[TamDenholm]

I wholeheartedly agree with you, those dodging tax by just operating like a permanent employee but through a Ltd company are on the wrong side of the law. The problem i had is it punishes those operating legitimately.

Lots of laws are like this, for instance the piracy warnings that they used to put at the start of DVD's that only punished lawful users cuz if your pirated it, the warnings would be cut out. Theres many more examples like this.

[pydry]

The only real fix is to tax business owner income at the same (or, ideally, higher) rate as employees.

If the government enforced a higher tax on people who didn't speak with received pronunciation I wouldn't begrudge those who faked it.

I don't doubt that there would an outcry from some corners - both non-earnest and earnest - about the "illegitimate tax dodgers seeking an unfair advantage" who did though.

[Silhouette]

The only real fix is to tax business owner income at the same (or, ideally, higher) rate as employees.

That seems like the perfect way to kill entrepreneurialism and flexible labour. Right now it costs almost nothing to go through the legal formalities of forming a limited company in the UK. However in terms of personal risk and investing your own savings to get the business started and the opportunity costs it can be a huge gamble for anyone who could otherwise be a well-paid professional employee.

We need some people to take those risks and make those investments. Some of those businesses will succeed and then they'll create new jobs and wealth and pay more tax. Of course that also includes employing people in the vast majority who don't want to take those risks and prefer the stability of regular employment.

If there's no reward for taking those risks and making those investments or (as with IR35 umbrella arrangements today) if you're actively penalised for working in a way that's economically useful then obviously it's going to deter most people from doing it. In the long term that doesn't help any of us.

[111615bd]

> I wholeheartedly agree with you, those dodging tax by just operating like a permanent employee but through a Ltd company are on the wrong side of the law.

I'm a permanent employee of a one-man startup that I own. Most of the income at the moment comes form consulting. I pay the exact same tax that I would for any other employee, or that an employer would pay if they employed me. Would you elaborate on how that is dodging tax?

[TamDenholm]

I said that those operating like a permanent employee but paying themselves through a ltd company are dodging tax, based on the limited information you’ve given, it sounds like you’re running a business, not acting as a disguised employee.

You say you’re a startup, that would assume you’re trying to create and offer a product or service from your company for the market, that’s a business. You say your income is currently from consulting, I would assume that means you’re offering a service to one or more clients, I don’t know the details but if you’re offering that consulting service like a business then you’re not a disguised employee.

If however you are working for a company, using their equipment, in their workplace, on their timetable, taking holidays when they say so, where you cannot substitute yourself with someone else and you don’t have any other clients and it’s essentially a permanent arrangement, then yeah, it’s possible you are falling foul of the IR35 law and you should speak to an expert on the subject.