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

lisyloo

As it is the company paying for it

This still costs the contractor more. It's THEIR company that's paying it, and despite the tax relief it's still COSTS MORE. It's NOT FREE.
In some cases they consider the space, peace worthwhile because they can work.
In other cases they might simply decide that the comfort is worth the extra (discounted) premium considering how long they spend commuting.

Most contractors still travel in standard class.

chucknorris

lisyloo wrote: »

This still costs the contractor more. It's THEIR company that's paying it, and despite the tax relief it's still COSTS MORE. It's NOT FREE.
In some cases they consider the space, peace worthwhile because they can work.
In other cases they might simply decide that the comfort is worth the extra (discounted) premium considering how long they spend commuting.

Most contractors still travel in standard class.

I find it amazing that this actually needs to be explained (obviously I'm not aiming that comment at you).

lisyloo

Just to add that an economically mobile contractor will only be able to claim accomodation as a business expense in the same place for 2 years.

After that - tough! - HMRC will not consider it a business expense.
I guess their attititude is that you should move regardless of your family or financial circumstances.
Although contractors get a lot of tax breaks, it's not as good as some people seem to think it is.
Note that they have ZERO employment rights.
So if you think they should move after 2 years then bear in mind they have no guarantee whatsoever of future work even if they have a written contract - it can be terminated at any time.

Pennywise

jimibaboza wrote: »

The train ticket reduces your profit so it reduces your corp tax payable.

As it is the company paying for it, there is no income tax payable on it as the amount is not technically income. Of course there are rules to stop this but they is circumvented by pretending to earn less than 10k a year so the benefit in kind rules don't apply.

To top it all all off, the contractor can then claim VAT back on the ticket.

I think you've been listening too much to your friends down the pub. There is no VAT on train tickets, so nothing to claim back. The benefit in kind rules don't apply to genuine business trips anyway, nothing to do with pretending to earn under £10k. Anyway, ALL taxable benefits in kind are taxable on directors - they don't have the £8.5k exemption that "normal" employees enjoy.

You've made so many points, so many wrong!

AndyBSG

God, the sheer number of completely false claims being bandied about here is amazing.

FWIW I have just moved from contracting to permanent.

The reason? Because although I took home more each month as a contractor I also had a LOT more outgoings, less benefits, less job security, had to pay myself for all my training requirements, no company pension contributions, redundancy, sick pay, holiday pay, had to spend time filing and collating my own expenses, no medical cover, had to pay my own indemnity insurance premiums, had zero job security, etc, etc.

Of course, the people here complaining about contractors earning more don't see that.

Here's an idea, for those complaining, why not go contracting yourself because it's not some secret hand shake club only a select few gain membership to...

It's like the fat guy sitting in his armchair drinking beer and watching TV who gets jealous at the guy with the six pack who diets and exercises regularly but won't get off his butt to do the same!

TheBlueHorse

I think the law should be that you can't hire contractors longer than 6 months or so. Longer than that, and they should be full time employees.

lisyloo

I think the law should be that you can't hire contractors longer than 6 months or so.

Why do you think that should be the law?
If businesses are happy with the flexibility it gives them and contractors are happy with the compensation in return for the (significant) trade-offs for example lack of employment rights, then why stop it?

You'd need to be careful how you word whatever law you make so that people can't get round it and there aren't any unintended consequences.

My husband does earn more as a contrator but there are significant downsides.
I'm not sure we could afford to be economically mobile and pay the significant costs of working away from home on a permanent salary, so I think your law would hamper people being economically mobile.

movilogo

Earlier example of £50k PAYE or £60k contractor - the contractor is almost certainly worse off than the employee, despite seeing £10k more headline.

A permanent employee does not have the option to turn his spouse as an employee in his own company with a just below income tax threshold salary.

That does make a difference (and that's why contractors do it).

They also have zero job security. Nil.

Not necessarily. Nowadays perm jobs offer no guarantee. In fact, companies are quick to fire perm employees as it will appear as lower fixed cost in their accountancy sheets - even if that means hiring contractors at an inflated rate.
It does happen and I have seen this in places where I have worked.

A salaried employee has no option to reduce tax as he gets the money after deducting tax already. He pays tax on total earning. A contractor pays tax after all the expenses which are deductible. So contractor pays tax on profit.

lisyloo

Nowadays perm jobs offer no guarantee.

Actually there are some guarantees if you have > 2 years service.
There is a guarantee of statutory redundancy - this is paid even if companies go into liquidation and it's a statutory right so I'd call that a guarantee.
Notice is a legal requirement also (I think that's under European rules) as are the working time directivee and holidays.
You can't be unfairly dismissed or disriminated against etc. etc.
Of course you can, but there are laws in place to protect you and get compensated.
Qute a few guarantees there I think.

A salaried employee has no option to reduce tax as he gets the money after deducting tax already. He pays tax on total earning.

Some have the option of salary sacrifice and in some cases employers share or give their employers NI saving. I only pay tax on 70% of my income as I sacrifice 30% to pension.
I realise some people may not want to do that.

Not necessarily.

No it's true. Contractors have zero job security.

chucknorris

movilogo wrote: »

A salaried employee has no option to reduce tax as he gets the money after deducting tax already. He pays tax on total earning. A contractor pays tax after all the expenses which are deductible. So contractor pays tax on profit.

Don't you use pensions to reduce your tax? For the last few years I have been investing the max annual allowance (was £50k, now £40k, it used to be your entire salary).