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Are you a Limited Company Contractor within the IT Sector Or Do you currently provide your expertise on a PAYE basis?
Contract Killer?
In a low - key press release following the March Budget the Chancellor Gordon Brown signaled the governments intention to counter tax avoidance in the area of personal service provision through one-man Service Companies.
The government believes that in many cases the engagement of one-man service companiesis is in effect diguised employment that affords the engaged person the luxury of paying substantially reduced tax and National Insurance by exploiting the advantages offered by a corporate structure. The vast majority of 'Limited Company Contractors' within the IT Contracting sector are particularly vunerable on this front.
If you are currently contracting within the IT sector through your own limited company your income and the flexibility with which you currently operate could be considerably reduced by the governments proposed legislation
There is an alternative. ****-********** Management has developed a PORTABLE payroll facility specifically designed to meet the particular needs of Contract/Temporary workers. Through our facility YOU can continue to legally minimise the amount of tax you pay and enjoy more of YOUR Hard Earned Money in a portable, Hassle-Free System with NO ADMINISTRATION that you can take from Contract to Contract, Agency to Agency, Employer to Employer. The enclosed brochure provides a detailed explanation of the benefits of our facility.
Joining is Quick and Simple?
If you would like to start enjoying the many benefits of our Portable Payroll Facility or should you require clarification on any aspect of our service please contact me on *********
Best Regards
*******************
Business Development Consultant
The attached brochure describes that you would become a shareholder of an umbrella or composite company working on a
"contract for services".
The income would comprise a weekly PAYE salary and a dividend payment generated from your shareholding in one of the companies within their facility.
It sets out, that those joining will increase their net earnings between 10% to 15%
Investigation
engineerjob.com had run an article from a leading Law Firm on omposite Companies which stated that "no one who researched the issues fully could possibly recommend that a person trade through an umbrella Company"
This Company seemed to be saying that they would also get round IR 35.
I phoned up the contact and stated I was a Naval Architect with my own Ltd Co. I had heard about this problem with the budget and could he help.
Would his solution get round this (discussing IR35). He stated it would.
I repeated the question: Would giving up my Ltd Co, which I had built up over the last 6 years and joining their scheme, result in not being caught by these new rules. He again said yes.
I asked him. Would my Wife be able to join this scheme. She was a secretary who temps through an Agency and gets paid PAYE. He said no problem.
I said that this all seemed too good to be true. What were the risks?. He said no risks with doing this.
Was he sure that it would get round any new rules. He then stated they had been inspected by the Revenue and there was no problem. He stated they had 1500 on their scheme
I asked him the cost. He stated that it would cost 2% of the money paid out as Dividend.
I then asked him to confirm all this in writing at which point he started to become uncomfortable. He eventually caught on and refused.
I suggested he have a look at engineerjob.com for more details on this situation and maybe reconsider sending out letters which are not only selling services that probably resulted in the Government introducing IR35 in the first place, but to add fuel to the fire, are actually insisting they will get round IR 35 by using such a scheme.
As the Title said: "Composite Companies: working hard to put you out of business"
Andy White | engineerjob.com | 16/6/99
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