Military Employment and Ltd Companies.

[FFP]

Bear with me on this one......One for those with some mil knowledge / IFA background I'd imagine.........

Chatting to a friend the other day, whose pally with a well known football star. He explained how well known football star actually started a limited company (Let's call it Joe Bloggs Ltd). The football club he works for then pays him / the Company for his services and he then is able to run his services as a business, with the associated tax breaks that I'm sure he gets.

Apparently, lots of them do it.

Got me thinking about us in the military.......

Could I start my own limited company, employ myself, have the RAF pay my company, and then write off a multitude of expenses ?

Any thoughts / ideas / obvious points I'm missing ?

[Widger]

You will find the answers in QRs

[VinRouge]

you could get your wife to start limited company and get her to contract services to the MOD I am fairly sure.... saves a poxy payout via the GEMS scheme!

[ExGrunt]

Not as common as it used to be.

Pop along to the HMRC web site and read IR35.

Auld Broon isnt dumb when it comes to extracting taxes.

[Tiger_mate]

I own my own Ltd Company and am employed by the MOD and taxed at 40%.
The company has its own tax allowance, and its earnings are not taxed at 40%. If I took a salary, I would be charged a 40% tax and therefore I do not take a salary at all, but the company reinvests and expands instead. To the best of my knowledge, the MOD does not sub-contract its 'uniformed' serviceman.

My company was created for transparency of earnings and to protect its products copyright rather then tax relief. A Ltd company is required to complete Company returns and Taxable accounts, the documentation of which costs over £600pa. I doubt that a loophole exists that will benefit a serviceman in creating a Ltd Company for any reason other then honourable ones.

A Company also requires 2 staff minimum, and must have a registered Secretary who is legally liable (jointly) for any wrongdoings including money laundering. Therefore whilst many an Open Prison has residents present due to Fraud, my advice would be to avoid taking on the taxman.

[RNGrommits]

This very subject came up last night at our exchange xmas drinks. One of my fellow controllers was telling me that her old man (ex mil) now works at Cott for a contractor to BAE and he has become a one man Ltd company. She is listed as the company secretary. Apparently even after all the fees he is saving £100 a week and most of the civvy contractors at Cott are doing the same. Thats a lot of cash to their relatively low salary and also means they can right off lots of items such as laptops, phone bills etc to the company. It certainly got me thinking about wether "Grommit Ltd" was allowed!

[caligula]

Not all of the above comments are strictly correct, however the theme is broadly true, and plenty of people seem to get away with this, in the short-term anyway. Probably the most pertinent comment is Ex Grunt. Trying to claim that you are a ltd company when in fact it is a one man operation receiving all its income from a single source is highly likely to attract HMRC's attention at some point as a breach of IR35. This is basically tax evasion, rather than avoidance - not something HMRC are very laid back about. Whilst there is some subjectivity about defining employment or not, a key measure is mutuality of obligation. If you're obliged to work, and they're obliged to give you work, you're probably employed. Another one is substitution rights. If you can't provide a substitute to deliver the service, your case will be pretty weak.

All of which is probably irrelevant anyway, since I guess that the personnel people will probably just say 'no' (apart from anything the employer carries the tax liability retrosepctively, if you should in fact have been employed)

[engineer(retard)]

Caligula
Some of what you say is right but you are delving into very grey areas of tax. Mutuality of obligation is usually easily defined in the contract as is the right of substitution, the grey areas is in proving what is actually implemented. IR35 is often used as a big bogeyman but when you look at organisations such as PCG their members have a long history of winning IR35 cases, even with large numbers from the IT world who the legislation was specifically targetting. In many cases, organisations (such as MOD) will only contract to registered companies, leaving little choice but to incorporate.
regards
retard

edited for spelling

[glad rag]

This very subject came up last night at our exchange xmas drinks. One of my fellow controllers was telling me that her old man (ex mil) now works at Cott for a contractor to BAE and he has become a one man Ltd company. She is listed as the company secretary. Apparently even after all the fees he is saving £100 a week and most of the civvy contractors at Cott are doing the same. Thats a lot of cash to their relatively low salary and also means they can right off lots of items such as laptops, phone bills etc to the company. It certainly got me thinking about wether "Grommit Ltd" was allowed!

Well then, having posted on an open forum I'm sure that the aforementioned connies will delight in being subject to a HMRC investigation...................:=

[tailchase]

With most contracts surely you are likely to be working via an 'agency' who employs you via a ltd company to provide services and simply pays the company a daily rate as per its contract. Whether you as director/employee chose to pass or fail IR 35 is ultimately down to you and the risk you want to take with the IR should they challenge your decision. Creative accounting or insurance aside, this is a subject as much down to the individual as the advice proferred by those who might know and claim to be able to understand/interpret the rules. The difference in income between effectively paying as paye versus dividends etc can be significant which is of course the reason for IR35 and its intent of overcoming 'hidden employment'.
No matter whether you chose to pass/fail IR35 there are still tax allowances applicable to the running of a company and your expenses.

[blogger]

I have a ltd company running just fine. Started up a year before leaving the RAF Excellent accountant working for me Don't expect to pay any tax (except NI got to keep the old age pension topped up) for many years to come.

Wake up folks get to college, get to Uni learn a trade and get the hell out.

[Could be the last?]

Not quite on thread, but a tax issue nonetheless -

I can recall a few years ago that an individual could claim the tax back on MMA. Are there other ALLOWANCES, such as GYH(P) perhaps, that you can also claim tax back on?

And absolutely no where near the thread.....

What are the rules on civvy clothing allowances, or where exactly are they laid down?

[Shadwell the old]

Could be the last

You can claim tax relief on the difference between the MMA (26.2p per mile I think) and 40p per mile. However, this only applies to duty journies and not to HTD or whatever it is called. There was a thread on here some time ago that went into all the nuances of if your wife takes you to the station if you are going on a visit. But in essence if you are travelling on duty you can claim, but not for going to and from work on a daily basis

With regard to clothing, if you are self employed, the only clothes you can claim for are clothes with the Company logo, or safety clothing - eg safety boots and hi viz clothing

Shadwell

[WorkingHard]

The taxation of Ltd Companies is essentially very simple. After arriving at a profit, Corporation Tax becomes payable on that profit at a rate of at least 19%. So if your salary is taxed at 40%, then what remains as profit at 19%, the remainder MAY be distributed as dividend therefore avoiding the employERS NI contribution on that part. There are lots of statutory obligations to meet in addition so you need to be very careful if you are not to collect expensive fines.

[Captain Gadget]

ExGrunt is quite correct in referring to IR35. I looked into this a few months ago with reference to a defence contracting job (and never pursued it, partly as a result of my enquiries).

The gist of IR35 is that, if you set up a company that demonstrably deals with multiple clients, you will most likely get the tax breaks. HMRC test diligently for this - EXGrunt is not kidding. If the company has only a single client for any length of time it is likely to be adjudged as having been set up purely for the purposes of tax avoidance (i.e. you could and should be directly employed by the client) and any income paid to you (= the company) will be taxed as pure income.

Tax consultants refer to this as being 'caught' by IR35. Quite.

Gadget :ok:

[Climebear]

Could be the last?
What are the rules on civvy clothing allowances, or where exactly are they laid down?

The Answer is JSP 752 Chapter 8 Section 3 - Civilian Clothing Daily Allowance (CCDA) and Civilian Clothing Annual Grant (CCAG)

There is too much detail in the leaflet to include here but hre are some selected qoutes:

The aim of the Civilian Clothing Daily Allowance (CCDA) and Civilian Clothing Annual Grant (CCAG) is to contribute towards the extra expenditure non-commissioned Service personnel necessarily incur as a direct consequence of being required to wear civilian clothing on duty.

Commissioned officers are not entitled to either CCDA or CCAG on the grounds they receive tax relief for the upkeep of their uniforms and, if not required to wear uniform, the tax concessions contribute to the provision and upkeep of their civilian clothes.

(I really must go home now and lie down)