Limited Co's and other "Tax Structures"

Anybody know anything about income tax?

A lot of the contractors I work with are setup up with a limited company in order to lessen some of their tax burden. I got in touch with a company today who offer such services.

They gave some some calculations suggesting how much money I could save assuming a monthly income of £3,520.00 (based on 37.5 hours a week), going for the limited company route I would earn £2,357.86 after tax (66%), but a quick look at www.listentotaxman.com shows that I should earn £2,589.00 via PAYE and would actually be better off. I guess the limited company works out better the more of your income which is in the 40% band.

They offer another salary structure called EMI Share Options, splitting pay into three parts, salary, expenses and EMI allocation. Again assuming a monthly income of £3,520 I would take home £2,851 (81%), better than PAYE. The thing that concerns me about this is the expenses part where they assume £500 per month business expenses. Being a backoffice worker at a financial services instituation I can hardly justify business expenses, so this would be basically lying to HMRC and hoping they never ask to see evidence of the so-called expenses. I am on the right track here? Sorry if this is obvious to everyone but I know nothing about tax. I would imagine the government would be clamping down on this sort of thing and the penalties quite severe. Risky.

So PAYE seems like the way to go. Any thoughts?

Sorry to say but I don't think you are earning enough to make much difference. I wouldn't bother.

I kind of figured that. Thanks for the input, I will keep racking up those hours.

Wrt "EMI Share Options" . . . don't touch these sort of schemes with a bargepole!!

A Dashing Blade said:

Wrt "EMI Share Options" . . . don't touch these sort of schemes with a bargepole!!

Click to expand...

Ha ha, OK great, that's what I needed to hear. Thanks.

Both of the computations they gave you are wrong. You earnings after corporation tax would be 2567.50 unless you had expenses and capital allowances in chich case it would be higher.

PAYE they gave you doesn't inclue 11% NICs which would put you at ballpark 2400.

All irrelevant anyway as you would have to pass the self employment test which you wouldn't if you're working in back office for a fin inst.

1. you'd need to be working for several employers and not just one
2. you'd need to be able to refuse work
3. you'd need the right to provide a substitute worker in case of your abscence
4. you'd have to be providing your own working equipment (computers etc)
5. you'd have to be able to pick your own hours

There are more rules I'm guessing you've already failed with the above if you're employed

HMRC have really tightened up policy and are actively searching for service companies which is their term for what you're talking about.

Sorry dude.

Get me a job...

Well there you go, I don't even know how much I earn. Problem is I can work anywhere between 35 and 55 hours a week so varies.

Thanks for the reply, given up on the idea, better break the news to the other guys on my team that they can expect a letter from HMRC in the not too distant future. I should really be looking to go permanent anyway. Looks like the only way I can get more money is to actually earn it, or for my trading to take off, or to drink less beer, and none of those are going to happen are they?

Get you a job…took my ages to get this one, competition is tough and I get the feeling any work that can't be automated these days firms are shipping over to India.

TBF they will probably get away with it. All that stuff in the post above is real "by the book" and I guess that a lot more people will bend or ignore the rules until the sh1t hits the fan. Based on what you've said if you do it you shoul save minimum 1900 per year if you jump on the bandwagon with the other guys so basically it's a trade off between risk and savings.

Yeh I see what you're saying on the jobs competition it's an absolute nightmare. Got to final 8 for buy side back-mid office the other month. Thought I'd aced it. Nope lol.

3 strike outs thus far but gotta keep head up eh.

Good luck with your tax dealy and never say never with the trading... I need other people to suceed to justify my own enthusiasm lol

Your CV is on cityjobs.com right? Hayes City seem to have a fair amount of work right now. Good luck