One-person company NI relief ban 'open to abuse'
And:
Ok, the article is right. But maybe it should be put in perspective.
Only the tax savvy are going to be interested in their alternatives, and the tax savvy are paying themselves mostly in dividends. We are not talking a lot of money. And if the tax-savvy have a spouse/partner they trust enough to make them a director, they probably already did it.
But there's another work-around:
With all the new anti-avoidance rules, that sounds to me like a good way to make yourself a target.
There's a better solution. Since anyone who knows what they are doing is going to restrict their salary, at the very most, to their tax-free allowance, the obvious solution to the whole thing is to stop pushing the tax-free income allowance further and further away from the NI thresholds, and instead bring the NI thresholds up. Every increase in the NI thresholds is helping the low-paid, as much as increasing the tax-free allowance does. In fact, increasing the allowance further does nothing for those making between £8-12K. So freeze it and increase the NI thresholds every year until they catch up. Then, there's no incentive for people to do creative and bizarre things to get around the new restriction.
But no, that wouldn't make sense, because it would make the tax environment simpler and easier to understand. It's much better to have complicated rules, varying thresholds, etc, etc.
George Osborne’s attempt to block one-person businesses from claiming the National Insurance Employment Allowance is going to be “too easy to dodge,” tax experts warn.
But the planned removal will be easily avoided using one of two workarounds. Firstly, by appointing another director, such as a friend or spouse and paying that person a token wage.
Only the tax savvy are going to be interested in their alternatives, and the tax savvy are paying themselves mostly in dividends. We are not talking a lot of money. And if the tax-savvy have a spouse/partner they trust enough to make them a director, they probably already did it.
But there's another work-around:
However there is another potential loophole in the government’s proposal and it relates to how payments are made, warns CIOT tax policy director John Cullinane.
“The exclusion is also open to abuse in that making a single payment after the director has resigned would seem to enable the company to escape the exclusion and hence qualify for [the] EA,” he said. “That former director could then even go as far as getting themselves re-appointed as director of the same company.”
“The exclusion is also open to abuse in that making a single payment after the director has resigned would seem to enable the company to escape the exclusion and hence qualify for [the] EA,” he said. “That former director could then even go as far as getting themselves re-appointed as director of the same company.”
There's a better solution. Since anyone who knows what they are doing is going to restrict their salary, at the very most, to their tax-free allowance, the obvious solution to the whole thing is to stop pushing the tax-free income allowance further and further away from the NI thresholds, and instead bring the NI thresholds up. Every increase in the NI thresholds is helping the low-paid, as much as increasing the tax-free allowance does. In fact, increasing the allowance further does nothing for those making between £8-12K. So freeze it and increase the NI thresholds every year until they catch up. Then, there's no incentive for people to do creative and bizarre things to get around the new restriction.
But no, that wouldn't make sense, because it would make the tax environment simpler and easier to understand. It's much better to have complicated rules, varying thresholds, etc, etc.
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