Reply to: What happens to my LTD (Car, equipment) when I move to IR35?

[WordIsBond]

If you have the funds in the company to cover the lease, it may be worth doing an inside contract as a PSC, rather than umbrella. Then, it's clearly a legit BIK.

[northernladuk]

But isn't there that old catchall that you are still working on the business but still have no sales. They'd have to go in to exact journeys etc to prove. Quite a grey area and some attitude to risk plays.

[WTFH]

at least with an electric motor the BIK wont be quite to bad

Not sure if it will be that simple - it’s a business asset being used purely for personal use.
The insurance for it will need to be purely personal use.
Check the lease to see if there is restrictions on mileage and the type of mileage.
And if it’s a car where you’ve claimed 100% of the VAT back saying it’s purely for business use, you might find you’ll owe at least 50% of the VAT to HMRC.

[CanPayButWouldRatherNot]

at least with an electric motor the BIK wont be quite to bad

[cojak]

Difficult to see how it would not be a BIK - your business mileage is no longer an allowable expense.

Ouch! I’d forgotten that.

[mudskipper]

Provided you have enough money in the company to pay for the lease as well as the usual taxes.

Difficult to see how it would not be a BIK - your business mileage is no longer an allowable expense.

[cojak]

Couldn't the car leasing costs could be offset against prior profits made by the company while contracting outside IR35?

So if you stop earning income part way through your company financial year, but you're still paying the leasing costs, would think you'd still count the costs against prior profits within your company, and could even do a carry back of a year (not sure if you can do more) if your lease carried into your company's next financial year (so your losses due to car lease, etc. would carry back against profits the prior year).

Not an accountant though so definitely one to check with yours!

Provided you have enough money in the company to pay for the lease as well as the usual taxes.

[lifexplorer]

Couldn't the car leasing costs could be offset against prior profits made by the company while contracting outside IR35?

So if you stop earning income part way through your company financial year, but you're still paying the leasing costs, would think you'd still count the costs against prior profits within your company, and could even do a carry back of a year (not sure if you can do more) if your lease carried into your company's next financial year (so your losses due to car lease, etc. would carry back against profits the prior year).

Not an accountant though so definitely one to check with yours!

[jamesbrown]

Well, unless you have a contract with a small company, if this the case you can decide on whether you are inside or outside, and if YOU decide you are inside THEN you will get the 5% expenses (as per JB’s post earlier).

It sounds bizarre to me, but there you go...

Right, it is bizarre in its complexity, which is why this small company exemption won’t last, IMHO. They will want to end up with a single-tiered system.

[cojak]

Assuming the changes come into effect, the 5% allowance disappears.

Well, unless you have a contract with a small company, if this the case you can decide on whether you are inside or outside, and if YOU decide you are inside THEN you will get the 5% expenses (as per JB’s post earlier).

It sounds bizarre to me, but there you go...

[mudskipper]

From now until April 2020 you can claim 5% expenses.

After April 2020 it is wrong , misguided and hopelessly optimistic.

Do you actually know what’s going to happen in April 2020?

Assuming the changes come into effect, the 5% allowance disappears.

[jamesbrown]

Well, that's why I'm asking here for guidance. It sounds like this is valid for now until April 2020 and things will be changing in a yet unknown way?

Sort of.

The draft legislation is available. This technical legislation is unlikely to change in substantive ways as it proceeds through Parliament. Clearly, there is some uncertainty about the shape of the UK gov't next April, but I still think the draft legislation is an excellent guide to what will actually happen under most permutations, including Labour (to begin with - obviously much more drastic subsequently).

The draft legislation is very clear.

Is your end client a small company, as defined by the Companies Act?

If your answer to the above is yes, then you will determine your own status and still have the 5% expenses allowance after April 2020, assuming you declare the contract inside (things will operate as now in the private sector).

If your answer is no, and your OP certainly implies that, then you will not have this 5% expenses allowance. You should assume you won't have it, because that is, unfortunately, very likely.

[fidot]

The 5% is relevant when income comes into the limited company for an inside contract as declared by the contractor - I.e. only private sector currently.

[northernladuk]

No, you really do need to make this explicit.

The 5% expenses is the example of this, we are jumping ahead of ourselves if we don’t make this clear.

Yeah but I've just had a thought. Why is it different only after April? Even if you go inside now it's PAYE or a brolly anyway so much the same?

I've a feeling I've missed something fundamental here though.

[cojak]

To be fair, with the raft of 'ZOMG what is diz IR35' questions we've had this week alone I'm assuming all the questions are related to what will happen next i.e. after April, not before

No, you really do need to make this explicit.

The 5% expenses is the example of this, we are jumping ahead of ourselves if we don’t make this clear.