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| CURRENT SECTION :: IR35 / IR591 | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
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The 2004 Budget has not lived up to the impact many observers thought it might. IR35 remains with us, IR591 is not nearly as bad as we feared, and most others taxes have been frozen. The highlights as they affect contractors are: 1. As of 1st April 2004 any Company with profits less than £10,000 pa and distributing that income as dividends will lose the 0% Corporation tax rate, and pay 19% instead. So, what does this mean for contractors? If you Company profit is £10,000 or less, and you take the whole amount as dividends you will be £1900 a year worse off. Between £10000 and £50000, again assuming the whole amount is distributed as dividends you will be worse off on a roughly sliding scale by £1900 at £10,000 profits and no worse off at all at the £50,000 threshold. Profits over £50,000, or cash not taken as a dividend is absolutely unaffected. Coupled with the recent benefits of the VAT flat rate scheme we believe that most contractors will on the whole be no worse off. 2. The Government is introducing a new disclosure measure to counter largescale avoidance of direct taxes. This will require those who devise and market certain avoidance schemes to provide the Inland Revenue with details of these schemes. This will hit ALL IR35 avoidance schemes, therefore even more care should be taken if thinking about one of these. 3. The 100% First Year Allowance for equipment purchased is reduced to 50%. This means that instead of getting tax relief for the whole cost of asset purchase in year one, it is spread over two years. 4. IR35 will remain, however the Government proposes to consider the issues raised by the interaction with the tax system of definitions of income of self-employment, and the remuneration paid to owner-managers, in a discussion paper which will be issued at the time of the 2004 Pre-Budget Report. Thanks to Simon Dolan at SJD Accountancy for this report Mar 17, 2004 Email this article Printer friendly page Previous Page
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