IR591 replaces IR35?

Any facts to go with this statement?

clive

industries in

Government are idiots. They bring in a rule that favours incorporation and then change something else because they have a rule that favours incorporation!

In article , John Smith writes

As we do not know what the new rules will be it is hard to know how to plan for them. Will they levy something akin to Class 4 NIC i.e. 8% on dividends? If so then it will not be 'too' bad. If they go the whole hog and treat dividends as 'earnings' for PAYE purposes then this could be disastrous.

Likely schools of thought may be: -

-consider paying as large a dividend as legally possible before Budget Day and taking the higher-rate tax on the chin. Better 40% now than

-plan to get money out of the company by other means e.g. rental income, interest on loans etc?

Anyone got a crystal ball?

Whatever happens, if the bye-product is that IR35 is abolished and we have some certainty back in the tax system then that has got to be something to cheer about.

Just go to any of the following websites, post your question and see what reponse you get:

John.

Agreed. If IR35 goes - no certainty on that yet - at least Engineers/IT Consultants/etc - will be able to plan ahead and not be afraid of getting a huge bill X years down the line. The current uncertainty is one of the big issues that people have with IR35.

I imagine I'll get people whining about IR35, like they have been ever since it was proposed. Have you got a summary of what damage it's done to the IT/Engineering industry, rather than to people's pockets?

clive

Nope, because there aren't any. Working in IT is stuffed because sales of New Technology products are stuffed.

Anybody who thinks the situation in the UK is down to IR35 is not looking carefully enough. IT workers in *all* the rest of the world have exactly the same problem (or worse) as the UK and they don't have IR35.

There is (as you suspect) a group of people who like to think that they can use the dire state of IT employment to show just how distructive IR35 was. Unfortunately, it just isn't possible to do this (though none of what I have said here should be used to show that I think IR35 is a good thing)

tim

I know this cannot be answered categorically but would *declaring* the divi before the budget be good enough?

It ought to be, because the income tax liability arises according to when it's declared, not when it's paid.

I think that getting around IR35 is easy enough if you are a bona fide software contractor; you get together with a few others who work for different firms, and you swap the work around. Then you've got a real business. What gave rise to IR35 was programmers who worked for the same client for years, on his premises, using his equipment. It is employment in all but name - some even had contracts of a sort.

The real problem for programmers is lack of work in the first place.

p.s. Your NOSPAM won't stop spammers; looking for words like "nospam" in emails is standard stuff in harvesting email addresses from usenet. Programs what harvest email addresses come with standard filters for removing common antispam measures like this.

It is extremely rare for the budget to have substantial changes in tax law for the current year.

In article , Fred writes

I beg to differ. Although it is unusual, I would not say extremely rare. Picture the scenario. Gordon Brown in the Budget announces that close company dividends will be subject to PAYE/NIC. This could cause a tax hit of 50% plus. Half the close companies in the country may be rushing to distribute the whole of their reserves in the following few weeks and pocketing the saving. Having said that this would give him a windfall this year!

In the Pre Budget Speech in December a number of changes were announced to the taxation of trusts that had immediate effect. This is quite common for anti-avoidance legislation.

So, basically if Brown taxes dividends by making them subject to NIC/PAYE then the best thing to do is to get your money out now ASAP and take the current hit as opposed to taking the hit IF he does th above? Of course, if he doesn't do this then alot of people will lose out. What a way to run an economy.

You mean - takes loads of dosh out now and put it back in as a gargantuan loan. Yes - buy a house with the "divi" say and get tax relief on the company loan. Now where am I going wrong here?

If you are already a 40% taxpayer, there is no tax penalty in declaring a divi right now. It becomes a purely cash flow issue, AIUI.