Director of Ltd Company will be doing some CIS work as a sole trader (he is registered as an individual) as work has dried up for the Company. The Company is a CIS subcontractor.
Can the Company hire the van and tools to him in order to carry out this work, and in particular with the van, it's registered to the Company and has only been used on Company business up to press. At present he claims 100% fuel costs so no VAT fuel surcharge, would this be affected.
I'm thinking maybe BIK but arguing with myself as it's not for the benefit of the employee but use by a bone fide self employed person, even though they are one and the same.
-- Edited by Leger on Monday 7th of February 2022 11:42:06 PM
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
The thing that comes to my mind (and no doubt HMRCs) is if they can work as an individual why can they not work through their company?
I'm assuming here company VAT registered, individual not. Company reclaiming VAT, individual not charging it.
I'm the wrong person to be answering CIS questions but I'm looking more at the big picture and thinking seperation of convenience? Why can he find work as an individual but not a company unless its because he's 20% cheaper if thats the case then its take a stp back and take a look at the bigger picture of whether this is a case of a director robbing the company of income which undermines their fiduciary duty of care.
I'm probably overthinking this just from the short description of the scenario.
If the businesses did completely different things then that would be different but this sounds as if you have the same person, running two businesses, both doing the same thing.
Sorry, I'm thinking that I must be misreading it.
All the best matey,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The thing that comes to my mind (and no doubt HMRCs) is if they can work as an individual why can they not work through their company?
Hi Shaun
Had this with a few of my clients, one where a Contractor refused to give my client any work as a Ltd Co but happily sub-contracted to him as a sole trader, I think the new IR35 rules scared him!
Also had a few builders where homeowners have point blankly refused to deal with them as Ltd Companies, I think this is down to all the bad press about cowboy builders and not being able to pursue a Company for not completing the agreed works, where as it is easier to go after a sole trader.
Hi John
I agree that it should be a BIK, the van still belongs to the Company and they are still an employee of the Company using the van for private use, you can pro rata it for the period of private use which would not work out to expensive and if they put there own fuel in there will be no fuel benefit, with the tools I would not even worry about it unless you are talking about significant plant & machinery.
As Shaun says if the Company is VAT registered you may need to look at the VAT disaggregation rules.
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Thanks Doug, that's good news, agree with you on the tools.
Thanks for the heads up on disaggregation, that hadn't even crossed my mind. He's going to have to decide whether to deregister (nowhere near VAT threshold) or register for VAT as a sole trader.
I've just looked at his vat returns last year and the vat input was a grand total of £600 vat, so I think it's going to make sense to deregister, as this may not be a one off.
Just a question on BIK, as I've had little involvement in them. The benefit for the year is £3500. Is this what he has to pay (pro-rata) or is it just the tax (20%)
Thanks Shaun.
As Dougie said, it's in connection with IR35, and since his last contract finished has struggled to find any other work through the Ltd.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
The benefit of £3,500 (pro rata) will be reported on the employees P11D and he will pay income tax on this, the employer will have to pay Class 1A N/I of 13.8% on this amount and reported on the P11D(b)
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
