Reply to: IR35 under the Tories

[dx4100]

IR35 does not prevent you operating your business in whatever manner you see fit. It does not stop you retaining profits. It does not stop you paying dividends. It does not stop you employing people. It does not stop you doing that leaflet drop or taking that office.

What it does do is affect taxation consequences of those actions.

The fact is that you could run a business whose work was largely caught by IR35 in exactly the same way as any other (though you would be mad).

IR35 continues to confuse the hell out of me. Then again, the only thing I do know about it for certain, that was the whole point.

[ASB]

ah, so there are some restrictions...

Reading this makes it sounds like if you wish to spend more than the 5% allows you are going to be found wanting. A restriction not in place unless you are IR35 caught.

For example, lets say you wanted to take on a office.

IR35 does not prevent you operating your business in whatever manner you see fit. It does not stop you retaining profits. It does not stop you paying dividends. It does not stop you employing people. It does not stop you doing that leaflet drop or taking that office.

What it does do is affect taxation consequences of those actions.

The fact is that you could run a business whose work was largely caught by IR35 in exactly the same way as any other (though you would be mad).

[threaded]

If you think the Tories will get rid of IR35 you're living in la-la land.

[TykeMerc]

Reorganising the whole of the labyrinthine UK personal tax system just in order to neuter IR35 is hardly likely, is it.

Improbable to say the least.

Plus of course a significant number of MP's and all UK Governments irrespective of party have a vested interest in keeping tax legislation as complex as conceivably possible. It funds an entire accountancy and legal profession which many MPs either come from or get fat Directorships in and if it's complicated then many tax payers wind up paying too much tax so revenues are boosted.
Complex tax law is also wonderful for HMRC as it allows the various managers to have nice empires of drones so boosting their pay grades and Honours list awards.

From a Governmental point of view ludicrously complicated tax law is a pure win.

[dx4100]

This is what really tees me off. You're running a company, you ought to have some idea how it all works.

Maybe you didn't read the part about me operating outside of IR35, aka IR35 not really a big issue for me. If it was you can be sure I would know exactly what I can and can not claim.

I would imagine most people running companies don't look at what you can and cannot claim if you are caught by IR35. But cheers for the slap down

Even inside IR35 you can deduct business expenses: the only one you can't have is training (because that's your employer's cost, even though you don't have one. Go figure). The 5% is deducted from YourCo's gross CTable income, i.e. after expenses and salary costs. You pay PAYE and NICs on the remaining 95%. Despite what it says, the 5% is nothing to do with expenses, it's simply an allowance becuase you're running a business. Except of course the whole point of IR35, in NL world, is that you aren't. That's why it's such an abortion of a law.

ah, so there are some restrictions...

Reading this makes it sounds like if you wish to spend more than the 5% allows you are going to be found wanting. A restriction not in place unless you are IR35 caught.

For example, lets say you wanted to take on a office.

http://www.ir35calc.co.uk/ir35_expenses_rule.aspx

I am not saying you are wrong. You are almost always right on these things and I value your opinion. The advice out there is hardly crystal if what you are saying is right.

Anyway, google "the potted guide to IR35" and have a read. It might help.

Thanks for the advice. Might read it out of interest.

[Doggy Styles]

You can't load NICs (employment taxes) on a personal stock market shareholder.

Why on earth not?

Because personal shareholders in the stock market (et al) are not employers or employees.

Just abolish NICs and raise income tax. Job done. I can't see what the problem is....

You can't? Reorganising the whole of the labyrinthine UK personal tax system just in order to neuter IR35 is hardly likely, is it.

[Wanderer]

You can't load NICs (employment taxes) on a personal stock market shareholder.

Why on earth not? Just abolish NICs and raise income tax. Job done. I can't see what the problem is. It doesn't matter where the income came from, it's still income.

Then we can avoid this whole IR35 charade

[malvolio]

?

5% rule + travel, accommodation and subsistence etc...

I am not a IR35 expert but my understanding is there are restrictions. Where am I going wrong with this ?

Lets say I wanted to do a massive leaflet drop advertising my company. Or a advertising campaign. I thought that sort of stuff would of been regarded as not being a "direct cost" related to the contract and hence would not be allowed ?

This is what really tees me off. You're running a company, you ought to have some idea how it all works.

Even inside IR35 you can deduct business expenses: the only one you can't have is training (because that's your employer's cost, even though you don't have one. Go figure). The 5% is deducted from YourCo's gross CTable income, i.e. after expenses and salary costs. You pay PAYE and NICs on the remaining 95%. Despite what it says, the 5% is nothing to do with expenses, it's simply an allowance becuase you're running a business. Except of course the whole point of IR35, in NL world, is that you aren't. That's why it's such an abortion of a law.

Anyway, google "the potted guide to IR35" and have a read. It might help.

[Walsingham]

An article I saw in the DT on the subject:

One radical option being considered is to allow the 600,000 people who sell their services through "one man" companies to opt out of employment.

Instead of paying 11pc Class 1 National Insurance Contributions (NICS) on their income they would pay the £2.40 a week due under Class 2 NICs, which is paid by the self-employed.

Anyone doing so would lose the right to statutory redundancy pay, maternity pay and jobseekers' allowance.

http://www.telegraph.co.uk/news/elec...-employed.html

Sounds fine to me.

[centurian]

Does anyone really worry about IR35? I have insurance through QDOS that should cover me for every eventuality, I'd rather pay £500 pa for that than a few £K more in tax.

This isn't a bash at QDos - in fact I think they are reasonably upfront about their TLC35 product. But if you think it offers 100% protection, you're heavily mistaken.

Many of the people in the Montpelier offshore scheme thought their scheme was 100% legal.

[dx4100]

What are you on about? IR35 has zero effect on business expenses, in or out.

?

5% rule + travel, accommodation and subsistence etc...

I am not a IR35 expert but my understanding is there are restrictions. Where am I going wrong with this ?

Lets say I wanted to do a massive leaflet drop advertising my company. Or a advertising campaign. I thought that sort of stuff would of been regarded as not being a "direct cost" related to the contract and hence would not be allowed ?

[malvolio]

I currently work outside of IR35...

The problem I have with IR35 is not subjecting all the company earnings to PAYE (even though this would see me paying more tax) it is the stupid restrictions applied to expenses. If they want to treat contractors with one customer as a disguised employee (which I think is a weak argument at best) then fine, but don't stop me attempting to operate like a business and grow my business further by having over the top restrictions on expenses and such like.

It benefits no one....

What are you on about? IR35 has zero effect on business expenses, in or out.

[dx4100]

Very sad stuff...

[dx4100]

I currently work outside of IR35...

The problem I have with IR35 is not subjecting all the company earnings to PAYE (even though this would see me paying more tax) it is the stupid restrictions applied to expenses. If they want to treat contractors with one customer as a disguised employee (which I think is a weak argument at best) then fine, but don't stop me attempting to operate like a business and grow my business further by having over the top restrictions on expenses and such like.

It benefits no one....

[The Wikir Man]

As others have observed, it'd be impossible (or unpopular) to implement.

My gripe with IR35 never was about paying more tax. It was about the fact until the courts ruled, it was not clear who was in and out. It's now clear that you can be out, if you get the right contract written, which is blatently stupid and unfair. If the govt found a way to make freelancers pay more tax (as opposed to current situation) where we pay less, I would have not been happy about paying more than employees, but would have got on with it - as my rate is far higher than what I'd get as a permie.

The end result of such a move would be fewer contractors. There'd be no point for many. The pool would reduce, so rates might go up, and I have less competition. However, few contractors would, as a whole, be had for the UK.

In CH, you don't get tax relief on dividends, so everyone is in IR35. I still wouldn't go permie. However, expenses are rather more flexible here!

Solidarity, sister!