Contract Electronics engineer work in UK/EU is now less well payed? - Page 1
Forum section: electronics / general

author: ocset
author_rank: Super Contributor
timestamp: January 05, 2019, 06:51:14 pm
content: Is it true that since last April, the tax breaks given to Contract Electronics engineers working as "limited company" in UK/EU are now severely reduced?..But that those working under "umbrella companies" see no change in their finances?

author: Zero999
author_rank: Super Contributor
timestamp: January 05, 2019, 09:30:42 pm
content: I don't know. I've heard the UK government are supposed to be getting tougher on taxing the self-employed.

author: cdev
author_rank: Super Contributor
timestamp: January 05, 2019, 09:40:46 pm
content: The biggest expense the self employed face in the US is often health insurance. Then comes the mortgage.

author: ocset
author_rank: Super Contributor
timestamp: January 05, 2019, 10:14:35 pm
content: thanks, i'm pretty sure that up until recently a contract electronics engineer in uk working under a "Limited company " arrangement could get away woth paying just 17% tax......but since April just gone i believe that this is no longer possible.?I also believe that those working under "Limited company", if working away from home, could actually get the hotel bill virtually all payed for them by the Taxman, but that since april just gone, this is no longer possible?

author: dmills
author_rank: Super Contributor
timestamp: January 05, 2019, 10:38:14 pm
content: Sounds to me more likely to be some changes to IR35, but there is usually room for a good tax accountant to save you significant money.What you have to decide is how far it is worth going, for example VAT can be handled in a few different ways, some of which will cause you to have to do significantly more paperwork then others, but might allow you to for example allow you to claw back the VAT on tools and lab supplies.Now thing is, if I am working mainly as a consultant in other companies, I might be better off just going for the flat rate vat scheme because it is simpler and my extra billable hours (not spent faffing with tax accounting) more then make up for the extra VAT cost. Much the same thing applies to claiming every stupid little expense against profit, you can do it, but maybe you would make more money actually working for a client instead?Also, if you push it too far, you invite a VAT or even a TAX AUDIT which are never fun.Regards, Dan.

author: Zero999
author_rank: Super Contributor
timestamp: January 06, 2019, 09:47:39 am
content: If you're a professional electronics engineer or tech, then you can claim some money back on tools and equipment, whether you're self-employed or not, but I've never bothered with the paperwork.

author: IanB
author_rank: Super Contributor
timestamp: January 06, 2019, 10:07:31 am
content: Quote from: treez on January 05, 2019, 10:14:35 pmHMRC has always been pretty hot on tax evasion. As you know, the only way to pay 17% income tax legally is to have very little income. Trying to avoid paying income tax by pretending to be a limited company instead of an employee has never been a legal way to reduce income tax liability. So "getting away with paying 17%" has never been a legitimate option.QuoteHow exactly would HRMC pay for your hotel bills? The best that could happen is that travel costs could be deducted as an operating expense for a business to reduce the tax liability of that business, but that is quite different from "virtually paying for" the travel costs.

author: tom66
author_rank: Super Contributor
timestamp: January 06, 2019, 10:28:17 am
content: There are a few ways around IR35 but you have to be very careful.As I understand it IR35 is targeted towards the employee masquerading as a contracting company situation, where one employee works for one business. HMRC rightly see this as tax avoidance and you will be treated as a regular employee and have to pay income tax and NI.If you work for multiple companies in a small time span (e.g. several contracts in a month), own most of your equipment and work out of your home/office and don't work on site all the time, you can still be a limited company and gain some of the advantages there.Personally I would still draw down a salary as a limited company director, with profits reinvested into the business. The reason is that HMRC may look down poorly upon you if you never draw a salary (under general anti-avoidance regulation) & it really isn't unfair if you pay a reasonable amount of tax on your income like everyone else! Of course, you should expense all the things that are necessary for your work, such as mileage, hotel expenses, equipment (with depreciation), etc. as those are expenses that a normal employer would pay for an employee.I am not a tax accountant and this is not taxation advice. Seek advice of a real accountant before getting yourself in trouble.

author: mikeselectricstuff
author_rank: Super Contributor
timestamp: January 06, 2019, 11:19:23 am
content: Re. VAT, assuming all your clients are VAT registered it's a no-brainer to register for VAT even if you're way below the registration threshold, as it costs your clients no more ( and in fact some companies' accounts depts will have a problem dealing with non-vat registered suppliers), and you can reclaim VAT on anything that could plausibly be used for the business.VAT paperwork isn't a big deal - maybe a couple of hours every quarter, not something worth paying an accountant for.I've never looked into the details of doing a limited company - looks like quit a bit more paperwork.

author: KJDS
author_rank: Super Contributor
timestamp: January 06, 2019, 01:25:26 pm
content: Ltd company will typically cost at least £800 a year in accountancy fees.I've not been paying too much attention to recent tax changes but it was probably too generous for too long for those contracting, and it's now swung back towards a more neutral situation.

author: AndyC_772
author_rank: Super Contributor
timestamp: January 06, 2019, 02:13:56 pm
content: Changes that have happened over the last few years...- the flat-rate VAT percentage has increased for companies which fall under the heading of "limited cost" companies. This newly defined category includes companies which spend a relatively small amount of their turnover on purchasinggoods(but no consideration is made of the amount they may spend onservices). This is bad news if, as in my case, you're VAT registered under the flat-rate scheme, and your end product is mostly non-tangible, ie. you provide technical data and expertise rather than physical objects. You're deemed "limited cost" even if, for example, you contract out things like PCB design or EMC testing.- from April (IIRC), any VAT registered business will have to use special software to submit VAT returns, instead of simply filling in about 4 boxes on a web form. This is, oddly, referred to as "making tax digital", and it's supposed to be 'better' in some sense. (Answers should be encrypted, written on a postcard in the prescribed font and posted in the nearest government-approved cross-cut shredder).- the tax-free allowance for dividends has been reduced year on year, so if you take money out of your company in the form of dividends as a shareholder rather than salary as an employee, you pay more income tax. This change has reduced, but not yet eliminated, the benefit of taking dividends as opposed to salary. The trade-off here is that if you take dividends, the company pays 19% corporation tax on the whole amount, but no National Insurance is due. On the other hand, if you're paid the same in salary, then it's an expense for the company so there's no CT payable, but instead you're paying income tax and NI on it, and the company has to pay employer's NI too.- IR35 looks to remain a good reason to ensure you have several active customers on a regular basis, and to insist on working to your own T's & C's. These are good things to have anyway.As always, the advice is to find a good accountant. Statements like "only 17% tax" and "half paid for by the taxman" are vague, inaccurate misunderstandings at best.

author: jc101
author_rank: Frequent Contributor
timestamp: January 06, 2019, 04:36:41 pm
content: Quote from: AndyC_772 on January 06, 2019, 02:13:56 pmI had the following from my accountant, basically HMRC want to get everyone using digital record keeping, doing away with paper records and eventually also the likes of spreadsheets too. I suppose they feel it's harder to cook the books with an account package.Quote