Help for self employed

[funkycoldmedina]

If I were a cynic, I'd say they're using it as further pushes towards forcing the IR35 changes through...

"If you'd been inside IR35 that wouldn't have happened..." sort of thing.

So many people quick to condemn contractors yet so few actually understand how and why it works that way.

Surely there could have been less brutal and penal way to move contractors to that. Many viable businesses will have gone to the wall and the loss of the Corp taxes with them.

 

[SwingsitlikeHogan]

Encouraging my lad to apply for 4th SEISS grant. He didn't qualify for 1st (or subsequent) SEISS grants as they were based upon tax year 2018/19 - and in that year his employed income was marginally greater than his self-employed (51/49). As a result he didn't qualify for SEISS.

He did get furlough but that only lasted into October - he was one of the hundreds of thousands made redundant in August and September before the extension to furlough scheme was announced. I can't recall why companies made folks redundant at that point - but with the ending of furlough they couldn't keep him on. There was something about the lead time to end October?

Anyway...as his income for 2019/20 was I think marginally more self-employed than employed maybe this time he'll qualify for a SEISS grant - but I have no idea if he does or not. If he is fortunate to get a grant he'll have 67p deducted from his UC for every £ grant he gets - but that's how it works and 33p/£ grant is better than what it currently is - nothing. Difficult.

 

[GreiginFife]

Surely there could have been less brutal and penal way to move contractors to that. Many viable businesses will have gone to the wall and the loss of the Corp taxes with them.

There were a number of options IMO.
The IR35 rules, while not perfect, were fine as they were. Forcing companies to make the determination they knew would only go one way.
Shortsighted and long term harmful in my view.

 

[Deleted member 16999]

Fundy might well be the man to explain in more detail, I can only speak from my own situation. I think traditionally it was a good way of paying less tax however was entirely legal and it has always been (and still presently is) the advice that all accountants will give a Ltd Co. I have have been a Ltd Co for about 10 years and in that time I can't say that I have ever felt that I've been putting one over on the tax man. It has been tax efficient however during that period the tax on dividends has increased and the gap between what I might earn at £50,000 and what a PAYE earns at £50,000 is now marginal. That doesn't take into account the holiday, sick pay etc that I don't get that a PAYE employee does so it's probably a very small benefit now. I have had the conversation with my tax man over the last few years and the advice is that it is still best to do it this way however it's a watching brief.

The most common misconception. Along with "all contractors are at it".
The set up is to avoid a Ltd Co contractor facing a double tax hit as people forget that as well as personal tax we also have to pay corporation tax and VAT bills.

My combined taxes for last year were night on £37k most of which was VAT and corp tax.

All of that comes from my day rate and therefore me with pension contributions to be made as well.

Also, the setup allows us to keep money aside for holidays and sick days should they arise as we, and I can't stress this enough, are not employees. We get no perks, no bonuses, no incentives, no "time off" pay.

In a lot of cases we have to buy our own tech, my last client did not supply IT kit to contractors so had I not already had one, I would have had to shell out, albeit via my company, for a laptop.

Do some take it to the extreme? I have no doubt as you will find with all things. But I have been a contractor for 9 years and not met a single person that does kick the arse out of it.

All the above for me plus also when I started out PAYE was not an option because you have to pay yourself monthly and as many business owners will tell you everything like insurances, leases suppliers have to be paid first and you're last in the food chain. I tend to pay myself in chunks as and when I've been paid by my customers.
One other reason I'm ltd is I work in a highly litigious industry that if for whatever reason a claim is made against me and my insurance won't cover it my house and assets are protected.
There has definitely been a concerted choice not to support businesses like mine and to say it's been stressful and heart breaking is an understatement. If it hadn't have been for my wife's work we would have been screwed and as someone who has always been self sufficient it's taken it's toll on me.
I've always paid my taxes and strongly believe everyone should and to be cut adrift at a time like this is hard to take.

Thanks for all the replies, like I said at the beginning I have absolutely no knowledge or experience in this area, 36 years in the Army from age 16 and all I “worried” about was the amount I got in the bank at the end of the month, as a single soldier living in barracks my rent, food, accomm etc was all taken at a source, when married all I worried about was food and utilities, as again, housing etc taken at source.

In all scenarios it didn’t matter whether I was on leave, working 9-5 or on exercise 24/7 I was paid the same. It can be quite traumatic when you leave and the real world kicks in.

One final question, Why do it if it seems so fraught with worry and pitfalls?

 

[GreiginFife]

Thanks for all the replies, like I said at the beginning I have absolutely no knowledge or experience in this area, 36 years in the Army from age 16 and all I “worried” about was the amount I got in the bank at the end of the month, as a single soldier living in barracks my rent, food, accomm etc was all taken at a source, when married all I worried about was food and utilities, as again, housing etc taken at source.

In all scenarios it didn’t matter whether I was on leave, working 9-5 or on exercise 24/7 I was paid the same. It can be quite traumatic when you leave and the real world kicks in.

One final question, Why do it if it seems so fraught with worry and pitfalls?

I can't answer for anyone else but it suits my skillset and lifestyle. I also prefer working for more than one company, gives a broader world view while acquiring more skills.

 

[Deleted member 16999]

I can't answer for anyone else but it suits my skillset and lifestyle. I also prefer working for more than one company, gives a broader world view while acquiring more skills.

Hopefully the benefits also outweigh the hazards for you.

 

[GreiginFife]

Hopefully the benefits also outweigh the hazards for you.

I don't really see any hazards as such, its just been made more difficult to get good roles thanks to the rule changes.

 

[ColchesterFC]

One final question, Why do it if it seems so fraught with worry and pitfalls?

For me it's because I can earn a decent amount of money and have 6 or 7 months of the year off to spend at home with the kids. I could earn almost as much if I was a company employee but I would then have someone telling me when and where I had to work and I would get less time off. As a freelancer I can pick and choose which jobs I accept and which I turn down. For example, I won't work Xmas, I don't do any job that requires a helicopter crew change and I won't work in Nigeria. As an employee I wouldn't be able to do that.

 

[road2ruin]

One final question, Why do it if it seems so fraught with worry and pitfalls?

For me it was an accident, I was made redundant and instantly started looking for a new job, there was very little out there at the time. A couple of client's who I had worked with for years asked if I wanted to freelance for them, they were just helping me out and so it went on from there. Suddenly the mortgage was paid for 6 months or so and I decided I'd take my time looking for a new job. I then realised that actually I would get paid more doing it this way rather than earning money for someone else and before I had kids it gave me a great lifestyle with the flexibility to play a lot of golf etc. In the meantime the company has provided a good income and still allows me to spend time with family.

In all honesty the fact that it's not as profitable compared to being PAYE that bothers me, it's this attitude that people have that because I pay myself like I do then I must be on the fiddle. Last year I paid a considerable amount in Personal Tax, Corp. Tax, VAT etc although I'm not complaining as my earning power (pre-Covid) was always better than any salary I'd get as a PAYE etc. There are pro's and con's to both to be honest.

 

[Deleted member 16999]

For me it was an accident, I was made redundant and instantly started looking for a new job, there was very little out there at the time. A couple of client's who I had worked with for years asked if I wanted to freelance for them, they were just helping me out and so it went on from there. Suddenly the mortgage was paid for 6 months or so and I decided I'd take my time looking for a new job. I then realised that actually I would get paid more doing it this way rather than earning money for someone else and before I had kids it gave me a great lifestyle with the flexibility to play a lot of golf etc. In the meantime the company has provided a good income and still allows me to spend time with family.

In all honesty the fact that it's not as profitable compared to being PAYE that bothers me, it's this attitude that people have that because I pay myself like I do then I must be on the fiddle. Last year I paid a considerable amount in Personal Tax, Corp. Tax, VAT etc although I'm not complaining as my earning power (pre-Covid) was always better than any salary I'd get as a PAYE etc. There are pro's and con's to both to be honest.

The little bit I’ve gained reading yours and others replies has been great, previously and not aimed at anyone, we hear the comments of “my accountant advised” or “I don’t get paid holidays or paid if I’m sick” etc and without these things being explained and at times it has come across as some wanting the best of both worlds (and why not) and feeling hard done to when it hasn’t worked out.

Thanks again.

 

[road2ruin]

The little bit I’ve gained reading yours and others replies has been great, previously and not aimed at anyone, we hear the comments of “my accountant advised” or “I don’t get paid holidays or paid if I’m sick” etc and without these things being explained and at times it has come across as some wanting the best of both worlds (and why not) and feeling hard done to when it hasn’t worked out.

Thanks again.

Yeah, it's definitely not an attitude of feeling hard done by with regards the holiday pay/sick pay, it was a choice I made to stick with the business rather than going back to PAYE. It's purely the impression that those on PAYE have that anyone who pays themselves a dividend is 'at it' and deserve everything they get with regards the taxman catching up with us. Sadly he catches up with me at least once a year with my company, quarterly with my VAT and once every 6 months with my personal tax payments!!

 

[GreiginFife]

The little bit I’ve gained reading yours and others replies has been great, previously and not aimed at anyone, we hear the comments of “my accountant advised” or “I don’t get paid holidays or paid if I’m sick” etc and without these things being explained and at times it has come across as some wanting the best of both worlds (and why not) and feeling hard done to when it hasn’t worked out.

Thanks again.

If I got sick pay/pension contributions and apprenticeship levy paid by the client I'd happily pay as much tax as an employee.

I don't think it can be underestimated the impact that taking a weeks holiday can have on someone when they don't get paid for it

 

[GreiginFife]

Yeah, it's definitely not an attitude of feeling hard done by with regards the holiday pay/sick pay, it was a choice I made to stick with the business rather than going back to PAYE. It's purely the impression that those on PAYE have that anyone who pays themselves a dividend is 'at it' and deserve everything they get with regards the taxman catching up with us. Sadly he catches up with me at least once a year with my company, quarterly with my VAT and once every 6 months with my personal tax payments!!

Don't even get me started on the "on account" payments to her Maj...

 

[fundy]

Don't even get me started on the "on account" payments to her Maj...

thatll be another £100 plus interest for being late on your advance payment please (something a PAYE employee has never had to deal with!)

 

[Deleted member 16999]

If I got sick pay/pension contributions and apprenticeship levy paid by the client I'd happily pay as much tax as an employee.

I don't think it can be underestimated the impact that taking a weeks holiday can have on someone when they don't get paid for it

Thankfully I never had the worry, but, surely holidays/leave etc is factored when you plan or agree to your workload, ie, Colchester does it for 26 weeks.

 

[GreiginFife]

thatll be another £100 plus interest for being late on your advance payment please (something a PAYE employee has never had to deal with!)

It's the calculations for the balancing payments, they never seem to make sense.
Employees don't know how good they have it ?

 

[fundy]

It's the calculations for the balancing payments, they never seem to make sense.
Employees don't know how good they have it ?

Then try explaining it to a plasterer who wants to understand why he needs to pay HMRC even more money

 

[GreiginFife]

Thankfully I never had the worry, but, surely holidays/leave etc is factored when you plan or agree to your workload, ie, Colchester does it for 26 weeks.

Not really, you get a contract for x number of months (days) at y rate. Usually the projects are so intense (6 month contract means 6 months work).
Yes, you can plan for it but it doesn't change the fact that you don't get paid.

Imagine getting £2000 one month and then £1000 the next but still having all the same bills to pay.

 

[Mudball]

There were a number of options IMO.
The IR35 rules, while not perfect, were fine as they were. Forcing companies to make the determination they knew would only go one way.
Shortsighted and long term harmful in my view.

We sometime use Contractors with specialist skills on our project alongside staff to cover areas that we dont cover. Simply because we may do 1 or 2 such projects a year, so no point putting the contractor on our books and then having to pay them for 9 months. Equally the contractor (most of them sole trader/ltd cos ) will work with other firms for the remaining 9 and they love what they do. Keeps them free from office politics. The whole IR35 will force us not to consider using contractors and simply turn down those jobs. it hits companies and it hits contractors.

Somehow the Tory/Chanellors view seems to be that there is Universal Credit available for those who could not get financial support. If this is the way to show that 'I am putting my arms around everyone and helping everyone' it is bonkers..

 

[Deleted member 16999]

Not really, you get a contract for x number of months (days) at y rate. Usually the projects are so intense (6 month contract means 6 months work).
Yes, you can plan for it but it doesn't change the fact that you don't get paid.

Imagine getting £2000 one month and then £1000 the next but still having all the same bills to pay.

I’m not for one minute saying you have it easy or it’s simple, just these are the pitfalls (hazards) you had to consider when going down your chosen route.

Given the issues you and others describe plus what Fundy has posted previously PAYE seems a lot more secure.