Will the dividend tax hike take the heat off IR35?

[OwlHoot]

Will IR35 become almost a non-issue, or will HMR&C want to have their cake and eat it?

Discuss, or get into an argument with Sasguru as you see fit

[jamesbrown]

Not really, at least on its own. It does render the differences less pronounced, and being a sole trader is probably more tax efficient now for a given remuneration, but that isn't an option for anyone using an agency and, more importantly, for anyone that wants the protection of a Ltd. Ultimately, HMRC want anyone who, in their view, should be on payroll to be on payroll, so that the full NI and PAYE taxes are paid (including Employer's NI) and so there's no scope to moneybox (i.e. distribute income across tax years, or retain income and then convert to capital). This is transparently heading in the direction where the balance will change in favour of "false" employment (probably through the broader application of SDC, beyond the public sector). They don't really care about the prospect of "false" employment, only about meeting a perceived revenue gap, but it's hopelessly shortsighted (i.e. w/r to the flexible economy and the overall tax take).

[northernladuk]

Didn't take long. There is always one sucker....

[NickFitz]

Given that inside/outside IR35 is the test used to determine whether you can claim travel and subsistence expenses when working through your own limited company, it will if anything now be of even greater interest to HMRC than previously.

[Pondlife]

As it stands there is still a reasonably large financial incentive to ensuring your contracts are operating outside. As HMRC see the bounty from the divs >£5000 they will almost certainly start to ratchet up the tax % or decrease the £5K allowance. Even then if you have large T&S expenses there is benefit being outside.

Give it 3 years. Anyone who has a single person ltd who gets work via agencies will be shafted. (IMVHO)

[jamesbrown]

Give it 3 years. Anyone who has a single person ltd who gets work via agencies will be shafted. (IMVHO)

Yes, putting a finger in the wind, that could be the next step in a rollout of SDC to the private sector. The Agency Legislation already has the SDC test (the same as the test for T&S), but PAYE salary and dividends are currently out of scope (the latter not being income from employment, the former being taxed through PAYE already). Details aside, I think we all know where this is heading in the next few years...

[AtW]

Dividend hike is just a start, it will go up in the future.

Germany's dividend tax got flat rate of 25%.

[FatLazyContractor]

inside/outside?

I always like doing it inside

[OwlHoot]

Given that inside/outside IR35 is the test used to determine whether you can claim travel and subsistence expenses when working through your own limited company, it will if anything now be of even greater interest to HMRC than previously.

Yes, I hadn't taken that on board, until I read some of the relevant web articles on this site.

[OwlHoot]

Dividend hike is just a start, it will go up in the future.

Germany's dividend tax got flat rate of 25%.

Oh, so presumably yet more secret EU tax harmonisation!

Vote brexit! You know it makes sense.