The new dividend tax - does this mean contractors who paid themselvs big divvies

theEnd

TheBlueHorse wrote: »

say someone went home and found a biro in their pocket from work and used it for writing a shopping list (for non-business purposes) - I am happy for that not to be taxed as a BIK (a bik hahaha)

So what about an iPhone that's rarely used for work or a Mac Book that a child has taken to school for a project. Stationary etc.

It happens a lot. I really don't think hmrc care at all.

theEnd

leveller2911 wrote: »

I've never understood how the self employed can work for a single company all year round and not be classed as an employee. In the past 20 years I've met 100's. They don't price up work, they don't decide what hours they work, in may cases they don't supply materials, don't supply their own vehicles,tools etc etc etc but they can still claim to be self employed contractors. The vast majority are not taking a financial risk.

Its just a con to allow employers to not pay NI and lay off the workers with a minutes notice.

Not forgetting all those 1 man band Ltd companies who paid themselves NMW ,claim working tax credits and then pay themselves a nice Divi at the end of the year. The sorry fact is until we trim the tax rules back to a basic system there will always be ways found to pay as little tax as possible.

The tax system is a mess because successive govts have been pushing tax rises into 'hidden' NI rather than Income Tax.

These changes level that up a lot. I can try to create a detailed breakdown when I have a chance.

I believe it's harder to claim benefits if you company fails as a director, so there is risk, whatever the company-client relationship.

lisyloo

It sounds really odd to me that an employer would give you a new phone and new laptop every year if they aren't needed for business.
I don't believe that is normal at all.

I work in IT so use a laptop all the time. I get a reasonable one every 5 years, so about £100 per year and that's core to my business.

theEnd

I once sat next to a graduate who came back from 3 months training in New York with $70k expenses bill. I don't think it even included the hotel.
(... he did nearly get sacked for it).

I really doubt any of it hit his P11D

jimibaboza

leveller2911 wrote: »

I've never understood how the self employed can work for a single company all year round and not be classed as an employee.

My understanding of it is that they should be. Under IR35 rules, a contractor cannot simply work for one employer all the time i.e. they are effectively an employee who invoices. The problem is that this is pretty easy to get around, just get a mate to give you a bit of work and bob's your uncle.

How do contractors avoid the benefit in kind rules? If they pay themselves 8K and then buy a laptop, phone and car for themselves through the company. Surely that will bring their effective income them up to the basic tax rate? Or have I got this worng?

lisyloo

Under IR35 rules, a contractor cannot simply work for one employer all the time

You don't have to operate under IR35 if you are contractor for one employer.
Some operate under limited companies. It depends on how the contract is written and the custom/practice.

If they pay themselves 8K and then buy a laptop, phone and car for themselves through the company. Surely that will bring their effective income them up to the basic tax rate?

You can't just buy yourself a car if you don't need it for business (loads of London contractors claim rail fares so it wouldn't be justified).

I guess it depends on whether you want to get into illegal tax evasion.
If you are not using it for business and claiming it as a business expense to evade tax then that is illegal.
If you use it for business and that's it's primary use and you wouldn't have bought it otherwise then no-one cares if your kid uses it for their school project on the weekends.
Technically you might be meant to declare any benefits but no-one cares about these fringe benefits.

I am not denying illegal tax evasion happens, I'm just saying there is a difference between benefitting from genuine business expenses e.g. not having to use your own washing powder because the hotel laundered your shirts and blatant tax evasion where an expense isn't for business at all.

There are some quite legal ways to avoid tax e.g. put it in your pension to avoid 40% tax, so if your getting into illegal tax evasion for a £2K laptop when you coulg get 40% of £40K via your pension then franklyyou're a bit thick (no offence, but I think it's a valid point).

jimibaboza

Got my answer. From the citizens advice bureau.

You won't pay tax on benefits in kind if you earn less than your personal allowance (£10,600 for most people in 2015/16).

lisyloo

You won't pay tax on benefits in kind if you earn less than your personal allowance

So that means any contractor paying themselves £10K in income, £30K in divvies and putting £40K into their pension doesn't have to pay income tax on benefits.

purch

Fatty Lawson was promising to simplify the Tax system in 1988.

Then he had a row with Maggie, and since then it's just got more complicated.

lawriejones1

A lot of anger here mixed with anecdote, but no genuine facts. I run a business (Ltd company, multiple clients and multiple suppliers), and there are s few unscrupulous contractors but most are trying to do the right thing in a difficult market.

The assumption we're all looking for ways to fiddle a few extra quid rather than building a client base is nonsense. There will always be those that do (and those that game the system like not declaring eBay income when they're running a business, failing to declare their BTL etc), but most of us are doing our best.

Personally I want to grow to a stage where I'm employing people on a decent wage, contributing more than I ever did being employed by someone else.