IR35 and marriage

In the UK there is a tax regulation IR35 which is designed to enable the government to regard a contract or agency worker (such as me) as a disguised employee of the client for tax purposes. Naturally, IR35 is for the benefit of the government, not the contractor. It means that if you stay in the same place for too long and get settled in, the tax man will hit you with income tax and national insurance on the whole value of your invoices without reference to your real expenses. In short, you probably end up paying £xxk more tax than you should.

The key points in determining if you are a disguised employee are:

• personal service
• direction and control
• mutuality of obligation

Source: http://www.pcg.org.uk/cms/index.php?option=com_content&task=view&id=4230&Itemid=291

Now, in my inexpert opinion, a test of a good principle of law is that you can apply the same principle in other areas. Lets take marriage for example. If the tax man can prove that in my relationship with my wife:

• I provide her with personal service with no right of substitution
• She tells me what to do
• I have obligations to continue my contract with her

then of course I am a disguised employee of my wife, and should be taxed accordingly. :)

My conclusion is that IR35 is an unfair tax rule.

Miracles do happen

My accountant has finally - after many many phone calls and emails - managed to produce a version of my company's final account that vaguely represents reality and does not add an unnecessary £1000 to my tax bill!

Freelance worries

I have noticed that I have become more stressed since becoming a freelancer. Better off, yes, able to pay bills, yes, able to start eroding my massive debts, yes. More relaxed, well no.

I suppose I could say yes, since if i wasn't better off I would probably be having my house reposessed by the bank and my children taken into care by the council.

But its not a free ride.

There are three main tax rules that wake me up sweating in the night.

• IR35 - this checks that you are a genuine freelancer and not a disguised employee. I think I am OK but I am borderline.
• The Managed Service Contractor regulations - if the tax man thinks that my accountant is having an influence over my company he can overlook the fact that I am a limited company and tax me as if I was an employee.
• The 'Arctic Systems' case going through the House of Lords at present - Arctic systems is a hsuband and wife that jointly set up a company and share its profits, though only the husband's work brings money into the company. The tax man and the lowest court think he is just giving away his income and should be paying the higher tax rate, the court of appeal say they were legitimately sharing the proceeds of thir joint company. The House of Lords has the final say and is due to report in August.

I woke up from a nightmare recently in which dinosaurs with big teeth were trying to eat me, and as soon as i woke I knew that they represented the tax office.

Render unto Caeser the things that are Caeser's. Yes, but not more than he is legally entitled to. for the first two, my case is borderline - i think I am OK but its not clear cut. For the latter, the House of Lords' decision will impact directly.

My Bulgarian Orthodox colleague is impressed that British people generally pay their taxes, in contrast to his countrymen [he tells me], and thinks it is a joy to pay for the priviledges of our nation. My parents simlarly don't claim benefits they are entitled to.

I would be happier to enter into this joyfully after I have cleared my credit cards.

I am clearly the black sheep. Wealth breeds greed. I resent paying one penny more tax than the absolute minimum that a good tax consultant can prove is required by law.

But am I really wealthy? I still owe £XX,000 to the credit cards and have a £XXX,000 mortgage. God also instructs us to pay our debts and to bring up our children. So charity to the govornment will have to wait.

Plus, the fact that I am running a company as well as doing my normal work, ie doing extra hours, and getting stressed by it all, should mean that I earn more than if I was just an employee.

Ultimately I believe God has brought me to this place, and will try to rest in Him, whatever the tax man decides.

Tax morality

I am now supposed to be glorying in my new role as director of my own company. However, life never runs smooth. In view of changes to the tax regime there have been huge numbers of people doing just the same, and this means that my company's bank, which should have foreseen the problem, can't cope with 18,000 simultaneous applications for new business accounts from people like me.

So I am still being paid through the old system subject to the new tax regime and paying far more than i should. AAARRRGGH. [Some of my colleagues are in a worse situation, having been abandoned by their respective partners and not getting paid at all.]

But all this raises questions. The tax regime has changed to stop people abusing the old system. Was i abusing the old system? Is it moral for a Christian to seek out the most 'tax-efficient' arrangement? Should he not willingly pay extra into the state which guarantees his welfare? Great theory, but little comfort when I have 6 kids and a mortgage.

Quick update

Pregnancy: Mrs is having strong morning sickness - not at all fun, but it makes her happy to know she is still pregnant. we will soon get a date for the first scan, at which we will find out of she is getting her hearts desire of twin girls. Lets not get over-optimistic, lets keep our feet on the ground, lets remember that many faithful Christians have asked God for twins (or any baby) and not received it. But we do have a good God and we keep asking.

Training: Finished my placement project. This was quite hard, as it had to be signed by the Vicar of the placement church, so I hd to be more diplomatic than I felt. However, he seemed quite pleased with my 7000 word report. I then discovered the guidance note which said I should only have writrten 1500 words. Oh well...

Prayer Request: I can't give details but there is a fly in the ointment which may prevent me from becoming a Reader all. I can't imagine God has brought me this far for nothing, but he does occasionally bring us down just to remind us who is in charge, before lifting us up again with even greater blessing (like Job). But please pray that He will take me along the easy path!

Work: Having a great holiday. Would have been better if I had submitted my timesheet last week so that I would have got paid this Friday. Getting ready for the lunchtime Alpha course. I was supposed to be printing the posters over the holiday, but I'm not clear about the details, and it is all going wrong. Please pray for this too. please pray also for a friend who is not allowed to advertise her work place christian fellowship in case it upsets the muslims in her company and its clients.

Car Tax: well I got all the paper work through at last, but not before I got fined £40.

Frustrations - the criminality of incompetance

So - I am a criminal. Not yet prosecuted or anything, but still a law breaker. I have not yet paid the tax on my minibus.

It was due at the end of September, but you get 15 days grace to sort it out.

Unfortunately I got in a muddle, and thought that it was the end of October and I would be able to pay with my first paycheck of my new job.

Come the day I am supposed to pay I look for the supporting documents:

1. The vehicle registration document
2. The MOT certificate
3. The insurance certificate.

I can't find the first, but never mind I can use the reminder note that they sent me. I have got the insurance certificate, but where is the MOT? Oh dear, I have found it, and it ran out in March. Since hen i have been driving illegally.

I am now 7 weeks late. I put the minibus in for its MOT test - it fails - it takes a week to get it put right.

Try to pay the tax again....I look for the supporting documents:

1. The vehicle registration document
2. The MOT certificate
3. The insurance certificate.

1 is still missing but i can use the reminder note - oh no, that can't be used after the original 15 days grace, long spent.

Also the insurance certificate, which i had found, has been replaced by the one from the previous year.

I phone the department, at least to let hem know I am trying. I only get voices reading irrelvant options, all of whihc refer me to the website. I try the website - it recomends a phone number, on which I only get voices reading irrelvant options, all of whihc refer me to the website. I try the website - it recomends a phone number, on which ... stuck in loop.. abort.

Finally manage to speak to a human being.. who operates a computer which recomends i look at the website...AAAAARRRRGGGHHHH!!!!!!!!!!!

Eventually download two forms - one is an application form to pay the tax, the other is for a new vehicle registration document which will cost an additional £19 on top of the £165 tax. I will try to print these out tonight, fill them in, and hopefully post them in the morning.

Until then, by non-payment of the tax, I am still a criminal, just becasue I am incompetant and can't organise my filing better.