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Thread: ER Advice

  1. #1

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    Hi - am looking for some wisdom, I don't know if anyone here can help

    I started contracting 5 years ago in the consulting line of work. My accountant led me into paying myself the minimal (salary and dividend) from my limited company to then benefit from Entreprenueurs Relief when I finish contracting.

    I'd like to draw down the money to buy a property and carry on with my business.

    Going onto payroll isn't an option as half of my contracts come through agents that wouldn't do this..

    Any ideas how to get my cash out using ER and carry on with my business without going against TARR / Phoenixing rules?

  2. #2

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    Quote Originally Posted by contractorfish View Post
    Any ideas how to get my cash out using ER and carry on with my business without going against TARR / Phoenixing rules?
    Have you considered fraud? I think that's about it.
    The whole point of the rules is to prevent you doing this.

    If you need the cash now, and want to continue contracting, then just pay the tax...
    See You Next Tuesday

  3. #3

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    Quote Originally Posted by Lance View Post
    Have you considered fraud? I think that's about it.
    The whole point of the rules is to prevent you doing this.

    If you need the cash now, and want to continue contracting, then just pay the tax...
    sure thanks Lance!

    if you consider i started contracting under one set of rules and then they changed.. perhaps this offers a different perspective (new 7.5% dividend tax / threshold around 2016).. sure if i started today i'd do things differently.. believe there must be a few contractors out there in my situation

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    Use an umbrella for contracts for the next couple of years? HMRC haven't categorically confirmed that would be safe (like they have with PAYE role for an unconnected employer), but my personal view I think it should be ok.

    If you want to continue trading via a new Ltd Co, doing similar work, then you won't legitimately be able to get CGT treatment on final funds from the old Ltd Co.

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    Quote Originally Posted by Lance View Post
    If you need the cash now, and want to continue contracting, then just pay the tax...
    Or delve into the rules around "beneficial loans" and the "S455" charge.
    ---

    Former member of IPSE.

  6. #6

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    Quote Originally Posted by Maslins View Post
    Use an umbrella for contracts for the next couple of years? HMRC haven't categorically confirmed that would be safe (like they have with PAYE role for an unconnected employer), but my personal view I think it should be ok.

    If you want to continue trading via a new Ltd Co, doing similar work, then you won't legitimately be able to get CGT treatment on final funds from the old Ltd Co.
    thanks! think umbrella is 20% worse than limited co, I don't mind taking a bit of hit but..
    https://www.contractorumbrella.com/r...ye-calculator/

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    Quote Originally Posted by wattaj View Post
    Or delve into the rules around "beneficial loans" and the "S455" charge.
    Not a good idea as he'd have to pay the loan back and then try to claw back the s455 tax.

    If you want to buy a house for yourself, then you will need to MVL to claim ER and then take a permie position.

    If you're buying an investment property, then you have more options available and wouldn't need to close your business down.

  8. #8

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    Quote Originally Posted by ChimpMaster View Post
    Not a good idea as he'd have to pay the loan back and then try to claw back the s455 tax.

    If you want to buy a house for yourself, then you will need to MVL to claim ER and then take a permie position.

    If you're buying an investment property, then you have more options available and wouldn't need to close your business down.
    Thanks, interesting - unfortunately it'd be a house for myself
    Moving to perm has always been plan b, the oppurtunity so far hasn't come up
    I guess the trick I missed and my accountant hadn't highlighted was that the ability to do ER is a major factor on the equivalent level of tax that'll be paid and hence important when setitng pricing / day rates with clients

  9. #9

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    Quote Originally Posted by contractorfish View Post
    Thanks, interesting - unfortunately it'd be a house for myself
    Moving to perm has always been plan b, the oppurtunity so far hasn't come up
    I guess the trick I missed and my accountant hadn't highlighted was that the ability to do ER is a major factor on the equivalent level of tax that'll be paid and hence important when setitng pricing / day rates with clients
    I think you'd have more luck/sympathy from an agent if you told them you wanted 20% more for whores and cocaine, than if you said it was to buy a house.

    One possibility which is probably dodgy as it sounds too easy..... Company buys house, you rent house from company.
    You'll still have to pay tax to get the money out of the company, but it might buy you more time to find a perm job and MVL.

    Cue an expert to explain why this won't work (probably can't claim ER on the house or summat)....
    See You Next Tuesday

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