Member Since: 30th May 2013
10th Mar 2017
Yes but that would mean he would have a taxable supply on the pub, so 20% of its current market value. Not good!
9th Mar 2017
Thanks DJKL. Would that then mean that the sole trader at the beginning with have an ouput VAT liability for 20% of the market rent?
9th Mar 2017
Thanks for your reply Euan.
The company is charging the ultimate tenants more than the sole trader charges to the tenant. The VAT is an expense yes but it is not very much so the company is profitable and he pays the CT due. His reason for setting this structure up was nothing to do with VAT but rather that he wanted the protection of a limited company (it also looks after boat moorings and other related trading activities).
I am just worried that he is somehow not charging enough VAT for the income that he ultimately derives from the property with the option to tax on it.
8th Mar 2017
Thanks for your replies.
In case it happens to anybody else I spoke to HMRC and explained my mistake i.e. that I had deregistered my client in error as I didn't know about the option to tax on his property. I thought he was registered for VAT only because of his building sole trader building and deregistered him as he wasn't making any supplies through that business anymore. They have advised me to re-register and to backdate the registration date in order to correct the error so that no VAT liability will arise.
I hope that helps if anybody else makes the same mistake.
8th Oct 2013
You are correct in thinking that you can deduct any salary and pension contributions from the IR35 caught income when you calculate the "deemed income" at the end of the year.
Actually though I'm wondering why you are not already paying yourself a minimal salary to get the maximum tax relief? Are you paying yourself solely through dividends at the moment?
Contributions paid from your company into your pension scheme are 100% deductible for corporation tax. You do have to be a bit careful though as you are a director and major shareholder, HMR&C says for it to be tax deductible it must be “in line with a contribution that would have been made for an unconnected employee in a similar situation.”
I think in general they look at the total package (salary + pension) in relation to the work done so you'd probably be ok with this - I would just suggest getting your accountant to check for you.
4th Oct 2013
It does. Thank you!
It does. Thank you!
30th Sep 2013
Thank you - that really helps. It is not something I've really thought much about before but I can see that it could lead to big problems later on if the right advice is not given when the contributions start.
Thanks again and have a good week!
29th Sep 2013
Actually the company is also making contributions but as he is a connected Director this has to be done with some caution i.e. to quote HMR&C “in line with a contribution that would have been made for an unconnected employee in a similar situation.” So, I thought it best for the company to match his personal contributions.
I don't think you can use prior year allowance on the contributing only up to your earned wages part - pretty sure that only applies to the 50k annual limit. Maybe I am wrong on that?
I'm still confused as to whether he has any kind of obligation to inform his pension provider that they shouldn't be claiming tax relief from HMR&C on part of his contributions. Can anybody help me with that?
28th Sep 2013
Thanks for your answers. I was really asking about the admin side. I appreciate that you only get relief equivalent to your earnings but I have a client who is paying in more than his salary (he takes most of his salary as dividends) so I was just wondering if he has an obligation to inform his pension scheme of the excess or if they get that information directly from HMR&C?
27th Sep 2013
Ok thanks, I'm assuming I have to work this out on a cumulative basis so it would actually impact in month 11 and 12 when threshold was reached...so 818 in month 11 and 858 in month 12.
Just out of interest, if I wanted to keep the salary at 750 and the company pays the 171 NI due to HMR&C on behalf of the Director - is this allowed? Is it just then treated as a benefit on P11D?