Self Employed

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dpinsussex
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Re: Self Employed

Post by dpinsussex » Thu Mar 26, 2020 9:42 pm

Paul Waine wrote:
Thu Mar 26, 2020 9:11 pm
Sorry, dp, I've now got summary of conditions from ICAEW (institute of chartered accoutants in england and wales, for anyone not familiar):

these are extracts

only available if average annual taxable earnings are below £50,000;
majority of income has to be from self-employment;
those who started employment after 5 April 2019 are excluded
Thanks Paul

Started 1st of June
Spent the 10k savings I had setting up.

Only option now is universal credit.
Been sat for 90 min waiting for the confirmation email. And no it's not in spam.
So frustrating

Burnley1989
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Re: Self Employed

Post by Burnley1989 » Thu Mar 26, 2020 9:45 pm

Was taking to my COO earlier about it all, I said I’d started with the F you attitude to those that dodged tax but we both said ultimately after a bit of banter with friends, this is actually really serious and nobody wants to see families on the bread line with huge mortgages and being told they won’t get anything other than the odd job until June, especially if they don’t want to risk their health. We are all in this together, time for everyone to drop that attitude.

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Re: Self Employed

Post by taio » Thu Mar 26, 2020 9:48 pm

dpinsussex wrote:
Thu Mar 26, 2020 9:42 pm
Thanks Paul

Started 1st of June
Spent the 10k savings I had setting up.

Only option now is universal credit.
Been sat for 90 min waiting for the confirmation email. And no it's not in spam.
So frustrating
The Cabinet Minister said on Question Time this evening that the government and HMRC would do what they can to help people in your situation. Vague I know but at least not dead in the water. Hope you get sorted.
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Paul Waine
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Re: Self Employed

Post by Paul Waine » Thu Mar 26, 2020 9:48 pm

dpinsussex wrote:
Thu Mar 26, 2020 9:42 pm
Thanks Paul

Started 1st of June
Spent the 10k savings I had setting up.

Only option now is universal credit.
Been sat for 90 min waiting for the confirmation email. And no it's not in spam.
So frustrating
and, I was hoping you'd be over the £50k limit... :(

Good luck, hope it all works out for you.
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dpinsussex
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Re: Self Employed

Post by dpinsussex » Thu Mar 26, 2020 9:55 pm

Worst thing is I left a 70k per year job for mental health reasons.
Took the big brave step to go out in to the big wide world without a corporate safety net.
Was just starting to get real traction and boom.
Thankfully I got paid for a job 2 weeks ago which pays my bills for the next month.
Since then lost 2 jobs that would have netted me 10k.

Best get volunteering and have some purpose in my life whilst this sh 1 t storm passes.

Onwards and upwards

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Re: Self Employed

Post by boatshed bill » Thu Mar 26, 2020 10:12 pm

IanMcL wrote:
Thu Mar 26, 2020 9:41 pm
But I also remember 'strengthening my business' making purchases, to reduce tax!


In fact, a loss, I remember being encouraged to make, to claim back tax from my former, well rewarded employment!
Absolutely, Ian. But basically if you've strengthened then in the long term you have more to fall back on (in theory).
Like everything this government does, tries to cover for all those so called employers who have recruited people under the guise of self employment, when in reality they are employees. The government will throw a small amount of corn at this, it's what they call chicken feed.

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Re: Self Employed

Post by nil_desperandum » Thu Mar 26, 2020 11:29 pm

It appears to me that there are a lot of people who will get little or nothing out of today's measures. I'm not an accountant and don't really understand a great deal about this, but if you had a contract from April to the end of June for say £10,000 and it's been cancelled, why couldn't they simply pay you a proportion of that since that is what you are losing? (Isn't this the same as paying other workers 80% of their losses?)

AndrewJB
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Re: Self Employed

Post by AndrewJB » Fri Mar 27, 2020 12:00 am

The more I look at this, the more it seems the government is wrestling with complexity to try to cover as many bases as possible, but ultimately too many holes people and businesses can fall through. For simplicity's sake handing out a universal living allowance would be better, and also cheaper for the government.

As it stands, people and businesses retain most of the running costs on a reduced income. As DP shows, there will still be some not covered by the rescue packages. When this is over there will be some people in financial holes due to unpaid rent, and businesses with new loans to repay. This will put a choke hold on demand once the economy is able to return to normal, and we'll end up with a bigger recession than we need to have. If instead we can put non-essential businesses on ice - so they don't have to pay their non working employees, or their unused operational expenses like rent - and then everyone else doesn't have to pay their mortgages, rent, credit card bill, etc - then all anybody will need is enough to live on for the duration. When business is finally resumed, there won't be the dead weight of excess debt hanging over everyone, and this will give a greater chance for demand to rebound in the economy. Sunak won't be in the unenviable position of picking winners and losers, and can claim to have safeguarded the nation's finances too. To me, that's win win.

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Re: Self Employed

Post by aggi » Fri Mar 27, 2020 12:16 am

Paul Waine wrote:
Thu Mar 26, 2020 7:26 pm
see my post - all your profit is all your salary.... they aren't separate things for self-employed.
I was assuming it would also apply to those who are self-employed but use a limited company. I guess they'll use a combination of the business interruption loan and the 80% of PAYE .

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Re: Self Employed

Post by aggi » Fri Mar 27, 2020 12:23 am

TheFamilyCat wrote:
Thu Mar 26, 2020 9:06 pm
It seems there's also some real fiddling to br done here. As far as I can tell, this is available to anybody self employed, even if their income hasn't been affected significantly. And they can still carry on working through it all if they like.
Discussing this with colleagues there were possible caveats. If you look at the site it has underlined whose income has been negatively impacted by Covid 19 and that forms part of the criteria.

How they'll assess that I've no idea.

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Re: Self Employed

Post by CrosspoolClarets » Fri Mar 27, 2020 12:36 am

aggi wrote:
Fri Mar 27, 2020 12:16 am
I was assuming it would also apply to those who are self-employed but use a limited company. I guess they'll use a combination of the business interruption loan and the 80% of PAYE .
Exactly.

The loan is only for cash flow difficulties obviously. It has no benefit in terms of permanently filling in for lost income due to the government’s action. Likewise, the rates benefit are only for those with premises.

The 80% of PAYE only works if the person has a job description and is put on temporary gardening leave (in essence) by their employer. So it is unclear how it will work if the employee is the owner who pays themselves mainly dividends and pays one or two junior staff too. Or should I say, it is clear, they get next to nothing.

The massive problem I have with this is that it continues the decade long Treasury misunderstanding of the role of the 1m+ small companies in the UK, many owners hardly earning enough to pay themselves after their staff (take the example of a guy running a roofing firm with 4 guys working for him who only makes £3k a month profit after costs and pays it in dividends - if this lingers for 3 months that guy is £9k down and then has to win work again which won’t be immediate, and these guys often live in traditional families where he is the only full time worker and they have no savings to put food on the table. I was chatting to a builder today who is getting desperate.)

Now they have also been put on warning that self employed NI and dividend tax will both go up in due course - adding a kick in the balls to a knife in the back.

That’s my concern - long term direction, and that’s why I fear for the Tories. Maggie has a lot of faults, but she looked after guys like that roofer. This lot don’t even know what one is.

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Re: Self Employed

Post by CrosspoolClarets » Fri Mar 27, 2020 12:41 am

The other thing I don’t get - why those setting up recently (often with big initial outlays) don’t qualify. In 2 weeks they can do a self assessment for 2019/20 (I am guessing that is when it opens) so HMRC have all the info they need. I suspect that will happen and this bit is a misunderstanding, leaving just the company directors as the main ones losing out.

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Re: Self Employed

Post by dpinsussex » Fri Mar 27, 2020 7:27 am

CrosspoolClarets wrote:
Fri Mar 27, 2020 12:41 am
The other thing I don’t get - why those setting up recently (often with big initial outlays) don’t qualify. In 2 weeks they can do a self assessment for 2019/20 (I am guessing that is when it opens) so HMRC have all the info they need. I suspect that will happen and this bit is a misunderstanding, leaving just the company directors as the main ones losing out.
Don't worry I have my accountant all over it. Have already sent every bit of paper / spreadsheet she requires.my accounts are ready to go once we get to year end in a week or so time because I used Xero and kept it bang up to date as I went along setting time aside every week to reconcile with the bank statement / feed.
Thankfully i had moved my year end date forward to coincide with tax year from 1st if June.
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Dy1geo
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Re: Self Employed

Post by Dy1geo » Fri Mar 27, 2020 8:15 am

Can’t see the Government changing criteria to allow returns for new self employed sole traders for 2019/20 at the moment as it is wide open to abuse, but if this nightmare continues past June they may be allowed but I cannot see it myself.

Labour at the last election stated that they would tax dividends at the same rates of income tax I.e up from 7.5% to 20% so I can see the Tories implementing this change when this mess is over plus NI raised for self employed to equivalent of employed.

There are losers in this as with any scheme, I have a mate who started self employment in October 18 and filed a tax return for 2018/19 but his employed income was slightly higher that year so he will get nothing and his work has dropped to zero.

Going forward we are all regardless of the Government going to have to pay a lot more tax to pay for years to come to pay for what the Government has put in place but we have to be thankful that we live in a country that can do this.
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Re: Self Employed

Post by Paul Waine » Fri Mar 27, 2020 8:29 am

CrosspoolClarets wrote:
Fri Mar 27, 2020 12:36 am
Exactly.

The loan is only for cash flow difficulties obviously. It has no benefit in terms of permanently filling in for lost income due to the government’s action. Likewise, the rates benefit are only for those with premises.

The 80% of PAYE only works if the person has a job description and is put on temporary gardening leave (in essence) by their employer. So it is unclear how it will work if the employee is the owner who pays themselves mainly dividends and pays one or two junior staff too. Or should I say, it is clear, they get next to nothing.

The massive problem I have with this is that it continues the decade long Treasury misunderstanding of the role of the 1m+ small companies in the UK, many owners hardly earning enough to pay themselves after their staff (take the example of a guy running a roofing firm with 4 guys working for him who only makes £3k a month profit after costs and pays it in dividends - if this lingers for 3 months that guy is £9k down and then has to win work again which won’t be immediate, and these guys often live in traditional families where he is the only full time worker and they have no savings to put food on the table. I was chatting to a builder today who is getting desperate.)

Now they have also been put on warning that self employed NI and dividend tax will both go up in due course - adding a kick in the balls to a knife in the back.

That’s my concern - long term direction, and that’s why I fear for the Tories. Maggie has a lot of faults, but she looked after guys like that roofer. This lot don’t even know what one is.
Hi Crosspool, simple thing is if a director has been cutting his tax bill by not paying themselves a salary plus employer's and employee's NI then this is "pay back time." Either the director was working in the business, and so should have been paid as an employee, or they were just the owner/shareholder of the business and they get their returns as dividends (which the business will have already paid tax on - but, yes at "less tax" than with PAYE and NIC). The Gov't is hardly going to say, we've now got this scheme that will reward you for the tax you've been avoiding, are they?

Paul Waine
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Re: Self Employed

Post by Paul Waine » Fri Mar 27, 2020 8:41 am

aggi wrote:
Fri Mar 27, 2020 12:23 am
Discussing this with colleagues there were possible caveats. If you look at the site it has underlined whose income has been negatively impacted by Covid 19 and that forms part of the criteria.

How they'll assess that I've no idea.
Starting point is the "assumption of honesty" just like when the self-employed and business directors submit their tax returns - and anyone else on self-assessment, as well. Then they do some spot checks....

So, the self-employed if gone into the hand-sanitizer business, or extra food deliveries or anything else that is increased in demand during this crisis shouldn't be getting a windfall of help they don't require.

FactualFrank
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Re: Self Employed

Post by FactualFrank » Fri Mar 27, 2020 8:42 am

Paul Waine wrote:
Thu Mar 26, 2020 9:18 pm
Take a look at the advice - it will protect those with average earnings over 3 years of less than £50,000 - so, average basic rate taxpayers only. It's for 3 months, so £7,500 total (though it appears the 3 months can be extended). Those who started self-employment last year miss out.
He's referring to people who may have their income down just 10% say.

They can apply and in theory bring in more than they normally would, overall.

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Re: Self Employed

Post by AndrewJB » Fri Mar 27, 2020 9:04 am

There’s a lot of vindictive stuff on social media about people voting Tory and now discovering how much they’ve smashed up the social safety net over the last ten years. Universal Credit, with its five week wait and harsh sanctions regime is not a pleasant experience. I don’t share the schadenfreude personally, but I also hated the anti-scroungers hysteria the press whipped up to get this new system put in place.

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Re: Self Employed

Post by FactualFrank » Fri Mar 27, 2020 9:15 am

Self employed won't gain from this overall anyway. We'll be paying more tax once this is all over and will lose out.

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Re: Self Employed

Post by Blackrod » Fri Mar 27, 2020 9:17 am

Seems to be a reasonable way overall taking the average of 3 years returns. Not too great for start ups though in that time frame as the early years might not look great. They are never going to capture everybody and every different scenario. The main issue is the time to get it to the people that need it and that they don’t over complicate the claim process. People who have earned a lot won’t be covered on the basis they should have put some in reserve and those that haven’t been honest won’t benefit from dishonesty. This is an important section of the economy and all the people that snipe about self employed can always do it themselves and take the risk and give up an employed position. I know plenty of people who wouldn’t take that risk. In fact most people wouldn’t. If people have taken a risk with a good idea and done well for themselves good for them.
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Re: Self Employed

Post by Paul Waine » Fri Mar 27, 2020 9:17 am

AndrewJB wrote:
Fri Mar 27, 2020 9:04 am
There’s a lot of vindictive stuff on social media about people voting Tory and now discovering how much they’ve smashed up the social safety net over the last ten years. Universal Credit, with its five week wait and harsh sanctions regime is not a pleasant experience. I don’t share the schadenfreude personally, but I also hated the anti-scroungers hysteria the press whipped up to get this new system put in place.
That's good, isn't it Andrew?

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Re: Self Employed

Post by AndrewJB » Fri Mar 27, 2020 9:51 am

Paul Waine wrote:
Fri Mar 27, 2020 9:17 am
That's good, isn't it Andrew?
I’m not sure it is, Paul. If what comes out of this crisis is a universal basic income, then that will be good, but negative triumphalism is ugly.

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Re: Self Employed

Post by IanMcL » Fri Mar 27, 2020 11:19 am

dpinsussex wrote:
Fri Mar 27, 2020 7:27 am
Don't worry I have my accountant all over it. Have already sent every bit of paper / spreadsheet she requires.my accounts are ready to go once we get to year end in a week or so time because I used Xero and kept it bang up to date as I went along setting time aside every week to reconcile with the bank statement / feed.
Thankfully i had moved my year end date forward to coincide with tax year from 1st if June.
I had an accountant for a short time. Bombarded me with questions, requiring research, when I thought I had hired the company to keep me concentrating on my business, working 100 hours a week.

Then they rang up one day and said, "we think you should register for vat. We are not sure, so are researching." They then wrote me a letter, which said, 'After extensive research and enquiry, we confirm that you should register for VAT. This should have been done by xxxxx date. You may be penalised!'. Fee £200!!!! (20 years ago)

I rang the Vat office, told them my circumstances. They immediately said, "most definitely, you must register. Penalty £50. They did give me a morning training session, which covered all the detail needed and a very useful local helpline.

I rang the accountant, told them they were a liability, not a help and went down the library and got 3 books on DIY tax. Read the bits I wanted, at my time of choosing and never looked back.

Also had a vat visit! My spreadsheet was able to show everything and all my documentation was in monthly A4 envelopes, so easy to produce.

The inspector entered my office and said, "Ah! Now i know why you have lots of income, pay vat and then have low income and claim back! We wondered what sort of Tattoo business you were running!"

(It was 'The Scottish Tattoo'! Like Edinburgh but indoors!)
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boatshed bill
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Re: Self Employed

Post by boatshed bill » Fri Mar 27, 2020 11:29 am

Ian,
Once I realised I didn't need to earn huge sums to be happy I deregistered and kept my turnover below the threshold. Best thing I ever did.

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Re: Self Employed

Post by Paul Waine » Fri Mar 27, 2020 3:03 pm

AndrewJB wrote:
Fri Mar 27, 2020 9:51 am
I’m not sure it is, Paul. If what comes out of this crisis is a universal basic income, then that will be good, but negative triumphalism is ugly.
Hi Andrew, only someone who wants to put the economy back to Year Zero would think that UBI is the solution to anything. Most of the population of the UK are still receiving the income they received before this covid-19 started. I'm including in that all the people employed by the gov't, all the people employed in sectors where they can work from home and their business is not significantly impacted by covid-19, plus all the pensioners who were already retired before this started. so, no need to pay everyone UBI (or "nowherecoins"). The gov't is covering most of the issues - the tax payers will pick up this cost in the years ahead - and, when this is all over the economy will get back on track.

Take care, Keep safe.

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Re: Self Employed

Post by AndrewJB » Fri Mar 27, 2020 3:27 pm

Paul Waine wrote:
Fri Mar 27, 2020 3:03 pm
Hi Andrew, only someone who wants to put the economy back to Year Zero would think that UBI is the solution to anything. Most of the population of the UK are still receiving the income they received before this covid-19 started. I'm including in that all the people employed by the gov't, all the people employed in sectors where they can work from home and their business is not significantly impacted by covid-19, plus all the pensioners who were already retired before this started. so, no need to pay everyone UBI (or "nowherecoins"). The gov't is covering most of the issues - the tax payers will pick up this cost in the years ahead - and, when this is all over the economy will get back on track.

Take care, Keep safe.
Year Zero - it’s below you.

If the government continues with economic orthodoxy, and actually borrows the money to cover this, then we’ll see a recession far more vicious than the last. More austerity at that point won’t be popular.

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Re: Self Employed

Post by Paul Waine » Fri Mar 27, 2020 4:03 pm

AndrewJB wrote:
Fri Mar 27, 2020 3:27 pm
Year Zero - it’s below you.

If the government continues with economic orthodoxy, and actually borrows the money to cover this, then we’ll see a recession far more vicious than the last. More austerity at that point won’t be popular.
Hi Andrew, the gov't is borrowing the money..... it doesn't grow on trees.

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Re: Self Employed

Post by Paul Waine » Fri Mar 27, 2020 7:11 pm

dpinsussex wrote:
Thu Mar 26, 2020 9:42 pm
Thanks Paul

Started 1st of June
Spent the 10k savings I had setting up.

Only option now is universal credit.
Been sat for 90 min waiting for the confirmation email. And no it's not in spam.
So frustrating
Hi dp, I'm sure you are already aware of IPSE, Association of Independent Professionals and Self Employed. www.ipse.co.uk/

I was a member when I was running my "one person" consultancy.

They are "all over" all self-employed issues, and, of course, have been in media a lot in the past couple of weeks.

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Re: Self Employed

Post by AndrewJB » Fri Mar 27, 2020 7:16 pm

Paul Waine wrote:
Fri Mar 27, 2020 4:03 pm
Hi Andrew, the gov't is borrowing the money..... it doesn't grow on trees.
Several governments have created money over the last dozen years. It’s a power sovereign nations have - as compared to household budgets. I’m normal times printing money reduces the value of that money, however in times like ours now when the economy cannot function as usual, it’s entirely possible, along with other measures like price controls and rationing. If the money goes out to households simply to pay for food and other every day living items, it won’t be inflationary. If (because there’s no certainty he will) Sunak actually borrows to keep households above water, then it’ll be a mistake on the same level as Churchill taking us back to the gold standard.

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Re: Self Employed

Post by Paul Waine » Fri Mar 27, 2020 10:07 pm

AndrewJB wrote:
Fri Mar 27, 2020 7:16 pm
Several governments have created money over the last dozen years. It’s a power sovereign nations have - as compared to household budgets. I’m normal times printing money reduces the value of that money, however in times like ours now when the economy cannot function as usual, it’s entirely possible, along with other measures like price controls and rationing. If the money goes out to households simply to pay for food and other every day living items, it won’t be inflationary. If (because there’s no certainty he will) Sunak actually borrows to keep households above water, then it’ll be a mistake on the same level as Churchill taking us back to the gold standard.
Hi Andrew, maybe you will believe the Guardian, if you don't want to accept my word - the government is increasing national debt, i.e. it is borrowing the money it is spending (on our behalf) to tackle covid-19 issues.

Budget: Sunak to pledge billions to soften Covid-19 impact as virus reaches Downing Street

https://www.theguardian.com/uk-news/202 ... n-covid-19 impact.

The issue with Churchill tying the value of sterling to gold (the gold standard) was that it was price control of the value of the currency. Yes, it was an error - and it is the same error that you are making in thinking that price controls can play a positive part if the government was to "turn the taps on" and print "new money."

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Re: Self Employed

Post by RingoMcCartney » Fri Mar 27, 2020 10:18 pm

Paul Waine wrote:
Fri Mar 27, 2020 10:07 pm
Hi Andrew, maybe you will believe the Guardian, if you don't want to accept my word - the government is increasing national debt, i.e. it is borrowing the money it is spending (on our behalf) to tackle covid-19 issues.

Budget: Sunak to pledge billions to soften Covid-19 impact as virus reaches Downing Street

https://www.theguardian.com/uk-news/202 ... n-covid-19 impact.

The issue with Churchill tying the value of sterling to gold (the gold standard) was that it was price control of the value of the currency. Yes, it was an error - and it is the same error that you are making in thinking that price controls can play a positive part if the government was to "turn the taps on" and print "new money."
Paul, I'd like to ask you a question.

With so many governments potentially borrowing trillions to help their respective nations through this global crisis.

Could you see a situation based on this.

Its said that if you as an individual owe the bank, say £10,000 they'll make sure you'll pay the back on their terms.

If you as an individual owed the bank £10 million they'll probably accept the way you repay the debt on your terms .

Given that globally, the debt will be enormous and very few nations are possibly likely to get through unscathed. Can you see debt write offs or scaled , so much "in the pound" deals?

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Re: Self Employed

Post by CrosspoolClarets » Fri Mar 27, 2020 10:36 pm

Paul Waine wrote:
Fri Mar 27, 2020 8:29 am
Hi Crosspool, simple thing is if a director has been cutting his tax bill by not paying themselves a salary plus employer's and employee's NI then this is "pay back time." Either the director was working in the business, and so should have been paid as an employee, or they were just the owner/shareholder of the business and they get their returns as dividends (which the business will have already paid tax on - but, yes at "less tax" than with PAYE and NIC). The Gov't is hardly going to say, we've now got this scheme that will reward you for the tax you've been avoiding, are they?
Evening Paul,

There are 2 issues I think:

1. If HMT don’t bale out these directors for lost business due to this, they should not then seek to level up tax. They can’t have it both ways. If Sunak says bailing out means morally levelling up, he cannot do one but not the other (but I bet he does).

2. These tax debates always ignore the additional risks of people running their own businesses. The roofer will have invested early capital. The contractor has to bid for work, and has a big lag before starting. There is no employer’s pension. No sick pay of note. Can’t get a mortgage on the same terms. All reasons why it is unfair to tax like an employee.

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Re: Self Employed

Post by dsr » Sat Mar 28, 2020 12:49 am

boatshed bill wrote:
Thu Mar 26, 2020 10:12 pm
Absolutely, Ian. But basically if you've strengthened then in the long term you have more to fall back on (in theory).
Like everything this government does, tries to cover for all those so called employers who have recruited people under the guise of self employment, when in reality they are employees. The government will throw a small amount of corn at this, it's what they call chicken feed.
If you've been following the recent cases of BBC presenters getting paid as self-employed for what (to normal people) appears to be employed work, you would have spotted that HMRC as a whole is opposed to "so called employers who have recruited people under the guise of self employment".

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Re: Self Employed

Post by boatshed bill » Sat Mar 28, 2020 9:44 am

dsr wrote:
Sat Mar 28, 2020 12:49 am
If you've been following the recent cases of BBC presenters getting paid as self-employed for what (to normal people) appears to be employed work, you would have spotted that HMRC as a whole is opposed to "so called employers who have recruited people under the guise of self employment".
I recall a time when they really were trying to stop some work described as self employment, example being if the employee always worked in the same location.
I can see why TV presenters would be termed self-employed because many have the opportunity of working for more than one employer.

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Re: Self Employed

Post by Paul Waine » Sat Mar 28, 2020 9:45 am

CrosspoolClarets wrote:
Fri Mar 27, 2020 10:36 pm
Evening Paul,

There are 2 issues I think:

1. If HMT don’t bale out these directors for lost business due to this, they should not then seek to level up tax. They can’t have it both ways. If Sunak says bailing out means morally levelling up, he cannot do one but not the other (but I bet he does).

2. These tax debates always ignore the additional risks of people running their own businesses. The roofer will have invested early capital. The contractor has to bid for work, and has a big lag before starting. There is no employer’s pension. No sick pay of note. Can’t get a mortgage on the same terms. All reasons why it is unfair to tax like an employee.
Hi Crosspool, I agree, running a business carries a lot more risk than being an employee. Running a business really puts those who do it at the very sharp end, if you can't find people who want to buy the businesses services then you have no business and you lose you money. Of course, once you are able to get some business you can start to make a living. If you are clever enough, have all the right skills and are lucky enough, you business will start to grow. It might grow so that it needs to employ other people. It might grow so that the business owner is "doing very nicely...." Maybe it grows so much, or the business concept is so good that someone else comes in and buys the business. Maybe the business owner makes so much money that they can retire very wealthy - though the vast, vast majority will still continue at the bottom of the pile and an "ill wind" will bring their business to an end. Such are the risks and rewards of running your own business.

But, so far as a business owner taking her/his earnings as dividends or taking her/his earnings as an employee of the limited company that they run their business through, then I think it fair that the gov't only provides support for their earnings as an employee.

With my little consulting business - set up as a typical "who wants to employ a guy in his 50s" consultancy - I was both the employee and the owner/director and employer. I put my wages through the payroll and put a little more into my pension. Then I was lucky, I'd just paid out to set up my website, plus the art work for a logo and 1,000 business cards and stationery (minimum order) and I was offered a new role as an employee. Passing over my (new, the ink had hardly dried!) business card was one of the clinchers in landing me the job - so, 5 more years in employment - and a further 2 years after my own 2 year "furlough" with poor health - and a single assignment for a client in this period. (I finally closed down my company at Companies House last summer).

I wish you well and every success.

Keep safe. Stay healthy.

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Re: Self Employed

Post by Paul Waine » Sat Mar 28, 2020 10:18 am

RingoMcCartney wrote:
Fri Mar 27, 2020 10:18 pm
Paul, I'd like to ask you a question.

With so many governments potentially borrowing trillions to help their respective nations through this global crisis.

Could you see a situation based on this.

Its said that if you as an individual owe the bank, say £10,000 they'll make sure you'll pay the back on their terms.

If you as an individual owed the bank £10 million they'll probably accept the way you repay the debt on your terms .

Given that globally, the debt will be enormous and very few nations are possibly likely to get through unscathed. Can you see debt write offs or scaled , so much "in the pound" deals?
Hi Ringo, we are a long, long way from the possibility of the UK defaulting on it's debt. Yes, piling up the debt is already making a difference to the UK's credit rating. I heard on the radio this morning that Fitch, one of the 3 major credit ratings (S&P Ratings and Moody's are the others) has downgraded the UK's long-term issuer default rating to AA- with negative outlook. This is still a strong rating, the 4th highest in their credit rating scale.

https://www.fitchratings.com/site/home

Weaker economies will already have poorer credit ratings and if some of those are hit hard by coronavirus, and are left to fund all their response on their own, then we could see some defaults. Many countries have defaulted on sovereign debt before and they will do again. Of course, if a country does default they don't "get it all their own way." The terms of settlement/repayment need to be agreed, it can be prohibitively expensive to borrow new money when the markets do finally re-open to a country that has been in default.

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Re: Self Employed

Post by FactualFrank » Sat Mar 28, 2020 10:21 am

Paul Waine wrote:
Fri Mar 27, 2020 4:03 pm
Hi Andrew, the gov't is borrowing the money..... it doesn't grow on trees.
If it doesn't grow on trees, why do we have branches?

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Re: Self Employed

Post by Paul Waine » Sat Mar 28, 2020 10:28 am

Fitch Ratings - press release:

Key Rating Drivers

The downgrade of the UK's IDRs reflects the following key rating drivers and their relative weights:

HIGH
The downgrade reflects a significant weakening of the UK's public finances caused by the impact of the COVID-19 outbreak and a fiscal loosening stance that was instigated before the scale of the crisis became apparent. The downgrade also reflects the deep near-term damage to the UK economy caused by the coronavirus outbreak and the lingering uncertainty regarding the post-Brexit UK-EU trade relationship. The commensurate and necessary policy response to contain the COVID-19 outbreak will result in a sharp rise in general government deficit and debt ratios, leading to an acceleration in the deterioration of public finance metrics over the medium term.

The Negative Outlook reflects our view that reversing the deterioration in the fiscal metrics beyond 2020 will not be a political priority for the UK government. Moreover, uncertainty around the future trade relationship with the EU could constrain the strength of the post-crisis economic recovery.

The coronavirus outbreak has inflicted an unprecedented shock on financial markets and economic activity, with policymakers struggling to avert a longer-lasting downturn. In common with other advanced countries, the UK has shut down parts of its economy to slow the spread of the disease, which will cause a deep contraction centred on 2Q20. On 23 March, Prime Minister Johnson announced more drastic measures to contain the spread of COVID-19, including closure of all non-essential shops and a ban of public gatherings of more than two people.

Under our much-revised baseline forecast that reflects the lockdown measures across the UK, we now estimate that GDP could fall by close to 4% in 2020. In the baseline, we assume that containment measures can be unwound in 2H20, allowing for recovery in sequential growth and the broader economy, leading to a sharp recovery in growth to around 3% in 2021. However, with so much depending on the extent and duration of the coronavirus outbreak, there is material downside risk to these economic forecasts. A plausible downside case, including a second wave of infections and a longer lockdown period, would see an even larger decline in output in 2020 and a weaker recovery in 2021. The strength of the recovery is subject to lingering Brexit uncertainty, as the final shape of any future trade deal with the EU remains unknown and the risk of the transition period ending without a deal persists.

The UK's public finances were already set to weaken following the stimulus measures announced in the budget on 11 March, and they are now set to deteriorate more rapidly. The government has announced substantive fiscal policy easing to mitigate the impact of the lockdown measures on the economy. There is some uncertainty around the fiscal impact, which will depend on the severity and length of the lockdown and the sustainability of any progress in coronavirus containment. Under our baseline, we estimate that the general government deficit will increase to around 9% in 2021 from 2.1% of GDP in 2019. Within this forecast, we estimate that the Coronavirus Job Retention scheme will cost 1.3% of GDP, assuming that 4.7 million employees will be supported over the three month duration of the scheme. We estimate that the whole COVID-19 response fiscal package will cost 4.4% of GDP in 2020.

For 2021 we do not include any further discretionary fiscal easing but we expect upward pressures on spending to persist. The expected recovery in GDP growth should support a rebound in revenue growth. Under these assumptions, we expect the deficit to narrow in 2021. General government debt will rise to 94% and 98% in 2020 and 2021, respectively, from 84.5% in 2019. Over the medium term, we expect public debt to peak at well above 100% of GDP beyond 2025 assuming a gradual reduction in fiscal deficits and trend GDP growth of 1.6%.

We fully recognise that timely and targeted policies can help reduce the risk of a more sustained loss of economic output. The likelihood that temporary stimulus measures are unwound will reflect policy choices and political developments. However, in our view, given the direction of public finances reflected in the March 2020 budget, it is unlikely that reducing public deficit and debt levels will be a priority for the UK government. Excluding GBP12 billion of COVID-19 related measures, the budget was targeting a rise in the fiscal deficit by GBP30 billion (1.4% of GDP) by 2024-25 and an increase in net debt of GBP125 billion (5.8% of GDP) relative to the pre-budget baseline.

The UK's IDRs also reflect the following key rating drivers:

The UK's ratings balance a high income, diversified and advanced economy against high and rising public sector indebtedness. Sterling's reserve currency status, deep capital market and strong governance indicators support the ratings. The very long average maturity of public debt (15 years) is among the highest of all Fitch-rated sovereigns and mitigates refinancing and interest rate risks. Public debt is exclusively in sterling, so a weaker exchange rate will not lead to deterioration in debt dynamics.

The Bank of England (BoE) has responded swiftly to the health crisis by cutting the base rate by 65bp to 0.1% and restarting quantitative easing with GBP200 billion of asset purchases, which will include gilts and corporate sector bonds. The response also includes a new Term Funding Scheme for SMEs, increased contingent access for banks to liquidity via a new contingent term repo facility in addition to the BoE's regular sterling market operations; and the COVID-19 Corporate Financing Facility to provide funding to business through the purchase of corporate commercial paper of up to one year maturity. The Financial Policy Committee (FPC) and the Prudential Regulation Authority (PRA) have adopted measures to support credit supply, including the reduction of the countercyclical capital buffer to 0% with immediate effect. This was set at 1% and was due to rise to 2% in December 2020. The cut is expected to support up to GBP190 billion of bank lending for businesses.

In Fitch's view, the swift and coordinated macroeconomic policy response by the UK Treasury and the Bank of England should limit the second-round effects of the initial shock and should help growth to recover, assuming that the immediate health crisis subsides. In particular, the combined liquidity support measures which include GBP330 billion (15% of UK GDP) of loans and guarantees from the Treasury and the Bank of England are an important component of an effective near-term policy response, providing support to the ratings.

Another component of the budget not related to COVID-19 was the announced increase in investment spending to 3% of national income, which would be its highest level for 65 years. Whether higher investment spending improves UK productivity and medium-term growth prospects would depend on how effectively such measures as large infrastructure projects are targeted. At this stage, we are not assuming any large impact on trend GDP growth from public infrastructure investment.

The uncertainty around the future UK-EU trade relationship and its effect on the UK's economy and public finances weighs on the rating. Negotiations on a trade deal have started but the two sides' initial positions appear far apart. While the UK is seeking a deep free trade agreement (FTA) that allows it to diverge from EU rules, the EU's starting position is to have the UK adopt EU rules as "reference points" and follow the evolution of those rules.

Given the divergent positions, little time available to strike a deal (December 2020) and the outbreak of the COVID-19 crisis that will take priority, other scenarios are possible, including a trade "cliff-edge" with the UK exiting the transition period at end-2020 and reverting to WTO terms, which would be negative for long-term economic growth compared with an FTA. Alternatively, the transition period could be extended, but in our view this would not be straightforward. The government has ruled out any extension to the transition period and legislated for a commitment not to agree to any extension in the Withdrawal Agreement Act. The government is only able to reverse that provision through new legislation.

**************************
it continues... I'm sure anyone interested gets their message....

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Re: Self Employed

Post by CrosspoolClarets » Sat Mar 28, 2020 11:02 am

Some fair observations Paul.

My concerns aren’t for me - my work has totally dried up due to the government shut down, but I have enough for food and the debate is whether we can afford next terms school fees, not something likely to get sympathy from the taxpayer.

The concern is for the fictitious roofer in my earlier example.

He has taken a risk, used all his savings to set up his business, employs staff, and his accountant has advised him to take dividends rather than salary in order to save a few % in tax (probably only saves one or two hundred a year). But he mainly takes them monthly, and needs it to put food on the table, there is little difference to a salary and the reason it isn’t a salary isn’t just tax, it is to give him options to leave his money in at certain times for example to buy new roofing equipment next year or to protect against bad debts. A salary can be flexed too but its much more of a faff.

The furloughing scheme protects his employees, but doesn’t protect him. If he furloughs himself, he has to shut the whole business down, he only gets 80% of £719, possibly less than rent and council tax on his accommodation (as far as I am aware, only social renters are being supported).

As far as I can see, the roofer has no way of paying his rent AND putting food on the table If this shutdown lasts 3 months. It was a government enforced shutdown, so the government has a duty to support this roofer (there are up to a million of him, not all roofers obviously).

I therefore struggle to see why all this faffing about with clever schemes is better than a simple UBI to all, clawed back at year end from those who earn over £x anyway. Fairer, simpler, and probably cheaper than a non refundable grant.

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Re: Self Employed

Post by RingoMcCartney » Sat Mar 28, 2020 1:55 pm

Paul Waine wrote:
Sat Mar 28, 2020 10:18 am
Hi Ringo, we are a long, long way from the possibility of the UK defaulting on it's debt. Yes, piling up the debt is already making a difference to the UK's credit rating. I heard on the radio this morning that Fitch, one of the 3 major credit ratings (S&P Ratings and Moody's are the others) has downgraded the UK's long-term issuer default rating to AA- with negative outlook. This is still a strong rating, the 4th highest in their credit rating scale.

https://www.fitchratings.com/site/home

Weaker economies will already have poorer credit ratings and if some of those are hit hard by coronavirus, and are left to fund all their response on their own, then we could see some defaults. Many countries have defaulted on sovereign debt before and they will do again. Of course, if a country does default they don't "get it all their own way." The terms of settlement/repayment need to be agreed, it can be prohibitively expensive to borrow new money when the markets do finally re-open to a country that has been in default.
Thanks for the response Paul. I hadn't thought of the response, by the banks, to country's that may default, further down the line. Punitive measures on any new money probably , means "there's no such thing as free lunch" is true.

I've read the ratings stuff you posted too , which was interesting, cheers for that. Isolation means I've actually had time to read it.

Anyway, I hope you and yours are all well , and stay that way.
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Re: Self Employed

Post by AndrewJB » Sat Mar 28, 2020 2:46 pm

Paul Waine wrote:
Sat Mar 28, 2020 10:18 am
Hi Ringo, we are a long, long way from the possibility of the UK defaulting on it's debt. Yes, piling up the debt is already making a difference to the UK's credit rating. I heard on the radio this morning that Fitch, one of the 3 major credit ratings (S&P Ratings and Moody's are the others) has downgraded the UK's long-term issuer default rating to AA- with negative outlook. This is still a strong rating, the 4th highest in their credit rating scale.

https://www.fitchratings.com/site/home

Weaker economies will already have poorer credit ratings and if some of those are hit hard by coronavirus, and are left to fund all their response on their own, then we could see some defaults. Many countries have defaulted on sovereign debt before and they will do again. Of course, if a country does default they don't "get it all their own way." The terms of settlement/repayment need to be agreed, it can be prohibitively expensive to borrow new money when the markets do finally re-open to a country that has been in default.
https://lesstewart.wordpress.com/2010/0 ... ston-saul/

This is from John Ralston Saul (Canadian philosopher) Dictionary if Aggressive Common Sense - on unsustainable national debts. It looks at the issue from historical precedent, international law, ethics, practical considerations and economics.

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Re: Self Employed

Post by Dy1geo » Sat Mar 28, 2020 3:17 pm

CrosspoolClarets wrote:
Sat Mar 28, 2020 11:02 am
Some fair observations Paul.

My concerns aren’t for me - my work has totally dried up due to the government shut down, but I have enough for food and the debate is whether we can afford next terms school fees, not something likely to get sympathy from the taxpayer.

The concern is for the fictitious roofer in my earlier example.

He has taken a risk, used all his savings to set up his business, employs staff, and his accountant has advised him to take dividends rather than salary in order to save a few % in tax (probably only saves one or two hundred a year). But he mainly takes them monthly, and needs it to put food on the table, there is little difference to a salary and the reason it isn’t a salary isn’t just tax, it is to give him options to leave his money in at certain times for example to buy new roofing equipment next year or to protect against bad debts. A salary can be flexed too but its much more of a faff.

The furloughing scheme protects his employees, but doesn’t protect him. If he furloughs himself, he has to shut the whole business down, he only gets 80% of £719, possibly less than rent and council tax on his accommodation (as far as I am aware, only social renters are being supported).

As far as I can see, the roofer has no way of paying his rent AND putting food on the table If this shutdown lasts 3 months. It was a government enforced shutdown, so the government has a duty to support this roofer (there are up to a million of him, not all roofers obviously).

I therefore struggle to see why all this faffing about with clever schemes is better than a simple UBI to all, clawed back at year end from those who earn over £x anyway. Fairer, simpler, and probably cheaper than a non refundable grant.
If the fictional roofer was a sole trader he presumably would have a business bank account. He doesn’t have to take out all of his income as a drawing, he could leave money in the account to buy equipment for his business and any that was solely for use in his business he would be allowed that as business expense and would reduce his Net Profit in the year he bought it.

I can sympathise with those that have taken their accountants advice and incorporated, but for the vast majority it was to save on tax and many accountants will advise clients to make purchases to reduce tax liability.

To me the Govt. by not allowing Dividends in annual income are setting out a marker that they intend to equalise the tax treatment of 100% single shareholder Ltd companies and sole traders.

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Re: Self Employed

Post by dsr » Sat Mar 28, 2020 4:28 pm

Dy1geo wrote:
Sat Mar 28, 2020 3:17 pm
If the fictional roofer was a sole trader he presumably would have a business bank account. He doesn’t have to take out all of his income as a drawing, he could leave money in the account to buy equipment for his business and any that was solely for use in his business he would be allowed that as business expense and would reduce his Net Profit in the year he bought it.

I can sympathise with those that have taken their accountants advice and incorporated, but for the vast majority it was to save on tax and many accountants will advise clients to make purchases to reduce tax liability.

To me the Govt. by not allowing Dividends in annual income are setting out a marker that they intend to equalise the tax treatment of 100% single shareholder Ltd companies and sole traders.
I doubt that bolded line. Spending money on something you don't want is a stupid way of saving tax. Accountants may advise on timing of spending or on what sort of equipment to spend, but the idea of spending £100 because it will cost you net £80 is of no benefit whatsoever unless it was something that was going to be useful anyway.

As for increasing dividend tax, the reason it is lower now is that companies pay Corporation Tax on profits, so if dividends were taxed at the same rate as salaries it would be double taxation.

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Re: Self Employed

Post by Dy1geo » Sat Mar 28, 2020 5:26 pm

dsr wrote:
Sat Mar 28, 2020 4:28 pm
I doubt that bolded line. Spending money on something you don't want is a stupid way of saving tax. Accountants may advise on timing of spending or on what sort of equipment to spend, but the idea of spending £100 because it will cost you net £80 is of no benefit whatsoever unless it was something that was going to be useful anyway.

As for increasing dividend tax, the reason it is lower now is that companies pay Corporation Tax on profits, so if dividends were taxed at the same rate as salaries it would be double taxation.

DSR you explained it far better than I did in respect of purchases for businesses regarding timing and whether or not a business needs and would benefit from the said purchase.

The point regarding dividends and taxation was only my personal thought after listening to the Chancellor in his Press Conference on Thursday regarding in balance in “taxation” and with this I include income tax, Ni and Dividend taxation between a a 100% LTD shareholder and a Sole Trader. He also hinted at changes in the rates of NI for the sole trader self employed. Also It was noticeable at the last election Labour targeted Dividend taxation and this is why I can see the Tories looking at this as a way of raising revenue.

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Re: Self Employed

Post by CrosspoolClarets » Sat Mar 28, 2020 5:27 pm

Dy1geo wrote:
Sat Mar 28, 2020 3:17 pm
If the fictional roofer was a sole trader he presumably would have a business bank account. He doesn’t have to take out all of his income as a drawing, he could leave money in the account to buy equipment for his business and any that was solely for use in his business he would be allowed that as business expense and would reduce his Net Profit in the year he bought it.

I can sympathise with those that have taken their accountants advice and incorporated, but for the vast majority it was to save on tax and many accountants will advise clients to make purchases to reduce tax liability.

To me the Govt. by not allowing Dividends in annual income are setting out a marker that they intend to equalise the tax treatment of 100% single shareholder Ltd companies and sole traders.
Generally agree.

I don’t think there is a huge difference in tax between employees, self employed and directors for people earning under £50,000.

20% IT and 12% NI, 20% IT and 9% NI, 19% CT and 7.5% dividend tax. Obviously all with different thresholds and one or two other minor things but largely the difference is marginal (less than a grand a year).

It is why I was observing that some missing the grant of up to £7,500 for 3 months is unfair. It’s a far bigger sum than any tax advantage.

But I totally agree that all these rates will be levelled up. That’s the direction of travel.

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Re: Self Employed

Post by Paul Waine » Sat Mar 28, 2020 5:53 pm

AndrewJB wrote:
Sat Mar 28, 2020 2:46 pm
https://lesstewart.wordpress.com/2010/0 ... ston-saul/

This is from John Ralston Saul (Canadian philosopher) Dictionary if Aggressive Common Sense - on unsustainable national debts. It looks at the issue from historical precedent, international law, ethics, practical considerations and economics.
Hi Andrew, thanks. I'll take it you now agree with me that the gov't is borrowing money to fund the covid-19 response.

John Ralston Saul: I guess he would be on your reading list. He's not on mine - after reading a little on the link. "No country has got rich by paying their debts" (or similar). What an odd idea. Who would lend money to a country if they knew that they would be repaid? And, of course, he is factually wrong.

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Re: Self Employed

Post by Paul Waine » Sat Mar 28, 2020 5:58 pm

RingoMcCartney wrote:
Sat Mar 28, 2020 1:55 pm
Thanks for the response Paul. I hadn't thought of the response, by the banks, to country's that may default, further down the line. Punitive measures on any new money probably , means "there's no such thing as free lunch" is true.
It's not just banks that lend money to governments, it's also pension funds, insurance companies and all other major and minor financial institutions. Plus "joe public" - you and me - can lend money to gov'ts and buy and sell their debts in the securities markets.

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Re: Self Employed

Post by RingoMcCartney » Sat Mar 28, 2020 6:00 pm

Paul Waine wrote:
Sat Mar 28, 2020 5:58 pm
It's not just banks that lend money to governments, it's also pension funds, insurance companies and all other major and minor financial institutions. Plus "joe public" - you and me - can lend money to gov'ts and buy and sell their debts in the securities markets.
Gilts.
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Re: Self Employed

Post by Paul Waine » Sat Mar 28, 2020 6:26 pm

CrosspoolClarets wrote:
Sat Mar 28, 2020 11:02 am

The concern is for the fictitious roofer in my earlier example.

He has taken a risk, used all his savings to set up his business, employs staff, and his accountant has advised him to take dividends rather than salary in order to save a few % in tax (probably only saves one or two hundred a year). But he mainly takes them monthly, and needs it to put food on the table, there is little difference to a salary and the reason it isn’t a salary isn’t just tax, it is to give him options to leave his money in at certain times for example to buy new roofing equipment next year or to protect against bad debts. A salary can be flexed too but its much more of a faff.
If I was sending people up on roofs and, I'd assume, erecting and dismantling scaffolding, I'd want the protection of limited liability. That would be my first reason to be "Roofers Ltd" rather than be a self-employed individual.

Then, I'd be looking at my budget... a very difficult thing, if you don't know at the start of the year how much work you will get, what your costs will be and so, what the profit will look like by year end. Dividends are paid out after CT has been paid. I'd be surprised if a roofer was drawing dividends from current earnings unless she/he has got a very good handle on the money they will make through the year. If I was his accountant - please, no one take this as accounting advice - I'd suggest taking a modest salary, something we'd know the business can afford, then toting everything up at the end of the year (maybe things can be so good a mid-year estimate could be made) and deciding how much, if any, additional salary to take, how much to put into a pension fund (where it isn't taxed and doesn't have NI charge) and then calculate profit, CT and dividends. However, you can see I don't do personal or small business tax for a living - and, I've overlooked, somewhere in this roofer's discussion with his accountant the accountant will be advising on the "sports car" he may need to put through his business accounts - zero emissions, Tesla, maybe. I-Pace Jag would be my pick. ;)

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