Bounce back tax

[elsergiovolador]

You are obviously doing it wrong, plenty of people make a profit on providing services. Maybe you meant "you won't necessarily be able to make as much profit"???

A company can't make profit while providing service "inside IR35", it's impossible.

[jayn200]

If you are a more traditional company that requires more than just you to make money this spending it on payroll makes sense. You can't get out of COVID cash-constraints because you can't pay your staff to make your widget, and you can't sell your widgets because you've no money to pay the staff to make them. The loan just alleviates one side of the problem. If your business is otherwise viable, you will be able to sell the things you build with the loan cash and everything eventually gets back to normal.

The other option of course is to take your £25,000 (based on a one-man limited IT consultancy turning over £100k), immediately turn it round as a £25k salary payment (incurring between £3-£10K in tax and NI - depending on other payments you make this year) then bankrupt the company and go out of business. It's essentially a £25K grant so long as you have no plans to use the company again

I would be weary of doing this. How would you explain it as anything other than attempting to extract the loan for personal use which is prohibited.

What legitimate reason would a business have for issuing such a large bonus to an employee when they have lost their revenue stream. Maybe you can come up with some creative rationale or just hope it never get queried.

[GhostofTarbera]

If you are a more traditional company that requires more than just you to make money this spending it on payroll makes sense. You can't get out of COVID cash-constraints because you can't pay your staff to make your widget, and you can't sell your widgets because you've no money to pay the staff to make them. The loan just alleviates one side of the problem. If your business is otherwise viable, you will be able to sell the things you build with the loan cash and everything eventually gets back to normal.

The other option of course is to take your £25,000 (based on a one-man limited IT consultancy turning over £100k), immediately turn it round as a £25k salary payment (incurring between £3-£10K in tax and NI - depending on other payments you make this year) then bankrupt the company and go out of business. It's essentially a £25K grant so long as you have no plans to use the company again

Option 2 seems to be preferred approach


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[Lance]

A company can't make profit while providing service "inside IR35", it's impossible.

which may be true but is entirely irrelevant to the question or the discussion.

[GhostofTarbera]

I see Starling bank has had to borrow £300M as ran out of money to deliver bounce back loans, I predict they close applications fiverr even in next few days

Same for tide, they are going live this week, I predict 2 days for them


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[mjcp]

I see Starling bank has had to borrow £300M as ran out of money to deliver bounce back loans, I predict they close applications fiverr even in next few days

Same for tide, they are going live this week, I predict 2 days for them


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Aren't they funds for the loans the Gov't owned British Business Bank Plc? Or is it just they who guarantee any loans issued under the Bounce back scheme?

Either way, I doubt any banks would have problems getting seed funds / source funds as the risk is minimal, being effectively insured by the gov't.

M

[GhostofTarbera]

Aren't they funds for the loans the Gov't owned British Business Bank Plc? Or is it just they who guarantee any loans issued under the Bounce back scheme?

Either way, I doubt any banks would have problems getting seed funds / source funds as the risk is minimal, being effectively insured by the gov't.

M

Starling already begging funding circle for money, after burning its own money


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[jamed]

In my opinion, for short term personal funding(which is pretty much the only reason a LtdCo contractor would use the BBL) is that a director's loan is the most cost-effective way of getting the money out.

Paying it out as a salary means a nasty bit of tax, all for some short term financing. Dividends obviously incur less tax but you still are still possibly paying thousands of tax just to have some cash in your pocket now that you need to pay back in the future.

Not sure if I'm missing something here or if there is another better way of doing it?

[Old Greg]

In my opinion, for short term personal funding(which is pretty much the only reason a LtdCo contractor would use the BBL) is that a director's loan is the most cost-effective way of getting the money out.

Paying it out as a salary means a nasty bit of tax, all for some short term financing. Dividends obviously incur less tax but you still are still possibly paying thousands of tax just to have some cash in your pocket now that you need to pay back in the future.

Not sure if I'm missing something here or if there is another better way of doing it?

You personally owe the company money, so not as easy to walk away from the company and its debt.

[GhostofTarbera]

You personally owe the company money, so not as easy to walk away from the company and its debt.

50K lasts a long time in retirement in Thailand / Vietnam

Just saying like


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