Composites What Do People Think Will Happen

**malvolio** · 31 October 2006, 13:01

Who owes the tax? The comp's business model is valid - they are merely providing a service - and they are probably paying all the CT they are supposed to. If you are a member of a composite and the structure is declared to be an invalid sham, it won't be the administrators, it will be the director-in-name-only tax avoiders who will be the ones in the firing line, backdated to Dec 2004.

No evidence it's actually happening yet, of course, but one sort-of composite has already been done for not paying its bills and it's the members that are being chased by the administrator.

**gravesendboy** · 31 October 2006, 13:01

Composites

As per normal the people running the composites will disappear ie administration and its the poor individulals who will bear the brunt of HMRC

**Bradley** · 1 November 2006, 10:09

Culpable

Originally posted by gravesendboy

As per normal the people running the composites will disappear ie administration and its the poor individulals who will bear the brunt of HMRC

I'd have to disagree here. If the employee/shareholder was taking advice from the people running the composite then they would have done enough to avoid the NIC charge. Its only if you knew what you were doing was wrong and more importantly the Revenue could prove it, that would mean that the Revenue would come after you for the NIC.

The Revenue and/or police usually go after the promoters of the scheme who should have known better.

The same applies with these umbrella companies that pay out inflated expenses. If the promoters suspect that an "employee" is claiming inflated expenses then they have a duty to report it to the police through SOCA. A suspicion is enough. So if the promoters of the scheme don't report it they are committing a criminal offence and the Revenue/police will go after them first.

**malvolio** · 1 November 2006, 10:33

You're assuming a composite will remain a valid business model. Indications in the last PBR are that HMRC sees them as purely a method to avoid tax by incorporating without taking any business risk or investment (and I personally find it hard to diagree with that view). It's quite likely the model will be closed down or its tax status changed to make it economically pointless. The bulk of the money is owned by the shareholders, not the composite whose business is almost certainly fully legal and fully taxed, and it is the shareholders who will be liable for any missing payments.

As for umbrellas and expenses, people who get that wrong aren't reading the information properly. Even our usual suspect company say (not very clearly, I have to admit!) that you should keep receipts and only claim what you spend. It's not their fault if people are greedy and/or illiterate. They are not your managers, they have no responsibility for what you do, they merely run your invoicing and payroll.

**DaveB** · 1 November 2006, 10:34

Doomed.

**Bradley** · 1 November 2006, 10:52

Didn't anything I said sink in then?

Originally posted by malvolio

The bulk of the money is owned by the shareholders, not the composite whose business is almost certainly fully legal and fully taxed, and it is the shareholders who will be liable for any missing payments.

Shareholders have their liability limited to the amount of share capital they have. That's one of the advantages of incorporation. The Revenue can only go after the shareholders if there's evidence that they knew what they were doing was wrong i.e. what I've said above!!

The managers of the scheme knew that what they were doing was contrary to published Revenue guidance and they should have known better. The Revenue can and will go after them personally.

**Ardesco** · 1 November 2006, 10:58

If all your contracting money is tied up as share capital in the composite when it goes under that can be quite a lot to loose.....

**Bradley** · 1 November 2006, 11:09

That's not how it works

Originally posted by Ardesco

If all your contracting money is tied up as share capital in the composite when it goes under that can be quite a lot to loose.....

The typical composite company will never give you more than say £10 sharecapital i.e. the most you would lose is £10

**Ardesco** · 1 November 2006, 11:17

must admit i don't reall know how they work, but I was under the impression a large chunk of your money was tied up as shares so they could pay out large dividends. But then as I don't intend on getting involved with composites I really don't have to worry about my lack of understanding of them

Composites What Do People Think Will Happen