Limited company - self furlough

Kidcurry55

On Monday I managed to furlough myself from my own one man Limited company. I got all the passwords and codes from my accountant. Apart from some difficulty with all the terminology I managed it. I now qualify for the grand total of £580 per MONTH !!!!

My colleague who I work with, on the same money is a sole trader and will get £2500 per month. I pay about £300 less in tax than him per year as I am a limited company. So over 3 months he will get £7500 and I will get £1740. But we work side by side doing the same job for the same gross income!!!  All because the HMRC allegedly cannot look at my accounts and see I pay all the right taxes, just different ways and the dividends I receive are all from my own company. Everything is right and legal but I am being discriminated against. I withdrew money from my pension to safeguard myself at the beginning of the crisis as self employeds normally get zero help, but that now means my universal credit benefit will be £4 per week. Wow. My shopping in about £75 per week so all my bills have to be paid out of my hard earned pension. How can this injustice continue. I should not be treated any different to my colleague!!!!

sharpe106

You are not being discriminated against some people are getting a big fat 0. Everybody is going to get different. Without knowing the figures nobody can really advise you.

Your bills have to be paid out of your pension? What do you think it is for and how do you think everybody else pays bills. 

silvercar

So the question is why did you set up as a limited company and he as a self trader? There must be another reason other than £300 a year tax saving?

calcotti

silvercar said:

So the question is why did you set up as a limited company and he as a self trader? There must be another reason other than £300 a year tax saving?

Possibly to separate their personal assets from their business liability - that’s an important consideration.

tripled

It's a difficult time, but in a normal recession, as Ltd Co directors we'd get nothing, so £580 per month isn't to be sniffed at.  I don't have a pension to fall back on, however I remember the 2008 crash, so always retain some of the profit in my company as a reserve so that in times like this I have something to get by on.

While on furlough you are allowed to do other work to help ends meet, which assuming you can find any, is very generous compared to claiming benefits.

pjcox2005

calcotti said:

silvercar said:

So the question is why did you set up as a limited company and he as a self trader? There must be another reason other than £300 a year tax saving?

Possibly to separate their personal assets from their business liability - that’s an important consideration.

Which (as well as the dividend point) could be an argument for a self-employed trader getting more support as a lack of income could potentially put more of their life at risk as there is no limitation of liability. For an individual set up in a company, they do have some protection from business debts (although i accept there are often personal guarantees).
I'm employed and not impacted so easy for me to say, but my wife is self-employed and potentially won't benefit at all due to timings of a new business. Whilst I understand frustration, Gov have done a relatively decent job providing a safety net which wasn't there to begin with so shouldn't be an expectation. I do get though why it would be emotional to receive a lot less.

unholyangel

Kidcurry55 said:

On Monday I managed to furlough myself from my own one man Limited company. I got all the passwords and codes from my accountant. Apart from some difficulty with all the terminology I managed it. I now qualify for the grand total of £580 per MONTH !!!!

My colleague who I work with, on the same money is a sole trader and will get £2500 per month. I pay about £300 less in tax than him per year as I am a limited company. So over 3 months he will get £7500 and I will get £1740. But we work side by side doing the same job for the same gross income!!!  All because the HMRC allegedly cannot look at my accounts and see I pay all the right taxes, just different ways and the dividends I receive are all from my own company. Everything is right and legal but I am being discriminated against. I withdrew money from my pension to safeguard myself at the beginning of the crisis as self employeds normally get zero help, but that now means my universal credit benefit will be £4 per week. Wow. My shopping in about £75 per week so all my bills have to be paid out of my hard earned pension. How can this injustice continue. I should not be treated any different to my colleague!!!!

What you're overlooking is that if you're only paying £300 a year less tax, that your income must greatly exceed that of your colleague. As a self employed person, he's paying 9% NI on profits above 8632 (and potentially an extra £150~ for class 2) for the 19/20 year + 20% on profits above 12500 (up to 50k at least). While you will be paying 7.5% above 14500 (up to 50k again). 

How can you expect to be treated the same when paying out if you're not treated the same paying in? 

unholyangel

calcotti said:

silvercar said:

So the question is why did you set up as a limited company and he as a self trader? There must be another reason other than £300 a year tax saving?

Possibly to separate their personal assets from their business liability - that’s an important consideration.

Does being a limited company dictate you need to draw dividends rather than pay salary? Or is that perhaps a choice they made to reduce the rate of tax/NI they pay? 

jhtdesign

I must say that I personally think this 80% of salary is a bit of a joke. when you take into consideration that people are getting mortgage & loan payment holidays, I bet it equates to a lot more than the 20% they lose through being furloughed. i was basically pushed into forming a ltd company by the government. about 7 years ago, i was self employed & had been for over 30 years, but my work dried up, i went to to apply for unemployment benefit & was told that as i was self employed, i couldn't get anything, so i decided that if i set up a limited company i could pay my self a salary & protect myself for the future. so therefore getting stabbed in the back twice. also i think its unfair that person doing the same job as me can still work & I can't, i could potentially lose clients to these people as they can still work. the government have to treat all, people fairly, especially when you have multi-millionaires being able to claim grants etc. typical conservatives, stuffing the working man. 

silvercar

unholyangel said:

calcotti said:

silvercar said:

So the question is why did you set up as a limited company and he as a self trader? There must be another reason other than £300 a year tax saving?

Possibly to separate their personal assets from their business liability - that’s an important consideration.

Does being a limited company dictate you need to draw dividends rather than pay salary? Or is that perhaps a choice they made to reduce the rate of tax/NI they pay? 

I think everyone pays the legal minimum tax/ NI that they can. That is why we have tax rules. The government decides what is appropriate for each class of income. People may give money to charities of their choosing, but I doubt many volunteer to pay extra taxes.

Thrugelmir

Kidcurry55 said:

I should not be treated any different to my colleague!!!!

Your colleague has contributed more to the Treasury. No doubt your accountant has set your affairs up to minimise your tax liability.  Hardly grounds for complaint.