"What you can claim tax relief on", simple guide?

TheCyclingProgrammer

You can call yourself self employed all you want but the fact is you're not and in the context of a discussion about tax it's very important. The rules for employees or Ltd company contractors are not always the same as for the self employed. Two good examples, food and phones have been mentioned in this thread already.

Yes, some people might see you as self employed but thinking of yourself and your company as the same thing is a dangerous mindset to have. YourCo is its own separate legal entity, even if you're the 100% shareholder.

If somebody asks you your employment status, the correct answer would be company director and/or employee.

UpToMyNeckInIt

TheCyclingProgrammer wrote: »

You can call yourself self employed all you want but the fact is you're not and in the context of a discussion about tax it's very important. The rules for employees or Ltd company contractors are not always the same as for the self employed. Two good examples, food and phones have been mentioned in this thread already.

Yes, some people might see you as self employed but thinking of yourself and your company as the same thing is a dangerous mindset to have. YourCo is its own separate legal entity, even if you're the 100% shareholder.

If somebody asks you your employment status, the correct answer would be company director and/or employee.

I agree, and indeed I do declare my 'Director/employed' status, but the second anyone does any digging, the response is 'oh well, you are self-employed then...'.

It is very frustrating.

Hence why others in my position also, for the sake of simplicity, class themselves as self-employed. This is quite right in 'the real world', but quite wrong 'on paper'.

booksurr

UpToMyNeckInIt wrote: »

Hence why others in my position also, for the sake of simplicity, class themselves as self-employed. This is quite right in 'the real world', but quite wrong 'on paper'.

this thread is asking for tax advice for the self employed. Your contribution is misleading because whilst you may think of yourself as self employed you are not; which is why your understanding and therefore ability to advise on tax related matters is strictly limited and in the context of food and travel is positively misleading for the self employed

purdyoaten

UpToMyNeckInIt wrote: »

That is an interesting point, and perhaps I am guilty of not properly explaining my situation (can't argue with that) , but not really relevant to the title of this thread (as is your entire contribution, given your employment status).

You are right in that technically, I am an employee of my own Limited company (not technically - you are!). So whilst 'I' and 'my company are on paper 2 entirely separate legal entities, in reality we are one and the same (errrr - no - would you want to be if, god forbid, you hit financial difficulties, for example?.

I could cease trading, and continue my work as a sole trader in a heartbeat if that makes any difference (I know, it does and yes, I used to, but 'going LTD' is a more tax efficient way for me to earn).

Please don't give me the IR35 lecture either (Did I mention this?).

Saying that, if I don't work, i don't get paid. I am free to pick and choose who I work for, have to invoice my clients etc... Just the same as if I were a self-employed sole trader.
(which you are not - at least we have established that)

When I explain my situation to insurers, mortgage companies and my IVA provider etc... they UNANIMOUSLY agree that I fall within their definition of 'self-employed'.

It's no use me trying to fiddle things: If I claim to an insurer that I am an employee, they ask:
Q 'Who do you work for?'.
A '...er, 'My Company Ltd' at my Home address'.

Q 'Work phone number?'
A 'Same as my personal one'

...and I just love showing payslips to mortgage companies (Yep - definitely not self-employed) , asking me to explain why, despite being an employee, I pay no income tax/NI.

...You get the idea.

Now if you are who someone here claims you are / were, I suspect you know of these dilemmas, but cannot see past HMRC red tape definitions. (Indeed - 12 years with HMRC and 20 working against them - that red tape has always been a problem:rotfl:)

.............................

Pennywise

UpToMyNeckInIt wrote: »

I agree, and indeed I do declare my 'Director/employed' status, but the second anyone does any digging, the response is 'oh well, you are self-employed then...'.

It is very frustrating.

Hence why others in my position also, for the sake of simplicity, class themselves as self-employed. This is quite right in 'the real world', but quite wrong 'on paper'.

Yes, it's one of those areas where the "real world" such as bankers, mortgage brokers, etc., need to educate themselves as the differences and implications of the limited company.

I've lost count as to the sheer number of clients I've had who've got themselves into all kinds of trouble by thinking that they're self employed when they're employed by their own limited company. Often they'll read up on self employment on the HMRC website and end up registering for class 2 S/e national insurance, and, as demonstrated in this thread, read the s/e factsheets/manuals on HMRC websites and end up either over-claiming or under-claiming their expenses. Not to mention all those who glibly take out "drawings" from their company with no regard to whether they're wages, dividends, and no paperwork having been done.

Banks and brokers are some of the worst. Even when they're told that someone is operating via a company, they still fill out the application form for self employment and then send out an accountant's reference asking for profits, drawings, etc., when what really matters is wages and dividends, meaning they have to re-write the application for an "employee" and re-issue reference requests etc.

I once came upon a bank manager who hadn't a clue about the differences and we had a real battle with him as he just couldn't get his head around the legal difference between the person and the company - not a young guy either, must have been dealing with companies for decades, but heaven knows what foul-ups and complications he'd have caused over the years!

TheCyclingProgrammer

FWIW, just because say, a mortgage lender, treats a company director as "self-employed" it doesn't mean they think you are actually self-employed, it just means they have a set of lending criteria for "self employed" people that they will apply to you.

But its often not as simple as that. I run my own freelancing/consultancy business through a Ltd Co. After discussions with my mortgage broker, it turns out that mortgage lenders will apply different criteria depending on how you are remunerated or how you want your earnings to be calculated.

If you just pay yourself a salary you can be treated as employed.

If you take a basic salary/rest as dividends you can be treated as "self-employed" and earnings calculated on total salary + dividends.

If you've been in business long enough and have accounts to back up your figures, some lenders will be happy to lend based on company net profit + any salary.

Finally, some lenders do specialist "contractor" mortgages where they will lend based on your day rate, assuming you're the sort of contractor that does long term contracts.

So all the more reason not to confuse how a bank or lender might see you with your actual status.