Reply to: IR35 - how many investigations per year?

[Wanderer]

Eh. I investigated it but didn't think it was worth it. Can't remember why exactly.

Probably because you have an awful lot of expenses.

I joined the FRS because I'm fortunate enough not to have to travel on business very much so my expenses are low and it saves a lot of admin hassle.

[malvolio]

Unless you are buying a lot of goods then it's a no brainer I thought?

Or paying hotel bills?

[dx4100]

Eh. I investigated it but didn't think it was worth it.

Can't remember why exactly.

Unless you are buying a lot of goods then it's a no brainer I thought?

[prozak]

An awful lot of us. It saves you at least a couple of hundred pounds a month, unless you are over the threshold and billing for more than £187k a year (IIRC).

Eh. I investigated it but didn't think it was worth it.

Can't remember why exactly.

[DaveB]

OK. But how many are on Flat Rate?

Not me.

An awful lot of us. It saves you at least a couple of hundred pounds a month, unless you are over the threshold and billing for more than £187k a year (IIRC).

[prozak]

20% is what you charge your client, and that is what they claim back from their VAT liability. But if you are on FRS, then you dont pay all the 20%, but only part of it. IT consultants, pay 14.5%, so that figure.

OK. But how many are on Flat Rate?

Not me.

[rd409]

How did you get 14.5%? Is this the flat rate amount?

All my invoices are vat at 20%.

20% is what you charge your client, and that is what they claim back from their VAT liability. But if you are on FRS, then you dont pay all the 20%, but only part of it. IT consultants, pay 14.5%, so that figure.

[craig1]

Financials and insurance companies don't charge VAT do they?

Any other companies that don't charge VAT?

Do they get the VAT back in another way?

If the companies have a negative VAT liability then they get the repayment when they submit the return.

[prozak]

How did you calculate the CT + VAT figure? My calculations comes to 38946. Did you put in 20% as VAT, that you charge? The reality is the you pay 14.5% or whatever

How did you get 14.5%? Is this the flat rate amount?

All my invoices are vat at 20%.

[prozak]

I used the defaults on that IR35 Calc website.

I did warn in my post above that it was dodgy analysis.

Sure pick it apart if you like. But I wont be defending my calculations.

[rd409]

You know this is an excellent point. And one not considered by many.

I just did a little calc thing at that IR35 calculator website and here is what i found.

For a contractor that generates 100k of revenue a year

1. The equivalent salary is 111532
2. The tax on 11532 is £42536 (employee NI + PAYE)
3. The total tax paid for the contractor CT+VAT is 48004

Conclusion: We pay more tax than a permie.

How did you calculate the CT + VAT figure? My calculations comes to 38946.
The reality is even more stark as the permie rate for a 500 odd a day contract is a lot less than 111k.


So HMRC should be encouraging us to contract and forget about IR35.

How did you calculate the CT + VAT figure? My calculations comes to 38946. Did you put in 20% as VAT, that you charge? The reality is the you pay 14.5% or whatever , and the client can reclaim 20%, so the Hector is losing if not making minimal for VAT. For CT; did you consider minimum salary, and other expenses that can be deducted?

Being a ltd company means you pay considerable tax if you plan your income. No one on this board, pays themselves full amount in salary or even salary/dividend.

Coming back to the point, I prefer the IR35 to stay as it is. I dont mind paying couple of hundreds every year for insurance, and some efforts in making sure, my working practices are compliant.

[prozak]

Although I agree with the principle of your point, it's not 100% right. VAT is a transparent tax for the vast majority of B2B relationships, if you didn't pay that VAT then your client would from their upstream business transactions, be it B2B ones of their own or B2C ones that generate the primary VAT liability, all you're doing is reducing their VAT liability and increasing yours, a nil sum game for you and HMRC. The only people who really pay VAT are the punters at the far end of the chain of transactions who can't reclaim their VAT expenditure.

Financials and insurance companies don't charge VAT do they?

Any other companies that don't charge VAT?

Do they get the VAT back in another way?

[craig1]

You know this is an excellent point. And one not considered by many.

I just did a little calc thing at that IR35 calculator website and here is what i found.

For a contractor that generates 100k of revenue a year

1. The equivalent salary is 111532
2. The tax on 11532 is £42536 (employee NI + PAYE)
3. The total tax paid for the contractor CT+VAT is 48004

Conclusion: We pay more tax than a permie.

The reality is even more stark as the permie rate for a 500 odd a day contract is a lot less than 111k.


So HMRC should be encouraging us to contract and forget about IR35.

Although I agree with the principle of your point, it's not 100% right. VAT is a transparent tax for the vast majority of B2B relationships, if you didn't pay that VAT then your client would from their upstream business transactions, be it B2B ones of their own or B2C ones that generate the primary VAT liability, all you're doing is reducing their VAT liability and increasing yours, a nil sum game for you and HMRC. The only people who really pay VAT are the punters at the far end of the chain of transactions who can't reclaim their VAT expenditure.

[prozak]

With regard to the tax that contractors pay, I paid far and away more tax in the last year through VAT and CT on my Ltd Co than I even earned in my last staff job. I suppose I'm still an IR35 tax dodging scumbag contractor, but if I went back to a staff role the chancellor would lose £000's every year from me alone. I don't expect politicians to start to understand that, they have other agendas.

oops. didn't see this before I posted my dodgy analysis.

[prozak]

.

contractors do generate wealth and assocaited tax payments via both CT and VAT)

You know this is an excellent point. And one not considered by many.

I just did a little calc thing at that IR35 calculator website and here is what i found.

For a contractor that generates 100k of revenue a year

1. The equivalent salary is 111532
2. The tax on 11532 is £42536 (employee NI + PAYE)
3. The total tax paid for the contractor CT+VAT is 48004

Conclusion: We pay more tax than a permie.

The reality is even more stark as the permie rate for a 500 odd a day contract is a lot less than 111k.


So HMRC should be encouraging us to contract and forget about IR35.