1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

UK Tax - share your experience guys

Discussion in 'Business & Tax Advice' started by ORM, Oct 30, 2014.

  1. ORM

    ORM Power Member

    Joined:
    Oct 16, 2013
    Messages:
    716
    Likes Received:
    675
    Location:
    wealth mastery
    Hi Folks,

    We all know that a lot of IM'ers around the globe are banking and not paying taxes. That's ok if you spend a lot of time in tax havens etc. For us who are based in UK need to pay quite a nice chunk of our profit to government. I am ok with paying it as I do not to mess with HMRC (who wants) , however I am interested in reducing tax legally. I had several meetings with my accountant and he said its better to leave most of the profit in PP which seems like tax evasion to me lol. I know in US PayPal reports to IRS if theres more than $20k generated. So the question would be: is there any loopholes etc. in UK tax Law which would help to reduce taxes legally?

    Feel free to share your experience/knowledge. No trolling please.
     
    Last edited: Oct 30, 2014
  2. ORM

    ORM Power Member

    Joined:
    Oct 16, 2013
    Messages:
    716
    Likes Received:
    675
    Location:
    wealth mastery
    114 views and not a single response. Is this because of this ->
    or no one gives a damn/earns enough to pay taxes? :)
     
  3. LostConnection

    LostConnection Senior Member

    Joined:
    Jul 20, 2014
    Messages:
    1,172
    Likes Received:
    1,350
    Location:
    Grinding away in the night
    One possibility is to setup a limited company, pay yourself less than £10k a year in salary and take the rest in dividends which have a lower tax rate.

    Just beware the IR35.
     
    • Thanks Thanks x 1
  4. crackarama

    crackarama Regular Member

    Joined:
    Aug 14, 2013
    Messages:
    347
    Likes Received:
    85
    Location:
    scotland
    Its a good question. Im in the UK and although im not making a lot of money right now, im hoping things im working on payoff and i will be looking for the same answers. Its good enough for Gary barlow and others to legally avoid tax then it will be good enough for me
     
    • Thanks Thanks x 1
  5. jak19

    jak19 Elite Member

    Joined:
    Jan 5, 2013
    Messages:
    2,548
    Likes Received:
    507
    make company and offset everything you can
     
    • Thanks Thanks x 1
  6. ZennoBlaster

    ZennoBlaster Senior Member

    Joined:
    Jan 17, 2014
    Messages:
    1,025
    Likes Received:
    306
    I like to hear the rationale behind your accountant's advice re PP. There's also the risk if PP decide to close your account, and walk off with your cash. I'm sure HMRC are looking closely at PP (they'd be daft not to!).
     
    • Thanks Thanks x 1
  7. blackhat-dudette

    blackhat-dudette Regular Member

    Joined:
    Mar 12, 2010
    Messages:
    313
    Likes Received:
    193
    Occupation:
    Freelance internet marketing expert
    Location:
    UK
    Home Page:
    I am the Director of a LTD company in the UK and this is the best route to go down:

    As a limited company you can pay yourself less than £10k to stay under the personal income tax level whilst still collecting your NI payments and then pay yourself dividends at a lower tax rate than income tax. Remeber that as a company Director, you are LEGALLY obliged to only take dividends if the business can accomodate it - for example if you take £5k dividends in January then make the company insovent in March you could face a lawsuit and potential prison time.

    Also, you can claim back anything you spend on the business as "expenses". The majority of ltd company owners do not pay themselves at all and live on these "expenses" claims.

    The other route is to register as a sole trader, you will not have the legal protection that a LTD company gives you, nor the tax breaks. However, you will not have to LEGALLY provide end of year accounts, nor report to companies house.

    It's swings and roundabouts to be honest, although if you are banking enough to consider how tax breaks can benefit you, I would probably go down the LTD route.

    Hope that help :)
     
    • Thanks Thanks x 2
  8. ORM

    ORM Power Member

    Joined:
    Oct 16, 2013
    Messages:
    716
    Likes Received:
    675
    Location:
    wealth mastery
    Thanks for all the answers guys. I'm registered as a sole trader and I see Ltd will be the way to go.


    Yeah, I think taxman can get any info from PP if theres a suspision of wrongdoing.
     
  9. meathead1234

    meathead1234 Moderator Staff Member Moderator Premium Member

    Joined:
    Sep 24, 2008
    Messages:
    3,816
    Likes Received:
    13,933
    Depends on your circumstances, every company/individual is different. That's why you hire a good accountant. I'd advise getting a better accountant if the best yours can come up with is leaving money in Paypal...
     
  10. Reyone

    Reyone Elite Member

    Joined:
    Sep 30, 2012
    Messages:
    1,577
    Likes Received:
    1,277
    Occupation:
    Hunter
    Never understood these type of threads seriously. Hire an accountant, pay some good money and thats that... posting shit like this around forums will get you nowhere.
     
  11. ORM

    ORM Power Member

    Joined:
    Oct 16, 2013
    Messages:
    716
    Likes Received:
    675
    Location:
    wealth mastery
    Did you even read thread title? ''UK Tax - share your experience guys''

    Posting shit like this might encourage some people to visit taxman before he visits them. Duh.
     
  12. LostConnection

    LostConnection Senior Member

    Joined:
    Jul 20, 2014
    Messages:
    1,172
    Likes Received:
    1,350
    Location:
    Grinding away in the night
    Agreed.

    My accountant is a small local accounting firm that offers good fixed rates with 50% upfront and 50% before submitting the annual returns. Got everything sorted quickly and without hassle, and they really know their stuff when it comes to taxes. It really is worth it to have a proper accountant.
     
  13. ORM

    ORM Power Member

    Joined:
    Oct 16, 2013
    Messages:
    716
    Likes Received:
    675
    Location:
    wealth mastery
    true, a good accountant is worth his weight in gold. Mine one was 1st in the list coz I know him since I moved to London.
     
  14. meathead1234

    meathead1234 Moderator Staff Member Moderator Premium Member

    Joined:
    Sep 24, 2008
    Messages:
    3,816
    Likes Received:
    13,933
    If you're making £200k+ a year drop me a PM - I'll intro you to my accountant, pretty good on the higher end
     
    • Thanks Thanks x 1
  15. ardley216

    ardley216 Elite Member

    Joined:
    Mar 28, 2008
    Messages:
    2,391
    Likes Received:
    2,356
    Occupation:
    Finding easy keywords
    Location:
    1,500,000,000 Keywords Re
    Home Page:
    I may or may not do this... ;)

    Also.. If you have a bicycle.. they pay you 20p for every mile you cycle to work.. I take the long route... 10 miles each way.. probably ;)
    The only difference is that I pay myself below NI rate.

    And yes, accountants are highly useful.
     
  16. MafiaBoss

    MafiaBoss Elite Member

    Joined:
    May 5, 2012
    Messages:
    1,522
    Likes Received:
    1,031
    Occupation:
    Currently Un-Occupied
    Location:
    In granny's Basement
    Home Page:
    when there is a will there is a way. migrate to Philippines.
     
  17. ORM

    ORM Power Member

    Joined:
    Oct 16, 2013
    Messages:
    716
    Likes Received:
    675
    Location:
    wealth mastery
    What for? Nice weather? Nah. Philippines' BIR collect taxes from online sellers as well.
     
    Last edited: Nov 1, 2014
  18. MafiaBoss

    MafiaBoss Elite Member

    Joined:
    May 5, 2012
    Messages:
    1,522
    Likes Received:
    1,031
    Occupation:
    Currently Un-Occupied
    Location:
    In granny's Basement
    Home Page:
    there are workarounds for that, and once you are done you will technically paying 0% taxes.
     
  19. heymalc

    heymalc Newbie

    Joined:
    Nov 13, 2014
    Messages:
    15
    Likes Received:
    7
    Location:
    Brighton, UK
    The solution not mentioned here at all (that I can see) is one which is usually missed by the huge majority of UK businesses. There is a structure called an LLP (Limited Liability Partnership) which PWC (a big legal and accounting firm) pushed Tony Blair to introduce in 2000. Blair didn't want to - because he feared people like us would take advantage of it. They needn't have worried - hardly anyone even knows about them.

    (Except all the accountant firms, lawyers, surveyors, etc who all have them.)

    Anyway, Blair had to cave or PWC etc had an agreement with the Channel Islands to pass a law for them, and thousands of firms would have registered there, hitting government revenues. So in a few months they had done PWC's bidding.

    Basically, anyone can have an LLP and it has members, like partners, including a LTD. One huge advantage of an LLP is that you can transfer assets in and out with no Capital Gains Tax. Eg, property, cars, goodwill, assets such as good domain names. With a Ltd company, that would result in a CGT charge.

    If you sold the entity - the same. Company - CGT. LLP - NO CGT.

    Basically, as long as you have some assets in the LLP you can limit your income tax to 20% (with no NI - which is only an extra tax). And you can draw down against those assets - which is different from an LTD - until they have been exhausted. Then you try and introduce some more.

    I've got 3 LLPs, including one with my business property in it (worth approx £500k, $800k) which would otherwise be at risk if one of my other LLPs went pear shaped.

    I hope that's not too confusing! Just something you ought to look into. If it's whet your appetite search for and subscribe to the Schmidt Report available by subscription. He is always writing about LLPs for small businesses. That's how I go interested - 8 or 9 years ago. The main author of that is my own tax guy, Alan. He's a good guy who specialises in helping the smaller biz.

    I suppose you are looking at £2-3k to set up an LLP. But if you are thinking of setting up a Ltd, then an LLP is a choice well worth considering. As your income grows (if you have that sort of biz and hopefully you do...) I think you will find that the benefit of having opted for an LLP will grow.

    I hope this is of interest to a few UK residents. I don't like paying any more tax than I legally have to and LLPs help me do that.

    Malc
     
    • Thanks Thanks x 4
  20. LostConnection

    LostConnection Senior Member

    Joined:
    Jul 20, 2014
    Messages:
    1,172
    Likes Received:
    1,350
    Location:
    Grinding away in the night
    Seems solid advice, I haven't personally looked into those, but have a mate who is an accountant for a real estate company, and surprise surprise, they're an LLP.

    Sounds worth a look, cheers.