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Beware IR35: it’s still alive and dangerous The all-out war between the taxman and the one-man service company has been going on so long now that most people are getting a little blasé about it. But all of the weaponry devised by HM Revenue & Customs (HMRC) is still out there, and one of the most controversial (at the time) and apparently powerful weapons in the taxman’s hands was the so-called IR35 rules, which actually came into force as long ago as the Finance Act 2000. If you provide your personal services through a limited company, don’t be fooled into thinking that this legislation is not really a live issue any more. It’s still very much alive and kicking. The purpose of this piece is to ensure that you don’t inadvertently fall into its grasp. Personal limited companies for fun and profit It all started with the comparatively innocuous practice of individuals changing from being employees to providing their services through a limited company. This was well worth doing for a number of reasons. First, if the money was kept in the company, you ended up paying a measly amount of tax on your income, something like 20% instead of the 40% income tax you would have paid. Second, national insurance flies out of the window, because, unlike the situation with an employment relationship, payments to a company aren’t subject to national insurance liability. Third, if you had a company with money in it, you could spread the tax load by giving the shares in your company to a spouse, and then paying dividends to that spouse. If he or she wasn’t working, this was a good way of using up their lower-rate tax threshold and making a permanent saving in income tax. (All the above is put in the past tense, but actually, come to think of it, if you read and profit from this article, there’s no reason why it shouldn’t still all apply now.) Of course, if there’s one thing the taxman doesn’t like, it’s seeing large numbers of people paying less tax than they could be doing. |
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In the July/August 08 issue of the Schmidt Report: NEWS EDITORIAL HOW TO AVOID INHERITANCE TAX ON PENSION DEATH BENEFITS TAX TIP OF THE MONTH INHERITANCE TAX HAVE FUN – AND SAVE TAX AT THE SAME TIME THE PROPERTY COLUMN THE BUSINESS COLUMN ASK THE EXPERTS |
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If you are a subscriber and would like more information about the above tax articles, further details are to be found in the 'Subscriber Only' section. Click here | ||
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THREE COMPELLING REASONS TO SEND FOR A FREE TRIAL ISSUE OF THE SCHMIDT REPORT... |
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IT WILL HELP YOU IDENTIFY WORTHWHILE OPPORTUNITIES ON HOW TO SAVE TAX. The Schmidt Report will arm you with the information you need to identify tax-saving opportunities. Furthermore, it will present the information in a way that is easy to understand and act upon. |
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IT WILL SAVE YOU TIME AS WELL AS MONEY. Tax legislation - even the structure of the tax system - is changing at an unprecedented rate. These changes could have a major effect on you and, if relevant, your business. It is crucial that you keep abreast of the latest news. Consider what effect the introduction of self assessment; the most recent budgets; the influence of the EU on our domestic tax affairs; the re-organisation of the Inland Revenue and Customs; the purge on tax avoidance; and a hundred other factors may have had on your finances. By providing you with a summary of the key news stories - and by warning you of any proposals which could impact on your profits - The Schmidt Report saves you having to search elsewhere for this information. |
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IT WILL INSPIRE YOU. It is easy to accept tax as inevitable. Yet from the individual on PAYE who manages to re-arrange his affairs in order to save a few hundred pounds a year - right up to Rupert Murdoch's international empire (which is famous for its ability to legally avoid tax) - it can be seen that tax is by no means automatic. Two individuals (or organisations) in the identical financial position may pay substantially different amounts of tax - depending on how they arrange their affairs. The Schmidt Report is a rich source of tax saving ideas. A regular reminder of how your tax bills could be reduced. In an interesting and inspirational manner it will show you precisely how tax savings may be achieved. |
The Schmidt Report is published by Wentworth Publishing Ltd, 17 Fleet Street, London EC4Y 1AA. You can contact our offices on 020 7353 6606, Fax: 020 7353 6533 or e-mail us at wentworth@online.rednet.co.uk |
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