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TBH would rather everyone paid tax fairly.

They want to properly tax contractors who are still dodging IR35. Good idea.

TBH would rather everyone paid tax fairly.

Ditto

The govt want to stop business owners being paid via dividends to reduce tax bills.

Replace that with

The govt want to stop major shareholders being paid via dividends to avoid tax.

I rhink RB has it. Still lots of people on £500 a day as the only revenue for their "business", paying themselves minimum salary and taking the rest as dividends from the company to avoid tax.

Is there a better way of managing this and not hitting genuine small businesses?

I'd also like to see changes to the tax laws for big businesses - there's no reason you can't do both.

They want to properly tax contractors who are still dodging IR35. Good idea.

Understand that but at the same time they're also penalising all small business owners who employ people and entrepreneurs at the same time. They're trying to crack all of the nuts very clumsily with one large swing of one oversized hammer!

Not great when we're trying to grow the UK economy through business startups and rely on these businesses to provide jobs for people, particularly when the government are expecting the private sector to take up the slack with the public sector job cuts.

It's pretty stressful and risky proposition setting up a new business, even more so when you start to employ people - there has to be some incentive surely!

not sure what this has got to do with google precisely.

Personally I'm happy to support google. I pay for services, use their free ones, and my companies gain greatly from them.

Just because some whiny politicians cant sort out the tax code they whip up the ill-informed to get angry about the bogeyman they've invented.

"look over there! a monster!"

The amount you pay in Corporation Tax is far higher than that of personal.
Don't forget - Dividends can only be paid from profit AFTER corporation tax has been paid.
Also - they remove the allowance that meant the first £10k of profit was tax free (like the personal allowance) so small businesses pay tax from the first 1p of profit!!

Google provides a brilliant service.

The real problem is stupidly complicated tax rules that fail to cater for international businesses.

If you can pay less tax legally, I see no problem.

not sure what this has got to do with google precisely.

It was just to emphasise that the government seem to have their priorities wrong. Slack UK taxation laws let Google (and other large corporations) get away with paying next to no tax, yet small businesses who don't realistically have the time, will or money to offshore get hammered as an easy target both in terms of Corperation Tax, and now again via dividends/earnings of their directors, many of whom don't actually earn that much and yet will have put everything on the line to start these businesses and support their staff. The government has now removed a big chunk of that incentive to start a worthwhile business.

That is trying to get me to allow small companies to avoid paying tax by using shares rather than wages

Why on earth would i support them being able to avoid tax?
How exactly will this impact on google?

they're also penalising all small business owners who employ people and entrepreneurs at the same time.

Just because some whiny politicians cant sort out the tax code they whip up the ill-informed to get angry about the bogeyman they've invented.

"look over there! a monster!"

I think very few people will not think that they way some companies organise their tax affairs, to avoid tax, is not a concern.

You dont GAS you are in the [ massive] minority on that one.

BLaming tax rules for companies creating artificial structures just to minimise tax is silly. No one forces google to do this, they actively choose to do this, they make the decision. It is their choice and we can blame them for this.

One of those basically if you think it ok to avoid tax - an option generally only available to the wealthy or self employed -then you wont care and wont mind that the tax burden is moved from the very wealthy to the less wealthy. Others will care.

Still lots of people on £500 a day as the only revenue for their "business", paying themselves minimum salary

Ok, I'll bite, I've been doing exactly this for the last year, and have no plans to stop anytime soon.
And why not, it's perfectly legal?
No-ones stopping anyone on here setting off on their own and giving it a go.

Still lots of people on £500 a day as the only revenue for their "business", paying themselves minimum salary and taking the rest as dividends from the company to avoid tax.

But dividends are still taxed.

At the risk of using actual facts (and some fag packet maths), someone working through a limited company billing at £500 a day, taking minimum salary and the rest in dividends, would turn over about £105k p.a, take home £77k and pay £28k in a mix of corporation and income tax. So, overall, an effective tax rate of about 25%.

There's also the VAT that they'll generate too, don't forget that.

it's perfectly legal.. No-ones stopping anyone on here setting off on their own and giving it a go.

At the risk of using actual facts (and some fag packet maths), someone working through a limited company billing at £500 a day, taking minimum salary and the rest in dividends, would turn over about £105k p.a, take home £77k and pay £28k in a mix of corporation and income tax. So, overall, an effective tax rate of about 25%.

I dont think anyone is going to argue they do it for a reason other than to reduce their tax burden. I assume that is the thing we agree on what we didagree on is whether this is ok or not.

What is legal may not be moral/the right thing to do.

As noted you are probably earnign above average and yet paying less tax than someone who earns far elss than you

That is what is wrong with it the well off are paying less.

You may not care but i am surprised you had to ask why folk dont like this.

I chose to remain a domiciled taxpayer for a couple of reasons. The main one was that I wanted my children to grow up where I grew up, to have proper roots in a culture as old and magnificent as Britain’s; to be citizens, with everything that implies, of a real country, not free-floating ex-pats, living in the limbo of some tax haven and associating only with the children of similarly greedy tax exiles.

A second reason, however, was that I am indebted to the British welfare state; the very one that Mr Cameron would like to replace with charity handouts. When my life hit rock bottom, that safety net, threadbare though it had become under John Major’s Government, was there to break the fall. I cannot help feeling, therefore, that it would have been contemptible to scarper for the West Indies at the first sniff of a seven-figure royalty cheque. This, if you like, is my notion of patriotism. On the available evidence, I suspect that it is Lord Ashcroft’s idea of being a mug

We all benefit from society and it requires the better off to accept, rather than avoid, their burden/responsibility.

Still lots of people on £500 a day as the only revenue for their "business", paying themselves minimum salary and taking the rest as dividends from the company to avoid tax.

It's actually closer to 30% when you take into account all or the other gubbins.

That's the problem. Hence the need for reform to close this tax dodging loophole.

It's already closed, but in a really shit way - IR35 is a pile of crap and HMRC know it.

Dividend reform is expected to net £500M a year? Small potatoes compared to the value contractors bring to the economy in flexible working benefits.

The trouble is, to work as a contractor you either need to be employed by an agency (doesn't really happen IME) or you need to run a company.

And if you took it all as a salary you'd take home £67k. Tax dodge pure and simple.

Why should a person with no employment security be remunerated the same as a PAYE employee.

EDIT: Also, you wouldn't be able to take it all home as you'd have the expenses of running a business (e.g. insurances, accountancy etc)

[quote=jimdubleyou ]Why should a person with no employment security be remunerated the same as a PAYE employee.

They're not renumerated the same as a PAYE employee - they're paid a lot more, and that's down to them getting paid a higher rate (supply and demand and all that - if the rate wasn't high enough it wouldn't be worth the insecurity etc.), nothing to do with the taxman - I'm not sure why you think you should be subsidised by other taxpayers as well.

EDIT: Also, you wouldn't be able to take it all home as you'd have the expenses of running a business (e.g. insurances, accountancy etc)

Which also has nothing to do with whether you avoid tax by running your income through a company - you can deduct those costs against tax either way, and as above the rates you charge the customer cover that, not what you save by tax avoidance.

Why should a person with no employment security be remunerated the same as a PAYE employee.

they're paid a lot more

Myth. I went permie at a job I was contracting at - make about the same take home after all taxes. That said I wasn't kicking the arse out of it by paying my self minimum wage because IR35 probably* applied to me.

*you will never know for sure unless you get investigated

you can deduct those costs against tax either way,

If you want a flexible workforce, you need to have an incentive for people to do it.

Part of the reason I went permie was I saw this lack of joined up thinking from the government bringing a load more BS down on the flexible workforce.

Back in the day contractors used to be self employed, and pay tax like a plumber does now. Then, the government of the day bought in a law that the client company would be liable for any self-employed person who didn't pay their Tax/NI. So, everybody had to incorporate to get a job. Queue a whole industry springing up to get the best out of a shit tax system.

The whole thing needs looking at, from the top down.

I have more of an issue with Amazon than Google, amazon have a substantial physical presence in the UK and have received grants to set up their distribution depots. They can't have it both ways.

Google on the other hand have a negligible physical presence in the UK and should be paying their taxes wherever they are based. They will however continue to bleed Britain dry, taking funds out of the UK economy and putting very little back.

It is as previously suggested a sledgehammer to crack a nut. I know several people with these "companies" which are basically them, one is a good friend of mine he's an IFA, he pays himself up to the tax threshold and his Mrs is on the books too, the rest is paid in dividends. £300k last year. Then he moans about people on benefits...

the rest is paid in dividends. £300k last year.

On which he will have already paid 21% corporation tax + an additional 28% in personal tax (I think, I never earned that much), and probably collected 20% in VAT with very little offset.

The trouble is; it also penalises those of us that have a limited company but actually use it as a limited company to sell actual things. (well, websites - are they real??)

I can fully understand the desire to dissuade people from "acting as an employee” without actually being one. But when it affects those not doing that, I have to wonder about it.

Rachel

If you want a flexible workforce, you need to have an incentive for people to do it.

The incentive is the higher amount they get paid - not the ability to dodge taxes.

I'm an ex-contractor myself (and employee several at the moment) and have observed many contractors properly taking the piss when it comes to avoiding paying tax.

If you were a sole employee of your own company you'd also have to pay employer's NI as well as employee's, so you'd end up paying more tax than if you were a permie at the same level.

And permies can get shares and dividends in lieu of salary, if they want. If you are a director, you will be a shareholder, so you're entitled to dividends IMO.

If you want a flexible workforce, you need to have an incentive for people to do it.

I dont think being able to avoid tax is part of any governments flexible workforce solution.

The choice of language and words one uses to describe folk is quite interesting " flexible workforce" sounds so much nicer than tax avoider.

Junkyard, the reason for being a contractor isn't to avoid tax. For most, anyway. In IT contractors are essential.

How you make them run their business is a different issue.

Anyone who is an owner (ie shareholder) of a company can have dividends. That's the point of owning a company. The question is, do you define a single employee as an owner or something else? Some contractors really are doing it for the tax dodging (slim as it is) and some really are trying to build businesses. I know a guy who works as a contractor via his own company, but at the same time attempting to create products owned by the same company that can be marketed separately, like any other startup. So he's effectively both.

In Germany, you can't set up a company and make yourself a single employee, in IT at least - you have to be a registered freelancer, effectively a sole trader.

I dont think being able to avoid tax is part of any governments flexible workforce solution.

The choice of language and words one uses to describe folk is quite interesting " flexible workforce" sounds so much nicer than tax avoider.

No, but the proposed solution to people avoiding tax is penalising all small businesses and will drive a lot of people back to paid employment (which may or may not be good for the economy).

Not every contractor is money grabbing mercenary scum* but the narrative painting them as such has clearly hit the mark for a few posters here.

*as the IT director of a pretty large UK bank described them

[quote=jimdubleyou ]Myth. I went permie at a job I was contracting at - make about the same take home after all taxes.

Well going permie there is a no brainer then (unless you want the flexibility yourself) - presumably that company didn't feel the need for a flexible workforce enough to incentivise it. It's not the government's job to provide that incentive through tax breaks.

You don't need to have indemnity insurance as a PAYE employee, I don't need an accountant any more etc.

Hence:

the rates you charge the customer cover that

[s]Queue[/s] Cue a whole industry springing up to [s]get the best[/s] rip the arse out of a [s]shit[/s] tax system with loopholes.

In Germany, you can't set up a company and make yourself a single employee, in IT at least - you have to be a registered freelancer, effectively a sole trader.

I'd go back to contracting if I could do this in the UK, but it's just not worth it at the moment.

but the proposed solution to people avoiding tax is penalising all small businesses and will drive a lot of people back to paid employment (which may or may not be good for the economy).

Not every contractor is money grabbing mercenary scum* but the narrative painting them as such has clearly hit the mark for a few posters here

[quote=molgrips ]Junkyard, the reason for being a contractor isn't to avoid tax. For most, anyway. In IT contractors are essential.

I don't think he's suggesting it is - I should point out I've done some IT contracting, contemplating doing more (any tax changes won't make a huge difference to my interest in that) and possibly setting up a 2 person company, so it's not like I don't see that side of the argument.

I am not and clearly only some contractors go down the route of actively avoiding tax.

I dont hate contractors I just dislike those who dont pay tax as its a moral duty to contribute to the greater good of society.

What makes it worse is that the ones generally avoiding tax are often the ones with the broadest shoulders.

[quote=jimdubleyou ]No, but the proposed solution to people avoiding tax is penalising all small businesses and will drive a lot of people back to paid employment (which may or may not be good for the economy).

I presume that's in the same way that limiting bankers' bonuses would drive them out of the country? I'm less than convinced any changes will make that much difference to people - as molgrips said, most people don't do it for the tax benefits, that's a side effect.

[quote=Junkyard ]What makes it worse is that the ones generally avoiding tax are often the ones with the broadest shoulders.

Inevitably - it's not worth doing until your income is above a certain level (for reasons mentioned above I have looked into this).

DO we blame the govt for this or those who avoid tax? What would work then ?

Bit of both? As somebody said above, it's a sledgehammer to crack a nut.

I think the whole freelancer pay/tax situation needs to be resolved by:

1)Recognising the status of one man bands
2)Recognising that they have legitimate expenses that should be offset against tax (maybe have a comprehensive list of what is allowed)
3)Should have the rest of their income taxed as a self-employed person
4)Should not have to have the complexity of complying with employers legislation

But, I'm sure it's more complicated than that.

I am not and clearly only some contractors go down the route of actively avoiding tax

Yes - these are the guys doing stuff like claiming their house as a business office expense, selling their cars to their business for 1p, employing their partners to open letters, paying themselves in directors loans with 1000 year terms and all that crap.

putting this up here:

http://www.owen.org/blog/8532

in respect of the google offshore argument, not neccessarily linked to the divi pay argument.

BLaming tax rules for companies creating artificial structures just to minimise tax is silly. No one forces google to do this, they actively choose to do this, they make the decision. It is their choice and we can blame them for this.

what precisely do you plan on blaming them for?

The problem isn’t only lack of data or lack of transparency. Even if we had full information on a company’s activities in each country (which we should) that doesn’t answer the underlying question: where is this profit being made? Profit is the difference between two much bigger, geographically dispersed flows (revenues and costs), and it isn’t straightforward to assign a geography to it.

I think we can all agree that, whatever else we might think, the profit is not being made in the Bahamas or the Cayman Islands. The lack of clarity about where profits should be taxed should not be an excuse for companies to be able to set up artificial structures that channel their reported profits to low-tax jurisdictions.

which is not what google do.
Sure, go after the cayman island tax dodgers, but just because google determine where they want to have their profits taxed (based on a judgement of where profit is created) is not a dog whistle for UK whingers.

Sure, go after the cayman island tax dodgers,

But not the Bermuda ones?

[quote=Stoner ]just because google determine where they want to have their profits taxed (based on a judgement of where profit is created)

Except that's not the judgement they use to determine where to have their profits taxed is it? Quite clearly they do make a lot of profit in the UK - they have UK consumers using their products, and UK businesses paying them to reach those consumers. Sure they have costs involved in providing services to both the consumers and the companies, but those costs aren't the entirety of the amount the UK businesses are paying them, and the profits they're generating by selling us to UK companies aren't actually being generated in Ireland or Bermuda. I'm not sure how their lack of a physical presence in the UK makes a difference to this.

I get that you like google - I also like google stuff, and don't even cross my fingers or hold my nose when using their products - but don't defend the indefensible.

but don't defend the indefensible.

I dont.

Tell me where* you think google generate the profit on the €50 pa I pay for each business user?

* geographically/fiscally

Quite clearly they do make a lot of profit in the UK

no, they make a lot of revenue in the UK. That's not the same thing.

They create in whichever part of their business[country]which pays the lowest tax ...DERR we all know this.

Clearly they do make alot of profit here they just arrange their business so that they pay this profit in whichever geographical country has the lowest tax burden on them. TBH its preposterous to argue google is set up as such for any reason other than tax minimisation.

what precisely do you plan on blaming them for?

go after the cayman island tax dodgers, but just because google determine where they want to have their profits taxed (based on a judgement of where profit is created)

Why are you being so deliberately thick/obtuse /misleading on this subject

you know loads so why do this tabloid shit and ignoring the issue?

because its clear that no-one else in here can answer the question of how much profit is generated in the UK.

Screaming for google to pay MOAR TAXES!!!! is embarrassingly simplistic. I am not being obtuse, I am pointing out the naivety of the level of argument being used.

How much more tax? another £1m? £100m? how much is enough? why? on what? revenue rather than profit? should they be treated differently to other companies?

should they be treated differently to other companies?

Possibly. It might not be such a bad idea to tax internet based services differently to 'real world' ones. They could sure as hell log the IPs of their search or ad requests and HMRC could get a reasonable idea of where their activity was happening.

ITs fine to raise complexities related to tackling what they are doing

It's not fine to pretend they are not doing it just to avoid tax nor to say yu dont know what the objection os or to caricature the argument as those who object are "screaming pay moar taxes"- C'mon stoner you are not this type of poster.

As far as I am aware - this deal aside- the argument they should pay more was accepted by all but those who like free market/big business/trade[ trying to be as neutral as i can there ] Hell even the tory party dislike google's practices.....well at least whilst the electorate does 😉

[quote=Stoner ]no, they make a lot of revenue in the UK. That's not the same thing.

I understand the difference - I did mention costs. Clearly the only way they're not making profit here is if their real costs of operating here are the same as or more than their revenue. Do you honestly believe that to be the case?

[quote=Junkyard ]Hell even the tory party dislike google's practices.....

Which of their doners is losing out? Makes you think...

Should individuals, contractors, small companies, corporations all pay a fair amount of tax? Yes of course, but that's not possible to enforce with the hideously complicated tax system and the inability of all countries to react to modern global business practices. There was a program on this week about how the rich avoid takes - it showed how much more complicated the tax rules have become - the UK are the most complicated in the world and the documentation is 3/4 the size of the Encyclopaedia Britannica!
So whilst I do not have an issue with small businesses and contractors paying what is fair what I do have an issue with is that the government takes easy pickings whilst leaving those corporations with large legal and tax departments to carry on regardless. It's not a level playing field at the moment and the new dividend tax will make it worse.

2 years ago I set up my own consultancy business, for now it's just me but I have plans to grow it in to a proper business, I am not a contractor, or in IT, but some parts of what I do have some relation to contracting so I occasional go on contractor.co.uk and the selfish mercenary attitudes of many on there is very telling and re-enforces what many above believe. The funny thing is that it is usually big businesses who benefit from this again as they no longer need to burden of having people of the pay roll.

I think a scheme for individual contractors / freelancers such as used in Germany is not a bad idea to help different them from proper small companies with employees and growth plans but the government should be concentrating on the corporations first.

So whilst I do not have an issue with small businesses and contractors paying what is fair what I do have an issue with is that the government takes easy pickings whilst leaving those corporations with large legal and tax departments to carry on regardless. It's not a level playing field at the moment and the new dividend tax will make it worse.

Yes it's this I was referring to with the reference to Google. This and the fact that those taking the risk to set up a business (not as a contractor) but as a proper business, possibly employing others, possibly generating exports are being lumped into the same category as contractors.