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Denny
23rd February 2007, 12:15
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Diestl
23rd February 2007, 12:21
If you are a Ltd, and outside Ir35 and accounts are all fine, then it doesn't matter, even if you call the company LtdToAvoidTax Ltd and register it on the day the legislation comes in, you aren't breaking the law.

jh0711
23rd February 2007, 12:21
thats a good point - from what I can gather a lot of people using composites are not really outside of IR35 they have just been winging it (on the advice of those who run the MSC no doubt) because both the punter and the MSC will earn more money.

if you move to a ltd only earn say £50k per year pay yourself minimum wage and then take the rest as dividends you may as well be waving a big flag saying 'dodgy accounts'


probably

Nixon Williams
23rd February 2007, 12:22
More tax initially may save you heaps more down the line and I suspect that the short term panic move to go limited over the next few months is more likely to do you (and possibly the rest of the limited co fraternity who genuinely operate outside IR35) more harm than good.

Quite a bit more tax really, and even if the contract is caught by IR35 you would be better off with your own Ltd Company.

An umbrella is only an option if you cannot handle simple paperwork and/or if you are only going to be contracting for a few weeks.

Alan

jh0711
23rd February 2007, 12:29
it is a good point Alan I believe there are VAT benefits (to do with flat rate vat - no idea of how it works)
however what about
Insurances (employers, public liability and PI)
initial cost of company formation
etc etc etc

these are all costs people would need to find money for up front when they move from MSC to LTD

you need to remember that there are a lot of people in the 10-15 quid per hour bracket who do helpdesk etc who simply do not have the spare funds for an initial outlay of that magnitude.

a lot of contractors using MSC (and brollies) would prefer to be paid PAYE directly to avoid the extra hassle and costs involved with either brollies or ltd's

but as many agencies do not offer this they choose brollies because they are quicker and simpler.

probably

gingerjedi
23rd February 2007, 12:37
Surely a good agent can do PAYE? mine (Modis) has the option if I like.

jh0711
23rd February 2007, 12:39
if inside IR35 and not claiming expense it may be the way to go - however be aware your rate will drop if you go PAYE direct with agency as they will start to incur the employer costs (holiday pay, employers NI etc) they may also charge a small fee for PI insurance.

Cowboy Bob
23rd February 2007, 12:41
Surely a good agent can do PAYE? mine (Modis) has the option if I like.

DP Connect do PAYE as well.

jh0711
23rd February 2007, 12:41
do either dp or modis try to disencourage (???) you from going PAYE?

Cowboy Bob
23rd February 2007, 12:42
if inside IR35 and not claiming expense it may be the way to go - however be aware your rate will drop if you go PAYE direct with agency as they will start to incur the employer costs (holiday pay, employers NI etc) they may also charge a small fee for PI insurance.

No it won't. I said this in another post replying to you. Yes your rate on paper will look lower, but your take home will be exactly the same.

Cowboy Bob
23rd February 2007, 12:42
do either dp or modis try to disencourage (???) you from going PAYE?

DP Connect don't seem to. I'm not PAYE but in their "welcome pack" it's listed quite prominently as a payment option.

jh0711
23rd February 2007, 12:46
hey bob I was just making the other poster aware that the rate will drop - you will no longer be on the same rate - yes as you say there will be no difference between take home pay (well there will be maybe a slight difference due to that other conversation)

the point I was trying to make is that if you are on £15 per hour and you ask to go PAYE with the agency they may say yes but the rate you will be on will be £13 per hour

sorry for confusion

Cowboy Bob
23rd February 2007, 12:50
the point I was trying to make is that if you are on £15 per hour and you ask to go PAYE with the agency they may say yes but the rate you will be on will be £13 per hour

sorry for confusion

No problem.

What you say above is correct. Just worth pointing out to those that are unaware that this is because the agency is now paying the employer's NI, not the contractor and that the take home is effectively the same.

Nixon Williams
23rd February 2007, 12:58
it is a good point Alan I believe there are VAT benefits (to do with flat rate vat - no idea of how it works)
however what about
Insurances (employers, public liability and PI)
initial cost of company formation
etc etc etc

these are all costs people would need to find money for up front when they move from MSC to LTD


We provide the set up & company formation for free, insurance cover can be sorted for about £2/300.

VAT is still charged at 17.5% but in year 1, only 12% of the gross invoices is paid over assuming you are in IT. The savings made here will more than pay for insurance cover and accountancy fees.

Alan

jh0711
23rd February 2007, 13:25
VAT is still charged at 17.5% but in year 1, only 12% of the gross invoices is paid over assuming you are in IT

what about in year 2?

Back In Business
23rd February 2007, 13:35
what about in year 2?13%

jh0711
23rd February 2007, 13:40
and year 3? is it a sliding scale or is there a limited to this benefit?

cityboy
23rd February 2007, 14:05
We provide the set up & company formation for free, insurance cover can be sorted for about £2/300.

VAT is still charged at 17.5% but in year 1, only 12% of the gross invoices is paid over assuming you are in IT. The savings made here will more than pay for insurance cover and accountancy fees.

Alan


Can you still claim vat back on purchases?

Bear
23rd February 2007, 14:11
stops at 13%

Claim back VAT on purchases over £2k from memory

lukemg
23rd February 2007, 14:14
Only got contract until middle of may and no chance of renewal.
Going from MSC to brollie for last 2 months, opening a ltd is easy but closing was a right pain last time. Will go LTD when/if new contract turns up but can't rule out (light touchpaper and retreat) going perm after this one...

Nixon Williams
23rd February 2007, 14:27
Can you still claim vat back on purchases?

You get a 1% discount on the rate in year 1, so in IT, the rate is normally 13%, but reduced to 12% in the first year.

No VAT is reclaimed but you can on any assets purchased in excess of £2000 - this has to be a single asset, so in most cases the VAT on a PC etc will not be reclaimed as few will cost in excess of £2K.

Alan

cityboy
23rd February 2007, 14:30
Thank you