance and she doesn't work (assuming that she doesn't).

If you had decided to freelance as SE you would still have given your spouse half the risk.

So the question remains. Your statement doesn't answer it IMHO.

tim

[TheFaQQer]

Hmm. I would write a letter to my MP but I'm not married so not sure what point I would be making.

1 - Doesn't only impact married people - your sister could have shares in the company, or your parents (in lieu of rent, perhaps?)

2 - It's the principle of the matter

3 - It's the thin end of the wedge

HTH

[Sockpuppet]

Hmm. I would write a letter to my MP but I'm not married so not sure what point I would be making.

[Ardesco]

My issue with the propoosed legislation is that you might be penalised, or you might not. There is no clarity on how you value what contribution they have made or not.

I'm not advocating allowing people to shift for the sake of it. But if the spouse / partner makes a contribution to the business, then we need to know how to value that contribution. The current proposals do not allow for this - we seem to be in a similar situation here in not being able to value accurately the contribution made, so can't assess the exact implications.

From what has come out so far they are going to work it out by seeing who brings the most money into the company. In my case the majority of company profit will be made from the income I bring in while Plan B and C will be ticking over with very little profit indeed until we can ramp up business.

I would love to just do Plan B and C, but that wouldn't pay the mortgage so I do the contracting to ensure that I can pay the bills and provide capital that the business can use for Plan B and C. You could say that I am being penalised for ensuring that my company has adequate cash flow to pursue other ventures.....

[TheFaQQer]

My wife spends a large amount of time on my business doing invoices and accounts and supporting plan B and C. Unfortunately Plan B and C aren't bringing in anywhere near what I bring in through contracting at the moment. I am now going to be penalised for paying my wife because of this. My wife has invested as much time, money and effort into my company as I have, yet if I pay her a dividend this is now going to be classified as my earnings and taxed accordingly. How is this fair?

My issue with the propoosed legislation is that you might be penalised, or you might not. There is no clarity on how you value what contribution they have made or not.

I'm not advocating allowing people to shift for the sake of it. But if the spouse / partner makes a contribution to the business, then we need to know how to value that contribution. The current proposals do not allow for this - we seem to be in a similar situation here in not being able to value accurately the contribution made, so can't assess the exact implications.

[Ardesco]

So that's the old, "The rule was like this 15 years ago so it can't be changed now" line. Sorry. governments are entitled to change their mind, there's no statute or case law that says they can't.

In any case, the critical point is that this form of incoming shifting is only available to couples who "incorporate". The SE person can't income share with their spouse, the employed person can't income share with their spouse.

The moral argument that needs a reply is not "why should couples be allowed to income shift", it is "why should this tax break only be available to those people who package their employment up in an incorporated company when it is not available to couples that don't"?

And please don't give me the guff about the spouse sharing the risk. In any family unit where only one person works, and that person works in a high risk job, the spouse shares the risk of the partner failing at that job and the whole family having no income.

There are probably a million or more couples out there taking a similar risk to a contracting couple who have no possibility of income sharing to mitigate that risk. ISTM that the risks of being a contractor, where you are placed in assignments using agency contacts, is far far lower than the risk taken by someone entering Self Employment where they have to find their own work, or a person being promoted to a sales role for the first time.

tim

I don't deny that they can change rules, but this change has come across as a spiteful knee jerk reaction to the Arctic Systems loss where the court proved that the government had got it wrong.

My wife spends a large amount of time on my business doing invoices and accounts and supporting plan B and C. Unfortunately Plan B and C aren't bringing in anywhere near what I bring in through contracting at the moment. I am now going to be penalised for paying my wife because of this. My wife has invested as much time, money and effort into my company as I have, yet if I pay her a dividend this is now going to be classified as my earnings and taxed accordingly. How is this fair?

The big issues that I have is that income shifting legislation is going to affect me even though my wife is doing valuable work for my company, if she didn't do it I would not have time to run Plan B and Plan C as well (or if I could the service would be tulipe because I wouldn't have enough time in the day to do everything that needs to be done).

I also firmly believe that as a married couple you should be able to join together your tax allowances and take full advantage of them. Look at the number of single parent families and families where the parents are not married at the moment. Tax breaks to encourage the family unit can only be a good thing IMHO!

[ratewhore]

The problem with simplifying the tax system is that it will then need less staff to run. Less staff to run mean less people with a direct dependency on maintaining NL in govt.

So no chance will they do it as it messes up their plans to make the majority of the country dependent on their policies...