Pilots self-employed for tax purposes.
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Personally, I wouldn't feel too bad about paying zero tax. I've contributed to this country for 9 years in the armed forces, paid a fortune in tax and taken pretty much nothing. They even taxed me at 40% for a small inheritance. When I came to reclaim some of it, they used a clever loophole to deprive me of about 20k that I was owed in tax rebate. When I needed some help and some financial breaks when I trained for my ATPL (unpaid, obviously), I got nothing. Yet if I'd decided to smoke myself to death whilst watching Sky TV for 2 years instead, I would have been subsidised to the hilt. In fact they made the training more difficult through fuel duty and VAT. When I was unemployed after my training, they viewed my sole asset, a flat, as an asset, despite the mortgage and the fact that you can't eat bricks and mortar. So again, I got nothing.
So, no I don't feel bad about pursuing tax efficiency to the highest level that I possibly can. I really am tired of people saying that I should pay my "fair share". I have, several times over as have many other airline pilots.
So, no I don't feel bad about pursuing tax efficiency to the highest level that I possibly can. I really am tired of people saying that I should pay my "fair share". I have, several times over as have many other airline pilots.
Last edited by D O Guerrero; 13th Aug 2009 at 12:13.
completely correct D-O-G
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If a guy really wanted to avoid paying any tax he could. The problem being it would be expensive from a tax advice point of view. You could use a company in some offshore location like the British Virgin Islands and take loans from the company instead of salary.
The problem is that when the tax man comes knocking on the door he will smell a tax avoidance scheme and will make you life difficult. By paying less tax in somewhere like Ireland when he knocks on the door you give him an Irish tax return and he might reckon that you are earning a small salary for an airline pilot compared to what you would earn in England but you are tax compliant none the less.
At the end of the day the tax office cannot tell you how much you should earn. If a guy is dumb enough to take a captains role with a company and agree a salary of maybe only £20k then it is not the place of the Inland Revenue to decide that you are a nut job for taking the job.
lets say I get a job working in McDonalds on minimum wage. The tax man can't make me pay more tax just because I am an airline pilot and the going rate is £150k. Its the same principal if you are only paid a salary of £30k in Ireland and you use the Irish tax breaks on new companies to park £100k then there is nothing wrong with this. It is legal, you are tax compliant, and you are providing for your future.
The other that should be mentioned is that CGT in Ireland is half what it is in the UK. So lets say you park £300k in the company after the three years. You finish your contract with BRK and then pay some accountant £1,000 to wind up the company. The assets of the company are £300k. they are distributed amung the shareholders, being you, and the shareholder pays 22% CGT on the cash.
Anyone on a contract, rather than bitching and moaning about it on the other discussions on this site and lament the inaction of the unions etc., should get themselves organised, get themselves set up in Ireland for the next three years at least and cream a bit of cash for their future.
As the meerkat would say "simples"
The problem is that when the tax man comes knocking on the door he will smell a tax avoidance scheme and will make you life difficult. By paying less tax in somewhere like Ireland when he knocks on the door you give him an Irish tax return and he might reckon that you are earning a small salary for an airline pilot compared to what you would earn in England but you are tax compliant none the less.
At the end of the day the tax office cannot tell you how much you should earn. If a guy is dumb enough to take a captains role with a company and agree a salary of maybe only £20k then it is not the place of the Inland Revenue to decide that you are a nut job for taking the job.
lets say I get a job working in McDonalds on minimum wage. The tax man can't make me pay more tax just because I am an airline pilot and the going rate is £150k. Its the same principal if you are only paid a salary of £30k in Ireland and you use the Irish tax breaks on new companies to park £100k then there is nothing wrong with this. It is legal, you are tax compliant, and you are providing for your future.
The other that should be mentioned is that CGT in Ireland is half what it is in the UK. So lets say you park £300k in the company after the three years. You finish your contract with BRK and then pay some accountant £1,000 to wind up the company. The assets of the company are £300k. they are distributed amung the shareholders, being you, and the shareholder pays 22% CGT on the cash.
Anyone on a contract, rather than bitching and moaning about it on the other discussions on this site and lament the inaction of the unions etc., should get themselves organised, get themselves set up in Ireland for the next three years at least and cream a bit of cash for their future.
As the meerkat would say "simples"
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I'm a radio presenter and everyone in my line of work is self employed. The companies want it that way so they can hire and fire at will and pay no contributions. Some guys operate as VAT registered limited companies and take a dividend, others are simply sole traders. We're no different to anyone else really - I have a boss, a permanent place of work and even though freelancing outside of my main contractor is permitted by the terms of self employment it's actually rather frowned on and might end up in the media equivalent of a tea and no biccies meeting.
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D O Guerrero,
At the risk of sounding repetitive my perspective is not whether you pay zero or 40% tax, (that's between you and the taxman), its about the repercussions of a profitable airline using this sort of scheme to compensate for pretty poor terms and conditions. It will only force down the remuneration package further.
Unfortunately this will affect all of us in the industry as the dive to the bottom is led by O'Leary and his cohorts.
At the risk of sounding repetitive my perspective is not whether you pay zero or 40% tax, (that's between you and the taxman), its about the repercussions of a profitable airline using this sort of scheme to compensate for pretty poor terms and conditions. It will only force down the remuneration package further.
Unfortunately this will affect all of us in the industry as the dive to the bottom is led by O'Leary and his cohorts.
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self employed or employed?
It is fairly straight forwards as a general term. If you are allowed to work for someone else when you want, then you are self employed. If you are not, and can only work for one company/agency, and told exactly when and where, you are 'employed'. That is pretty much as easy as it gets.
IR35 is taken on each indervidual contract, so if you have multiple streams of income, and all are different contracts, (say contract 1,2,3 and 4) all doing the same thing, (say driving taxis), yet contract 4 says that you can not drive a taxi for someone else and dictated when you must turn up for work, (sound familiar?)
, then contract 4 is a restrictive contract, and in theory all the income gained through contract 4 is liable to NI and PAYE tax paid by the company issuing the restrictive contract. Contracts 1,2 and 3 however have no such restrictions, and therefore you can choose when and how many hours you work for them, this is taxed under the self assessment or your companies capital gains tax, as these incomes are legit self employed incomes to your business or company.
Remember, IR35 only applies to Ltd's.
I hope that might have cleared something up a bit better?
Again, be very careful what is posted here, as HMRC will use any information and resources to show that there was information being posted regarding these sorts of things.
Having said that, they do have much bigger fish to fry, and looking at BRK accounts and tax returns, it is interesting to see how a company with so many pilots on its books, has such a small turn over......maybe HMRC should have a little look at Brookfield and Brookfield International, as well as their Offshore accounts.....!!??
IR35 is taken on each indervidual contract, so if you have multiple streams of income, and all are different contracts, (say contract 1,2,3 and 4) all doing the same thing, (say driving taxis), yet contract 4 says that you can not drive a taxi for someone else and dictated when you must turn up for work, (sound familiar?)
, then contract 4 is a restrictive contract, and in theory all the income gained through contract 4 is liable to NI and PAYE tax paid by the company issuing the restrictive contract. Contracts 1,2 and 3 however have no such restrictions, and therefore you can choose when and how many hours you work for them, this is taxed under the self assessment or your companies capital gains tax, as these incomes are legit self employed incomes to your business or company. Remember, IR35 only applies to Ltd's.
I hope that might have cleared something up a bit better?
Again, be very careful what is posted here, as HMRC will use any information and resources to show that there was information being posted regarding these sorts of things.
Having said that, they do have much bigger fish to fry, and looking at BRK accounts and tax returns, it is interesting to see how a company with so many pilots on its books, has such a small turn over......maybe HMRC should have a little look at Brookfield and Brookfield International, as well as their Offshore accounts.....!!??
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"Whistle Blower",
I was wondering why you chose that name.
Then I read your last paragraph!
I have officially "Gone Quiet" on this now!!! .................. If you get my drift!?
I was wondering why you chose that name.
Then I read your last paragraph!
I have officially "Gone Quiet" on this now!!! .................. If you get my drift!?
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Whistle Blower is 100% correct. The rules governing what is a contract of services (employee) and a contract for services (self employed contractor) is pretty clear cut. The concept of direction and control are crucial and there is no doubt that all of the pilots are under the direct control and direction of Ryanair.
While the UK and Irish tax authorities could easily prove that the pilot is an employee the problem is who is the employer, Ryanair or BRK? If the UK authorities decide that they will invest time and effort in pursuing BRK. They make a ruling, BRK appeals it and even if the Inland Revenue win then BRK just need to show that Ryanair is the employer and not BRK. Ryanair decide on the roster, Ryaniar decide who to hire, Ryanair decide on the competency levels etc. Therefore Ryanair are the employer and all of the pilots should be taxed in Ireland.
The Inland Revenue then have to justify its pursuit of BRK and the cost of going to court in return for lining the pockets ofg the Irish tax office.
Likewise the Irish tax authorities knock on the Ryaniar door and tell them that all of the contractor pilots are under their control and direction and therefore are employees and that they need to start deducting tax from them.
Same problem, Irish tax office head into court, ultimately win their case and then Ryanair tell them that the pilots are actually leased from Brookfield and that they are employees of BRK and then the tax must be dedcuted from the pilots salary and paid to the UK government.
The risks currently outweigh the potential rewards for the tax authorities on both sides of the Irish sea. From the horses mounth in the Irish tax office I have heard that they have decided to let the sleeping dog of contractors lie and in return they have insisted that BRK ensure that each contractor is registered for, and paying tax.
Where the risk comes for pilots is in doing nothing and waiting for either a union or tax office to come riding to their assitance and gettign BRK to pay their taxes. I would expect that both the irish and UK tax authorities will get a list of pilots from BRK and then they will, like father christmas, check the list and see who's been naughty by not filing any taxes and who has been nice and paid something somewhere to someone.
The message from the Irish tax office is to get yourself registered, pay your taxes and if you are from outside Ireland then you will not have a very big tax liability.
In most other sectors self employed people only get paid when they produce evidence that their taxes are in order. This is the way it was doen when I was down under on contract and it makes so much sense it can only be a matter of time before it is adopted by the tax offices up here.
While the UK and Irish tax authorities could easily prove that the pilot is an employee the problem is who is the employer, Ryanair or BRK? If the UK authorities decide that they will invest time and effort in pursuing BRK. They make a ruling, BRK appeals it and even if the Inland Revenue win then BRK just need to show that Ryanair is the employer and not BRK. Ryanair decide on the roster, Ryaniar decide who to hire, Ryanair decide on the competency levels etc. Therefore Ryanair are the employer and all of the pilots should be taxed in Ireland.
The Inland Revenue then have to justify its pursuit of BRK and the cost of going to court in return for lining the pockets ofg the Irish tax office.
Likewise the Irish tax authorities knock on the Ryaniar door and tell them that all of the contractor pilots are under their control and direction and therefore are employees and that they need to start deducting tax from them.
Same problem, Irish tax office head into court, ultimately win their case and then Ryanair tell them that the pilots are actually leased from Brookfield and that they are employees of BRK and then the tax must be dedcuted from the pilots salary and paid to the UK government.
The risks currently outweigh the potential rewards for the tax authorities on both sides of the Irish sea. From the horses mounth in the Irish tax office I have heard that they have decided to let the sleeping dog of contractors lie and in return they have insisted that BRK ensure that each contractor is registered for, and paying tax.
Where the risk comes for pilots is in doing nothing and waiting for either a union or tax office to come riding to their assitance and gettign BRK to pay their taxes. I would expect that both the irish and UK tax authorities will get a list of pilots from BRK and then they will, like father christmas, check the list and see who's been naughty by not filing any taxes and who has been nice and paid something somewhere to someone.
The message from the Irish tax office is to get yourself registered, pay your taxes and if you are from outside Ireland then you will not have a very big tax liability.
In most other sectors self employed people only get paid when they produce evidence that their taxes are in order. This is the way it was doen when I was down under on contract and it makes so much sense it can only be a matter of time before it is adopted by the tax offices up here.
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....if you are from outside Ireland then you will not have a very big tax liability......in Ireland.
(My bold and addition)
The fact remains that if you are resident in the UK, or more accurately cannot prove that you are resident elsewhere, HMRC will want the difference between what you pay in Ireland and what you are liable for in the UK. If you're a 40% taxpayer here and pay 20% in Ireland HMRC will want the other 20%.
I wouldn't count on hiding under the radar either. HMRC are doing deals with the likes of Lichtenstein to get at non-payers so the Irish won't be witholding any information from them, that's for sure.
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some expenses are allowable in other counrties and not in the UK. Its like if you worked for an airline in Belgium you would get a more generous per diem than in the UK. The per diem is not part of your taxable income, when you send in your taxable income to the UK tax office it is calculated on your taxable income.
In many cases your total income and your taxable income might not be the same which can lead to tax savings.
In many cases your total income and your taxable income might not be the same which can lead to tax savings.
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It's very clear...as far as Brown is concerned.. if your work starts in the UK it is subject to tax , you could say you are based in Mongolia but it really won't wash. Even if you are paid " Off shore" it is your responsibilty to pay tax and declare the earnings in the UK. So why do employers like this suedo self employed status.. well it saves them empoyers NI and means you are not in the system for hols etc. So will they catch you? probably, especially if you have a mortgage or property in UK.. money laundering means you simply can't dump large sums as deposits etc.. Your log book will clearly show where you are starting work, remember if you do get caught, the fine is 100% of the tax avoided and it is a Criminal Record you aquire.
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There is a legal distinction between you as a contractor flying for an airline or agency like BRK and you being an employee of a company which has a contract with an airline or agency.
Mr Brown will have his greedy little hands out for his cut of any money you receive from your employer, and if you live in the UK he doesn't care where you earned that money.
Therefore if you are a contractor with BRK and you get £100k form them then you will pay tax on £100k.
If you work for a company that has a contract with BRK and you have an employment contract with the company and you will pay tax on the amount the company pays you and not on the amount the company earns. So if you get paid £50k then you pay tax on £50k. If the company is Irish then it wont pay tax on the other £50k either.
Gordon Brown cannot say how much you have to be paid. While there is minimium wage legistlation there is not a sub section that says that minimum wage for a pilot is £75k a year. So long as your company is paying you above minimum wage then it is legally compliant.
There are generous per diem payments available in Belgium, in Ireland there are per diem payments available as well but thereis also the small company exemption from corporation tax for the first three years.
You don't have to use dodgy "offshore" schemes or try to hide money in bogus bank accounts to avoid paying tax. If you are earnign £100k a year and living in a country with decent public services proper roads and toilets that flush then you need to accept that you will have to pay a reasonable amount of tax. Thsi does not mean you have to be a patsy and pay through the nose. There are tax planning opportunities out there. There is no magic bullit that will result in no tax, no one should be under that illusion.
What does the forum think is an acceptable tax rate for a pilot earnign £100k and above? 10% could only be achieved by "dodgy" means,
20% with really good and effectvie tax planning,
30% with a cheap lazy accountant.
Anything above and you deserve to be paying that much.
My last contract I earned close to £200k per annum and paid all in less than 30% which I would consider pretty good. I can sleep sound and not panic everythime I get a letter from the tax office.
Mr Brown will have his greedy little hands out for his cut of any money you receive from your employer, and if you live in the UK he doesn't care where you earned that money.
Therefore if you are a contractor with BRK and you get £100k form them then you will pay tax on £100k.
If you work for a company that has a contract with BRK and you have an employment contract with the company and you will pay tax on the amount the company pays you and not on the amount the company earns. So if you get paid £50k then you pay tax on £50k. If the company is Irish then it wont pay tax on the other £50k either.
Gordon Brown cannot say how much you have to be paid. While there is minimium wage legistlation there is not a sub section that says that minimum wage for a pilot is £75k a year. So long as your company is paying you above minimum wage then it is legally compliant.
There are generous per diem payments available in Belgium, in Ireland there are per diem payments available as well but thereis also the small company exemption from corporation tax for the first three years.
You don't have to use dodgy "offshore" schemes or try to hide money in bogus bank accounts to avoid paying tax. If you are earnign £100k a year and living in a country with decent public services proper roads and toilets that flush then you need to accept that you will have to pay a reasonable amount of tax. Thsi does not mean you have to be a patsy and pay through the nose. There are tax planning opportunities out there. There is no magic bullit that will result in no tax, no one should be under that illusion.
What does the forum think is an acceptable tax rate for a pilot earnign £100k and above? 10% could only be achieved by "dodgy" means,
20% with really good and effectvie tax planning,
30% with a cheap lazy accountant.
Anything above and you deserve to be paying that much.
My last contract I earned close to £200k per annum and paid all in less than 30% which I would consider pretty good. I can sleep sound and not panic everythime I get a letter from the tax office.
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As a UK resident, and an FR employed pilot, I asked the UK revenue about this. They advised me if I worked and paid tax outside of the UK this was fine. They also said however, If I spend and average of more than 90 midnights in the UK each year, I should also file a self cert every year and they would levy tax on the diference between what I paid outyside and what I would normally pay here in the UK.
All of these schemes seem fine until the revenue catch up with you and hit you with a big bill for back taxes!
All of these schemes seem fine until the revenue catch up with you and hit you with a big bill for back taxes!
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Precisely Ballsout, IF YOU WORK AND GET PAID OUTSIDE THE UK. If you work in the UK you are subject to tax. The two agency guys that were 6 years! Gatwick based, UK home owners, claimed they were off-shore because they were paid on the IOM..No said Mr Brown, very naughty boys, pay the tax plus 100% of the tax in a fine for "tax avoidance" oh, and ps.. we still may prosecute you! nice criminal record for tax fraud/evasion just so the employer can pay you without them paying NIC .. At least Cathay will give you a calculation of UK duties and statement of tax paid to HK.. then it's up to you regarding the 90 day rule.
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All true, BRK however have now insisted that each of the contractor pilots operate through a company structure, this presents the opportunity for some tax planning as the earnings of the company and the earnings of the company are not the same.
If you are earning more than you spend every month why would you pay tax on it, either leave it in the company and use it to either invest or to provide for your pension.
What you can also do is plan for a year off. If you aim to accumulate a years pay in the company it means that even if you are out of work you will still get a monthly salary. It also allows you to take a year off and still receive a salary, paid out of the retained profits of the company.
If you are earning more than you spend every month why would you pay tax on it, either leave it in the company and use it to either invest or to provide for your pension.
What you can also do is plan for a year off. If you aim to accumulate a years pay in the company it means that even if you are out of work you will still get a monthly salary. It also allows you to take a year off and still receive a salary, paid out of the retained profits of the company.
