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curious1

Any Tax Experts Here?

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I have a Ltd company (company A) but am the only employee. I am currently on a short term contract with another company B contracted out from company A.

Company B is hundreds of miles from company A and my home residence, but as the contract is a number of months I am now renting a flat near company B that I hope to write off as a business expense. I intend to continue renting my main accomodation near company A and not relocate either my residence or business to near company B...

Now, does this allow me to effectively write off most of my accomodation, food, and travel expenses whilst working for company B? Assuming the costs of retaining my busiess and residential address near company A are less than the savings achievable by deducting my living costs at company B, this seems like a fairly easy way to reduce my taxable income..... or am I missing something?

Cheers

c1

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Ask your accountant ?

(1) You don't have an accountant > If you are asking the above questions you need one.

(2) You have an accountant. As above - ask them !!

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I have a Ltd company (company A) but am the only employee. I am currently on a short term contract with another company B contracted out from company A.

Company B is hundreds of miles from company A and my home residence, but as the contract is a number of months I am now renting a flat near company B that I hope to write off as a business expense. I intend to continue renting my main accomodation near company A and not relocate either my residence or business to near company B...

Now, does this allow me to effectively write off most of my accomodation, food, and travel expenses whilst working for company B? Assuming the costs of retaining my busiess and residential address near company A are less than the savings achievable by deducting my living costs at company B, this seems like a fairly easy way to reduce my taxable income..... or am I missing something?

Cheers

c1

I would not call myself a tax expert, but do do the corporation tax returns for the group of companies that I work for. If the accommodation expenses are wholly exclusively and necessarily (the restrictions may be more relaxed than this) in the course of the contract with company B then there is absolutely no reason why they cant be reclaimed as far as I am aware. The alternative would be hotel bills, which presumably would be comparable to the rent so there is no obvious difference in the rationale of how they are treated.

Do you do your own corporation tax return or employ an accountant?

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Now, does this allow me to effectively write off most of my accomodation, food, and travel expenses whilst working for company B?

I'm not qualified to answer, but in my experience as a contractor the above are perfectly legitimate business expenses. You might be on a sticky wicket with booze, but otherwise any living expenses solely related to work are fine. I spent a year working down in Exeter whilst living up near Stroud, and I had no problems setting my digs, food and travel expenses off against income tax.

Seek professional advice.

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I'm not qualified to answer, but in my experience as a contractor the above are perfectly legitimate business expenses. You might be on a sticky wicket with booze, but otherwise any living expenses solely related to work are fine. I spent a year working down in Exeter whilst living up near Stroud, and I had no problems setting my digs, food and travel expenses off against income tax.

Seek professional advice.

Does it not get offset against your corporation tax rather than your income tax ?

Maybe not - that is why I pay accountants far too much for their services !

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Thanks for the feedback!

I have a tax adviser who I have contacted, but given my distrust of the profession I thought I'd crowdsource a response to my questions on the internet... more fool me eh! hehe

I've basically come down to London to look for contract work, so I've been to a few places for meetings, and eventually found myself a gig onsite. This will only last for 3 months afterwhich I will either head back home or find other work down here. It seems like a pretty good situation to be in, but I would imagine after a while the tax man would surely start asking why I don't just move down her permenantly...

I'll post back with my accountants response.

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Does it not get offset against your corporation tax rather than your income tax ?

Maybe not - that is why I pay accountants far too much for their services !

Good point. I was using an umbrella company so slightly different to company rules I expect. The principle still stands though.

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Good point. I was using an umbrella company so slightly different to company rules I expect. The principle still stands though.

Given I'm paying myself a minimum wage and taking profits as dividends then it shouldn't affect the outcome.

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Given I'm paying myself a minimum wage and taking profits as dividends then it shouldn't affect the outcome.

For a 3 month contract that is probably the way to go. With all this IR35 malarky it does get confusing though.

If you get a gig that is likely to last for a decent length of time ? I would pay myself more of a 'normal' wage just in case the tax man comes knocking looking for a fight. No idea if it would have any impact on whether I got investigated or not, however nobody else does either so I do it and ****** knows what will happen !!

Earning 100k per year and paying yourself only 6k as a director is surely a red rag to a taxman bull..

I figure they may have some way of looking for likely candidates to get stuck into. Maybe not and it is just random. Nobody knows apart from them.

If I was earning 100k I would pay myself a salary of maybe 30k and take the rest in dividends. Lose out a bit on tax but possibly look 'better' in regards to the taxman. Take the middle ground.

This is not advice by the way - just what I would/have done. ****** knows if it is right or not !!

Curious1 - What do you do out of interest ?

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Earning 100k per year and paying yourself only 6k as a director is surely a red rag to a taxman bull..

I figure they may have some way of looking for likely candidates to get stuck into. Maybe not and it is just random. Nobody knows apart from them.

If I was earning 100k I would pay myself a salary of maybe 30k and take the rest in dividends. Lose out a bit on tax but possibly look 'better' in regards to the taxman. Take the middle ground.

For the last couple of years the personal tax return has had a service company income box - a total for salary and dividends.

Obviously HMRC will now use the information in that box to identify targets and seek to challenge the contractors status; the £6,000 salary guys will obviously be at the top of that list. A few thousand enquiries @ say £100,000 each should make quite a nice dent in the deficit.

£6,000 p/a salary is still ok if you are absolutely sure that you're outside of the scope of IR35. But by absolutely sure I mean know all of the case law backwards.

So if you don't know what Dragonfly is be very careful.

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I will be continuing to do work for my own clients concurrently with working onsite at company B so I think I should be totally safe from IR35....

I work in digital media..... so doubt I'll even slip over 40k this year...

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One point not mentioned but relevant to the OP is the question of whether the offices of company B are a temporary workplace or if they become a permanent workplace.

If it's a temporary workplace it should normally be fine.

The rules are a bit complex but the main pitfall is the 2 year rule (i.e. it's a permanent workplace if you expect to spend more than 40% of your time there over a period of more than 2 years).

It can also be a problem if you expect to spend more than 40% of your time at company B's offices over the whole of your employment with company A.

The best place to look for more information is HMRC booklet 490 - especially chapter 3.

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For the last couple of years the personal tax return has had a service company income box - a total for salary and dividends.

Obviously HMRC will now use the information in that box to identify targets and seek to challenge the contractors status; the £6,000 salary guys will obviously be at the top of that list. A few thousand enquiries @ say £100,000 each should make quite a nice dent in the deficit.

£6,000 p/a salary is still ok if you are absolutely sure that you're outside of the scope of IR35. But by absolutely sure I mean know all of the case law backwards.

So if you don't know what Dragonfly is be very careful.

Yes noticed that wee box myself. I did the 'higher than average' contractor salary well before that anyway. Must have the same thoughts as those dastardly tax men !!

As for IR35 I don't think anyone knows the 'rules' 100%. It is all one big grey area and on purpose IMO. Some of my contracts are in and some of them are out. I think, again without knowing, that this would help in terms of an investigation. I have actually bothered to think about each and if it is in IR35 or not. Then again maybe not.

All you can do is make yourself look less attractive to investigate than the next chump. Doesn't matter if you are slower than a lion - just as long as you are faster than the rest of the gazelles, type of thing.

But Curious1 should be sorted as they are doing different work for different clients at the same time. If anyone doing this is caught within IR35 it really is taking the mick.

Overly complicated + UK = shock horror. Not.

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Yup, and I'm working on my own equipment too...

If this works out ok, I think I'll be on to a good thing... having my london rent deductable whilst being still based in the north paying a minimal rent...

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Yup, and I'm working on my own equipment too...

If this works out ok, I think I'll be on to a good thing... having my london rent deductable whilst being still based in the north paying a minimal rent...

Aye sounds like a plan. It always amazes me how many contractors (Especially new ones) think when they pay their own expenses they get it all back ?! They get told by their accountant how much to pay themselves for a wage, and expenses and dividends or whatever and assume they get it all back. Just because they pay themselves the cost of the expenses does not mean they are free. A lot think this. You do get to offset it against your corp tax (I think) though. So in reality I think it works out at a 22% discount on what you paid.

I tried to explain this to someone once and they just didn't get it.

"I bought that computer for £500 and I paid myself a cheque for £500 expenses to I got it for free..."

Incredible !!

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"I bought that computer for £500 and I paid myself a cheque for £500 expenses to I got it for free..."

Incredible !!

hahaha classic.

yea that's the thing... a 20% discount is well worth it!

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hahaha classic.

yea that's the thing... a 20% discount is well worth it!

Too right. That lot take enough from me anyway.

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Too right. That lot take enough from me anyway.

Don't forget the VAT comes off first.

So £500 machine = £425.53 nett of vat

£425.53 less corp. tax at 22% = £331.90

So 33.6% 'discount' overall.

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All this stuff is entirely legitimate.

Only if within the rules.

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I have a Ltd company (company A) but am the only employee. I am currently on a short term contract with another company B contracted out from company A.

Company B is hundreds of miles from company A and my home residence, but as the contract is a number of months I am now renting a flat near company B that I hope to write off as a business expense. I intend to continue renting my main accomodation near company A and not relocate either my residence or business to near company B...

Now, does this allow me to effectively write off most of my accomodation, food, and travel expenses whilst working for company B? Assuming the costs of retaining my busiess and residential address near company A are less than the savings achievable by deducting my living costs at company B, this seems like a fairly easy way to reduce my taxable income..... or am I missing something?

Cheers

c1

You might actually be better off claiming the mileage at 40p a mile both ways.

Golden rules with tax are:

1) Keep things looking sensible - HMRC will go for companies with disproportionate figures (expenses verses PAYE etc - they pick an industry, pick a set of companies then literally put the figures through a spreadsheet to see who pops up woth a second look)

2) Always keep a pot equal to any questionable payments - if they want it they want it there and then!

3) Never use accountants unless you really really need to - once your paperwork is in some one elses hands you haven't a clue what's going on and can't work your money to your advantage! Accountants keep it simple for them.

4)

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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