Reply to: Expenses when working away from home Mon-Fri staying overnight

[cojak]

Since this thread has finished being Professional, I'm locking it.

Go play in the General playground. Any more name calling in the Professional forums will result in bans all round.

[VirtualMonkey]

Sorry what?
I dozed off after
"I have been contracting for a month and a half now and I have my paperwork mostly in order. I have set up my own limited company which has been running dormant since 2004 but with all returns made on time each year"
Clearly you should know how to run a business as you have had the best part of a decade to figure it out.


wake me up in another 8 years with a cup of tea and a query on the most tax efficient way of taking money out of the business will you?

[northernladuk]

12

See your 12 and double to 24.

[Guest22]

Ah, I've concluded that many of on here are belittling on newbies and are arrogant, obnoxious, prejudgmental and rather pompous... that seem to have far too much time on their hands that spend it all on here spouting off at anything that makes you foam at the mouth. I am on here to get some answers then I'll not return till I need more - I'm far too busy for this nonsense, but I'll say my piece now in the hope you will stop poking people for asking innocent questions.

I have been contracting for a month and a half now and I have my paperwork mostly in order. I have set up my own limited company which has been running dormant since 2004 but with all returns made on time each year. I am VAT registered, I'm on the Flat Rate Scheme and Annual Accounting Scheme. I'm in the process of registering for Corporation Tax and have almost secured an accountant. I have a PAYE scheme/reference. I have PI insurance with Hiscox and IR35 cover with Qdos. I use FreeAgent to manage my books and time and have submitted my first invoice which will be paid next week. And I've successfully executed my first contract and begin my second contract in two weeks. So for anyone here to start mouthing off saying I can't run a business or put any work into doing research when all of the above is as a result of doing exactly that, they can shove it. My questions are about the finer details and I see this forum as a resource so I will use it because I have very little time. It feeds me answers (spoon or not, I don't care) and there are some extremely helpful people on here that I appreciate very much. The forum succeeds because these helpful people exist and people in the future with similar questions will benefit from it. However, there is just too much pompousness on here and it is exactly that reason I found using the search facility difficult. 90% of the results are people flaming and trolling and having jokes about nonsense rubbish in between the meaningful posts. So I find it easier to ask about the details in a fresh topic than spending 5 hours sifting through pointless points from people like malvolio. The problem is, this forum is poorly moderated and is filling up with lots of this sh*t - a precursor to winding up as a less useful forum that could easily eventually be replaced by another up-and-coming better moderated forum as the most prominent UK contracting forum on the Interwebz.

Judging from the time some people seem to spend on here when they supposedly already have the knowledge so are probably just on here looking for fights, I don't think you're the 'big boys' at all. I earn a tidy rate and work in investment banking where I think I mix with much bigger boys than you - how's that for arrogance, but you deserve it for being so annoyingly obnoxious and arrogant yourself ('you' referring to those fitting in the aforementioned description).

Rant over, but I hope my lengthy post strikes a chord in some way as I'm not prepared to waste 10 minutes like this again and will come back when I have further questions I need answering unless I find another forum that is better.

[/rant]

[northernladuk]

People get irritated because the first thing people want to understand is if their £2.50 lunch deal from Costa is expensable. Not a mention of training, funding or other professional considerations; just can I dry clean my pampers on the company?

LOL.. Just brilliant.

[tractor]

..

Thanks Clare@InTouch, as you've previously put here, where I can see malvolio has also been 'Sigh'ing at newbies asking questions. Why are some people too pompous to accept there will always be new people starting out? Maybe they've just forgotten what it was like to have little or no knowledge about the subject matter. Saying 'Sigh' all the time just exuberates arrogance.

Anyway, that pro forma makes things very clear and the consideration of 'notional' tax credit is effectively the grossing up of the dividends as mentioned in my earlier link.

tractor, I can't claim for Prozac? Damn, what about Temazepam? Being on this forum is extremely stressful and I have to take drugs I would otherwise not take if I were not a contractor using this contracting forum. So I argue it's expensable!

[Did anyone watch Ramsay's Kitchen Nightmares last night?]

People sigh because ALL of your questions could have been answered by a very basic understanding of company structure/taxation and if you didn't have that, a cursory glance at the interweb thingy or HMRC own guidance.

People get irritated because the first thing people want to understand is if their £2.50 lunch deal from Costa is expensable. Not a mention of training, funding or other professional considerations; just can I dry clean my pampers on the company?

BTW, the big boys here don't watch Ramsay - tacky cooking, they read Ramsey- taxation hth

[northernladuk]

Thanks Clare@InTouch, as you've previously put here, where I can see malvolio has also been 'Sigh'ing at newbies asking questions. Why are some people too pompous to accept there will always be new people starting out? Maybe they've just forgotten what it was like to have little or no knowledge about the subject matter. Saying 'Sigh' all the time just exuberates arrogance.


tractor, I can't claim for Prozac? Damn, what about Temazepam? Being on this forum is extremely stressful and I have to take drugs I would otherwise not take if I were not a contractor using this contracting forum. So I argue it's expensable!

Mal's shared sighing is because most people do their own research and look for professional advice when starting a business as they are legally responsible for the LTD's finances. Being spoon fed on a public forum is not the way to run a business. The people you are asking put the work in so a bit frustrating when others don't.

The important thing is you are asking questions on some smaller aspects of running your business, the dangerous bit is what you don't know about so don't ask. We can answer questions but it doesn't teach you how to run your business.

That could be why you are getting a less than warm welcome I am afraid. Lisa has given you the best advice possible for your situation but you seem hell bent on ignoring it and stumbling on.

[Guest22]

Thanks Clare@InTouch, as you've previously put here, where I can see malvolio has also been 'Sigh'ing at newbies asking questions. Why are some people too pompous to accept there will always be new people starting out? Maybe they've just forgotten what it was like to have little or no knowledge about the subject matter. Saying 'Sigh' all the time just exuberates arrogance.

Anyway, that pro forma makes things very clear and the consideration of 'notional' tax credit is effectively the grossing up of the dividends as mentioned in my earlier link.

tractor, I can't claim for Prozac? Damn, what about Temazepam? Being on this forum is extremely stressful and I have to take drugs I would otherwise not take if I were not a contractor using this contracting forum. So I argue it's expensable!

[Did anyone watch Ramsay's Kitchen Nightmares last night?]

[VirtualMonkey]

whoever owns this sockie has done a great job of winding everyone up.
21 posts and most of the regulars here are about to take a weapon to him/her and need prozac....appparently. When you get some can I have some too please? Otherwise does anyone want to borrow my sword?

[Clare@InTouch]

*Yawn*



OK, this is all becoming much clearer. From here, 10% up to £35k, 32.5% above this. I guess the thresholds will have change for the new financial year, but I can't find figures for this anywhere yet.

There's a good example given here which factors in grossing up of dividends when calculating the dividend tax.

The only thing I'm not clear on is how my figures are going to be affected by my permanent employment salary. I received a salary every month during the 2011/12 financial year, and I will also be receiving a salary this month, too (the last one). I guess for the 2011/12 financial year, it will put all my dividend tax firmly in the higher tax bracket. But, for this year, how do I factor in my personal allowance? The aforementioned example seems to consider that the OP's day job swallows up the income tax personal allowance already. That will also be the case for me this year from my one salary payment this month. So, I surmise that if personal allowance is swallowed up by a permanent job salary, then I can assume I have no personal allowance left when working out my dividend tax (in other words, income tax personal allowance and dividend tax personal allowance are one and the same)?

tractor, don't cringe, take some Prozac. I'm new to contracting, so accept my baby steps or leave the advice to the big boys in here rather than being facetious.

Income is taxed:

0- 35,000 - basic rate band
35,000 - 150,000 higher rate band
150,001 upwards - additional rate band

Your tax code will increase the basic rate band, usually up to £42,475 (with a tax code of 747L). Next year the £42,475 is the same (it's just a higher personal allowance and a lower higher rate band).

Dividends are taxed at 10% in the basic rate band, but they also have a 10% tax credit, so it's effectively zero. If you pay yourself £1,000 what you've actually received is £1,111 with tax paid of £111. This 'notional' tax credit needs to be considered when thinking about tax bands.

In the higher rate band dividends are taxed at 32.5%, less the 10% tax credit to give 22.5%. This equates to 25% of the net (A gross dividend of £1,111 taxed at 22.5% = £250 and a net dividend of £1,000 taxed at 25% = £250).

It's therefore necessary to consider your total income including the tax credit in order to know how much of your dividend income will fall into higher rates, and you can then know that anything taken above that amount will result in 25% tax on the extra you've taken.

Dividends are always taxed last. If you have a salary of £34,000, savings income of £10,000 and dividends of £20,000 it will be the dividends that fall into the higher rate band.

[tractor]

*Yawn*

tractor, don't cringe, take some Prozac. I'm new to contracting, so accept my baby steps or leave the advice to the big boys in here rather than being facetious.

I lol'd...

fa·ce·tious   /fəˈsiʃəs/ Show Spelled[fuh-see-shuhs] Show IPA
adjective
1. not meant to be taken seriously or literally: a facetious remark.
2. amusing; humorous.
3. lacking serious intent; concerned with something nonessential, amusing, or frivolous: a facetious person.

I did intend to be taken seriously, I wasn't trying to be humorous and the point I was making is certainly not nonessential.

I simply don't get the idea that this kind of question seems to be based on that being in business = getting away with almost everything as a tax deductible expense. This kind of stupid thinking is what got us IR35 etc. I was merely pointing out a little of the history.

As for your 'big boy' comment you will probably benefit from the definition of facetious above.

ps clearly you have a fixation on prozac. Just to clarify, you cannot claim for that either.

[Guest22]

*Yawn*

Yes, you can only take 25K of dividends a year. The rest has to be transfered to a friend of your choice and the record of the transaction has to be removed from your statements before you hand them to your accountant.

Just kidding.. There is a soft cap where you break in to the next tax bracket. I think most people generally call this a max limit for tax efficiency but is not a hard cap.

You seriously need to get this accountant issue sorted PDQ

OK, this is all becoming much clearer. 10% up to £35k, 32.5% above this. I guess the thresholds will have change for the new financial year, but I can't find figures for this anywhere yet.

There's a good example given here which factors in grossing up of dividends when calculating the dividend tax.

The only thing I'm not clear on is how my figures are going to be affected by my permanent employment salary. I received a salary every month during the 2011/12 financial year, and I will also be receiving a salary this month, too (the last one). I guess for the 2011/12 financial year, it will put all my dividend tax firmly in the higher tax bracket. But, for this year, how do I factor in my personal allowance? The aforementioned example seems to consider that the OP's day job swallows up the income tax personal allowance already. That will also be the case for me this year from my one salary payment this month. So, I surmise that if personal allowance is swallowed up by a permanent job salary, then I can assume I have no personal allowance left when working out my dividend tax (in other words, income tax personal allowance and dividend tax personal allowance are one and the same)?

tractor, don't cringe, take some Prozac. I'm new to contracting, so accept my baby steps or leave the advice to the big boys in here rather than being facetious.

[ASB]

It was a newsreader

Last year, newsreader Sian Williams (presenter of BBC Breakfast) took the taxman to court claiming that she should be allowed to deduct several thousands of pounds in hair, clothing and make up costs, being as she was on the telly. Previous cases had failed on the grounds that clothes were not exclusively used for a job, as they also provided warmth and decency. Ms Williams argued that the studio was warm and she was quite prepared to present Breakfast naked.

MPs rules mean newsreader presents show naked? | BitterWallet

That wasn't the one I was thinking of. The one I was thinking of (and I got it the wrong way round the wig and gown were allowed it was the balance of the court clothing that wasn't) I have managed to find: Mallalieu v Drummond [1983] Wholly & exclusively: expenditure having an intrinsic duality of purpose: Clothing

[tractor]

...

Every time I see a thread like this where people are trying to micromanage their business to pay the least tax they possibly can, I cringe.

It reminds me of 2000 when the pre IR35 days were about to become history with the onslaught of Primarolo, Darling and Timms etc. See here for the Hansard extract. I repeat the important bit that got all their hackles up:

Dawn Primarolo Perhaps the hon. Gentleman needs to be reminded of everything that the Government have done for small businesses: the small business company rate cut; the new 10p corporation tax starting rate; first-year capital allowances; enterprise management incentives; and help through the Small Business Service. He still has not told the House why his party supports a few workers who use their companies to avoid paying 1181 tax when millions of others pay their tax. I direct him to Computer Contractor magazine of October 1999. Under the headline "Make hay while the sun shines", it said: ‘Beg, borrow or steal to avoid paying higher tax rates this year. Next year you will not be able to avoid it. You should recognise that your company … is a tax haven.’ He has to realise that, as we have rules in the system for self-employed and PAYE employees, it is not unreasonable to expect those few who are avoiding the rules to comply with them.

Contrast that with the following quote from 1929 and you will see that this problem has been at the fore for almost 100 yrs:

"No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer's pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue"

Once you have grasped the two extremes, realise that the middle ground between extremely complex case law and tax statute is pretty much common sense. Bear in mind also that the case from the quotation of Lord Clyde in 1929 had far more value attached to it than your poxy 5 quid for dry cleaning.

It is this kind of petty wriggling that got us IR35, Son of IR35 and IR35 2.0

[LisaContractorUmbrella]

Sorry. GET A GOOD ACCOUNTANT