Jump to content
House Price Crash Forum
Sign in to follow this  
SarahBell

Company Tax Changes

Recommended Posts

Following the hike in dividend tax rates from 6
April 2016, and the surprise cutting of capital
gains tax (CGT) rates, HMRC are keen to ensure
that money taken out of a company is taxed as
income rather than capital as much as possible.

New rules, and amendments to existing ones, will
go some way toward doing this; however, a darker
possibility is also lurking in the background.


The May issue of Tax Insider is out today, and
Andrew Rainford muses over recent changes to
company distributions, as well as potential
further reform based on HMRC consultation.

Remember, forewarned is forearmed!

https://www.taxinsider.co.uk/tax-insider.html

What is the darker possibility?

Share this post


Link to post
Share on other sites

Dunno. Do you have the newsletter at hand?

In related news; seems the tax man is hungry...

http://www.contractoruk.com/news/0012513hmrc_cracking_win_over_msc_contractors.html

The first ever court appeal against the MSC legislation has found in favour of the taxman, who is calling the ruling “cracking” for protecting up to £9million.

"We are pleased with the Tribunal's decision that this so called ‘own company’ avoidance scheme does not work," a spokesman for HMRC reflected on Friday.

There are a lot of these schemes in the UK, and plenty in oil and gas.

Share this post


Link to post
Share on other sites

Dunno. Do you have the newsletter at hand?

In related news; seems the tax man is hungry...

http://www.contractoruk.com/news/0012513hmrc_cracking_win_over_msc_contractors.html

There are a lot of these schemes in the UK, and plenty in oil and gas.

Oh dear ,the parasitic employment agencies have lost an income stream as well whats not to like

Share this post


Link to post
Share on other sites

Oh dear ,the parasitic employment agencies have lost an income stream as well whats not to like

When one door closes another one opens.

Hint: I guarantee you will see Gidiot standing up in Parliament boasting about the number of new business start ups. The sudden spike should provoke some thought.

Edited by Caveat Mortgagor

Share this post


Link to post
Share on other sites

When one door closes another one opens.

Hint: I guarantee you will see Gidiot standing up in Parliament boasting about the number of new business start ups. The sudden spike should provoke some thought.

Probably so but that judgment casts the net far and wide

Share this post


Link to post
Share on other sites

Can someone spell it out in plain English for a simpleton like me?

Contractors have the option of working via a Ltd company, and this way they can be paid a minimal salary, and receive the bulk of the pay via dividends.

It is possible to delegate the running of the Ltd company to a 3rd party (e.g. accountant). However, new legislation meant that if a 3rd party managed the company on behalf of a contractor, then full tax as if paid via PAYE was payable (due to a high incidence of aggressive avoidance by 3rd party company managers - e.g. regularly closing and reforming the company in order to avoid tax investigations, etc.)

In this case, HMRC have ruled against a major provider of this type of managed service company, and are now going after clients of this company for unpaid tax.

It is likely that HMRC will be going after various types of small company suspected of being a contractor, in order to make sure that full tax is paid. It is also possible that the government are preparing new legislation to bring the new self-employed contractor lambs to slaughter.

Edited by ChumpusRex

Share this post


Link to post
Share on other sites

Contractors have the option of working via a Ltd company, and this way they can be paid a minimal salary, and receive the bulk of the pay via dividends.

It is possible to delegate the running of the Ltd company to a 3rd party (e.g. accountant). However, new legislation meant that if a 3rd party managed the company on behalf of a contractor, then full tax as if paid via PAYE was payable (due to a high incidence of aggressive avoidance by 3rd party company managers - e.g. regularly closing and reforming the company in order to avoid tax investigations, etc.)

In this case, HMRC have ruled against a major provider of this type of managed service company, and are now going after clients of this company for unpaid tax.

It is likely that HMRC will be going after various types of small company suspected of being a contractor, in order to make sure that full tax is paid. It is also possible that the government are preparing new legislation to bring the new self-employed contractor lambs to slaughter.

That exactly why i have avoided those schemes scams it hurts even more when they want it back all in one go and will hurt even more if it`s been spent

Share this post


Link to post
Share on other sites

Contractors have the option of working via a Ltd company, and this way they can be paid a minimal salary, and receive the bulk of the pay via dividends.

Speaking as someone who has worked that way at various times including the second half of tax year 2015-16 ...

Dividends have just become less attractive. With a salary (basic rate tax - all figures from memory) I pay 20% income tax + 11% national insurance + 13% jobs tax. But of that I can reclaim the 20% by investing tax-efficiently, so the net payment is 24% of the headline salary figure. Or just 22.5% of the amount paid out by the company.

Crucially, that comes out of money on which the company hasn't had to pay corporation tax. Dividends, on the other hand, come from money on which 20% corporation tax has already been paid. 20% vs 22.5% is not such a big difference.

And now the whole thing is complicated by new dividend taxation! OK, that too can be reclaimed by investing, but it diminishes the difference still further.

In summary I'm really not sure what I'll do this year, if I make enough for it to matter. I might even be tempted to redirect some basic-rate money into the pension.

Share this post


Link to post
Share on other sites

ChumpusRex, on 03 May 2016 - 7:02 PM, said:snapback.png

Contractors have the option of working via a Ltd company, and this way they can be paid a minimal salary, and receive the bulk of the pay via dividends.

Speaking as someone who has worked that way at various times including the second half of tax year 2015-16 ...

Dividends have just become less attractive. With a salary (basic rate tax - all figures from memory) I pay 20% income tax + 11% national insurance + 13% jobs tax. But of that I can reclaim the 20% by investing tax-efficiently, so the net payment is 24% of the headline salary figure. Or just 22.5% of the amount paid out by the company.

Crucially, that comes out of money on which the company hasn't had to pay corporation tax. Dividends, on the other hand, come from money on which 20% corporation tax has already been paid. 20% vs 22.5% is not such a big difference.

And now the whole thing is complicated by new dividend taxation! OK, that too can be reclaimed by investing, but it diminishes the difference still further.

In summary I'm really not sure what I'll do this year, if I make enough for it to matter. I might even be tempted to redirect some basic-rate money into the pension.

It has been increasingly used in the construction /engineering industry to work via these companies ,but of lat they have been doing the minimal wage part and paying the rest out in the form of loans then i presume the itd company is wound down at the end of the tax year

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   26 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.