Victory is close on IR35 - happy days

[PerfectStorm]

Good news if it turns out to be true.

Given HMRC/HMT you can guarantee there'll be a sting in the tail somewhere down the line.

Dividends to be taxed at 70%

[jamesbrown]

I remember suggesting this a decade ago on this very forum (before I knew it was the Irish model) and people associated with the PCG were too wedded to the divis model. If PCG had had the common sense to promote this then (and TBF, perhaps they did and I missed it), then maybe things would have landed differently.

It's a bitter pill in the sense that it will involve a lot more tax, overall, which is probably hard for a trade body to argue without seriously irritating their membership, but not everything is about tax. It's partly about just being left the feck alone to run a business.

[jamesbrown]

Dividends to be taxed at 70%

Obviously completely pointless because a majority of dividends don't relate to owner-directors and the discrepancy between PAYE (with both NICs) and CT + dividends is much less than it was.

[Old Greg]

It's a bitter pill in the sense that it will involve a lot more tax, overall, which is probably hard for a trade body to argue without seriously irritating their membership, but not everything is about tax. It's partly about just being left the feck alone to run a business.

It's a very easy business in Ireland. If you're a proprietary director paying the equivalent of sole trader NIC, there is no hassle re disguised employment (possibly things are different in the construction sector). There is a strong tax disincentive against the model of profit + CT + divis. Therefore, your contract income comes in; you deduct your expenses; pay everything else out as taxable salery. No profit and no CT. The old UK model of the MSC is alive and well as the Director's Umbrella where you have six unrelated Director / Shareholders and your accountant is the seventh director.

Annoyances at the Irish system are:

- Personal taxation levels are high (not related to the model above, however)
- No allowances for travelling to temporary workplace 24 month rule style (however, if you travel by public transport, it costs me 2k per year for a Dublin commuter zone train + tram pass, which comes out of my pre-tax income - a dispensation that is open to all employees); mileage and subsistence for travel to other client sites for meetings etc. are pretty generous
- There are tax disincentives against retaining money in the company if you have plans to be a 'proper business'
- My pet current hate which is not about tax is that the legal system is slow; still trying to enforce a debt from an agency from July and now the courts are suspended

[jamesbrown]

It's a very easy business in Ireland. If you're a proprietary director paying the equivalent of sole trader NIC, there is no hassle re disguised employment (possibly things are different in the construction sector). There is a strong tax disincentive against the model of profit + CT + divis. Therefore, your contract income comes in; you deduct your expenses; pay everything else out as taxable salery. No profit and no CT. The old UK model of the MSC is alive and well as the Director's Umbrella where you have six unrelated Director / Shareholders and your accountant is the seventh director.

Annoyances at the Irish system are:

- Personal taxation levels are high (not related to the model above, however)
- No allowances for travelling to temporary workplace 24 month rule style (however, if you travel by public transport, it costs me 2k per year for a Dublin commuter zone train + tram pass, which comes out of my pre-tax income - a dispensation that is open to all employees); mileage and subsistence for travel to other client sites for meetings etc. are pretty generous
- There are tax disincentives against retaining money in the company if you have plans to be a 'proper business'
- My pet current hate which is not about tax is that the legal system is slow; still trying to enforce a debt from an agency from July and now the courts are suspended

Interesting. Of those, I think the major issue there, in the UK context, would be taxation of travel expenses. Absent that, it would make many contracts in the regions nonviable. There's a strong argument to do something on that vs. employees in order to maintain a flexible labour market.

[Old Greg]

Interesting. Of those, I think the major issue there, in the UK context, would be taxation of travel expenses. Absent that, it would make many contracts in the regions nonviable. There's a strong argument to do something on that vs. employees in order to maintain a flexible labour market.

Agreed. But the travel expenses are not an intrinsic part of the Irish system. Ireland just has a different view of what travel is tax deductible, and takes this view within the context of public transport being tax deductible for all employees. IMO the Irish model of sole trader / proprietary direct NIC class and divis taxed as income would work perfectly well alongside the 24 month rule.

It's the kind of think that Keir Starmer should get behind to present a tax fairness / backing the self-employed image. He could even make an eco-friendly version of this which reduced the mileage rate for private vehicles for 24 month rule commuting.

[malvolio]

Agreed. But the travel expenses are not an intrinsic part of the Irish system. Ireland just has a different view of what travel is tax deductible, and takes this view within the context of public transport being tax deductible for all employees. IMO the Irish model of sole trader / proprietary direct NIC class and divis taxed as income would work perfectly well alongside the 24 month rule.

It's the kind of think that Keir Starmer should get behind to present a tax fairness / backing the self-employed image. He could even make an eco-friendly version of this which reduced the mileage rate for private vehicles for 24 month rule commuting.

Starmer and fairness are not easy bedfellows. Look at his history.

However, two issues in that model, ignoring any "interesting" interpretations : travel is not tax deductible for journeys to your place of work, and HMG are not going to change that for 30-odd million employees, and it legislates against you trying to grow your business (some people want to do that, oddly enough) or reserving untaxed gross for bench time and sickness. Levelling out your income is a major benefit of the current LtdCo model

[jamesbrown]

it legislates against you trying to grow your business (some people want to do that, oddly enough) or reserving untaxed gross for bench time and sickness. Levelling out your income is a major benefit of the current LtdCo model

Personally, I find that to be a weak argument. Whether a warchest is in a company account or a personal one is largely irrelevant. Obviously, the size of that warchest does depend on cumulative taxation over a period of time, but I think we can separate tax rates from tax structures. I would not advocate high taxation of employees or the self-employed (in the broadest sense of that term). I agree that business expenses are an issue, though, and that needs to be dealt with, not only for travel but capital and human resources for companies that do want to grow.

[b0redom]

Personally, I find that to be a weak argument. Whether a warchest is in a company account or a personal one is largely irrelevant. Obviously, the size of that warchest does depend on cumulative taxation over a period of time, but I think we can separate tax rates from tax structures. I would not advocate high taxation of employees or the self-employed (in the broadest sense of that term). I agree that business expenses are an issue, though, and that needs to be dealt with, not only for travel but capital and human resources for companies that do want to grow.

This. I have a chunk in personal cash, a B2L and also a stocks and shares ISA I've got a bit in the company. If the brown stuff hit the fan I initially woudln't give a stuff where the money was as long as I could get my mitts on it, I certainly wouldn't want to be worrying about ER + MVL in order to get money out in a tax efficient way.

[Old Greg]

Starmer and fairness are not easy bedfellows. Look at his history.

However, two issues in that model, ignoring any "interesting" interpretations : travel is not tax deductible for journeys to your place of work, and HMG are not going to change that for 30-odd million employees, and it legislates against you trying to grow your business (some people want to do that, oddly enough) or reserving untaxed gross for bench time and sickness. Levelling out your income is a major benefit of the current LtdCo model

The legislating against business growth is the main disadvantage. No system is perfect. But look where you're going to end up with current trajectory.