Reply to: 90% Take home?

[DigitalUser]

Re: 90% Take home?

As I am sure the EBT guys thought a couple of years ago as well but it is a fair point and probably quite correct.

No 'probably' about it, there is case law and thus precedent. Unless things change HMRC can't challenge spouses or civil partnerships with respect to income splitting.

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[kal]

It was an avoidance scheme that failed. As such its no longer avoidance and becomes evasion.

Its just another example of an artificial entity being created to fix a problem. It doesn't work because courts see through them.

Exactly once it's deemed by the courts to be illegal its no longer avoidance and becomes evasion, the precise point I was trying to make with the avoidance/evasion comment...

[eek]

I know the difference. HMR&C, unfortunately, don't. HMRC wins case against tax avoidance scheme on car repairs

It was an avoidance scheme that failed. As such its no longer avoidance and becomes evasion.

It was just another example of an artificial entity being created to fix a problem. It doesn't work because courts see through them.

[LisaContractorUmbrella]

Tax avoidance is legal, its about minimising your tax exposure within the law (e.g income sharing with your spouse as per the Arctic case), tax evasion is about illegally not paying tax that you are required to do so by law (= you go to prison), simples.

I know the difference. HMR&C, unfortunately, don't. HMRC wins case against tax avoidance scheme on car repairs

[kal]

I wasn't talking about the Arctic case I was talking about your remark concerning 'avoidance'

Tax avoidance is legal, its about minimising your tax exposure within the law (e.g income sharing with your spouse as per the Arctic case), tax evasion is about illegally not paying tax that you are required to do so by law (= you go to prison), simples.

[LisaContractorUmbrella]

HMRC lost the Arctic systems case so I think they already know...

Revenue loses Arctic Systems test case

I wasn't talking about the Arctic case I was talking about your remark concerning 'avoidance'

[kal]

Tell that to HMR&C - you can use it as your defence

HMRC lost the Arctic systems case so I think they already know...

http://www.thisismoney.co.uk/money/a...test-case.html

[LisaContractorUmbrella]

The key point here is that tax avoidance is legal, tax evasion is not

Tell that to HMR&C - you can use it as your defence

[kal]

I don't think anyone could argue that paying a dividend to a spouse who has done very little to contribute to the companies income is for anything other than tax avoidance. If i had a spouse who i trusted, I would probably be tempted to do the same, but I would not pretend it was for anything other than tax avoidance.

The key point here is that tax avoidance is legal, tax evasion is not

[kal]

I don't understand this type of calculation.

Working as a standard Ltd, from the money that turns up in your company bank account you have to pay Corporation tax and VAT (irrespective of anything else).

Are you talking about 80-85% after these have been paid?

Not factoring in VAT as such (apart from I guess that flat rate bit) but yes am looking at that figure after corp tax, that does include my expenses of 15k + salary of ~ 8 k as well

[eek]

I don't understand this type of calculation.

Working as a standard Ltd, from the money that turns up in your company bank account you have to pay Corporation tax and VAT (irrespective of anything else).

Are you talking about 80-85% after these have been paid?

I think you can ignore VAT from the equation as its not included in most advertised day rates (remember contracting is a business to business transaction).

As I am sure the EBT guys thought a couple of years ago as well but it is a fair point and probably quite correct.

EBT are pushing it. The point of an EBT is that you get a benefit which does not directly relate to what you do. It doesn't work when the amount being paid out has a direct correlation to the amount you paid in.

I don't think anyone could argue that paying a dividend to a spouse who has done very little to contribute to the companies income is for anything other than tax avoidance. If i had a spouse who i trusted, I would probably be tempted to do the same, but I would not pretend it was for anything other than tax avoidance.

Income sharing between man and wife dates back to the 1930's and was only introduced then because prior to that Men had to pay income tax on the income their wife earnt.

[Ketchup]

I don't think anyone could argue that paying a dividend to a spouse who has done very little to contribute to the companies income is for anything other than tax avoidance. If i had a spouse who i trusted, I would probably be tempted to do the same, but I would not pretend it was for anything other than tax avoidance.

[northernladuk]

But it has been through the courts and HMRC lost, see the Artic Case. So if your wife/husband has allowance left fill yer boots and sleep soundly.

As I am sure the EBT guys thought a couple of years ago as well but it is a fair point and probably quite correct.

[cojak]

I'm around the 80-85% mark running a standard Ltd with 15k a year expenses, share split with the missus etc, why in the world people would want to risk getting into bed with these dodgy outfits these days is beyond me...

I don't understand this type of calculation.

Working as a standard Ltd, from the money that turns up in your company bank account you have to pay Corporation tax and VAT (irrespective of anything else).

Are you talking about 80-85% after these have been paid?

[proggy]

You could argue splitting income with your missus isn't exactly straight down the line. Yes there is nothing stopping you doing it but can't argue it is anything but avoidance in 99% of situations including contractors. If I said ( a couple of years ago) one of them is a legal method to avoid tax and retain 85% of earnings but does not conform to the spirit of the law which one would you say I was talking about?

... but let us not get in to that argument on this thread.

But it has been through the courts and HMRC lost, see the Artic Case. So if your wife/husband has allowance left fill yer boots and sleep soundly.