27-07-13, 09:39 AM
There are advantages to not being on PAYE and becoming a self employed sub contractor to your employer but as said, you'd lose most of the advantages of being an employee. I'm on PAYE for the day job but am also registered as self employed for contract work I do as a sideline. I have to fill in a tax return where I put in my income from my PAYE employment from the day job and then have to account for the income from the contract work. The advantage there is that I can claim against tax any expenses I incur as a result of the self employment. When I visit a customer to do the work, I can claim 45p a mile as a business expense, any tools or specialist clothing I buy to do the work, I can claim as an expense. So, unlike the day job, I am not taxed on the full income, only the profit after the expenses have been taken out. BUT, I also have to pay self employed National Insurance contributions on top of what I am paying through PAYE although if my self employment earns me less than £5k a year I can claim an exemption on this.
If I was to take out a loan to buy equipment that I need to do the work, I could claim the interest on that loan against tax. This is how I understand F1 does it. They take out a loan to provide operating capital and the interest payments on that loan are claimed as a legitimate business expense so they are not taxed on that amount. The fact that the loan comes from another, legally separate, company within the same group is irrelevant but it does mean that the money all comes out of the same bucket and doesn't actually go anywhere.
There's a big difference between tax evasion, which is illegal, and tax avoidance by playing the system which isn't. As I previously said, we would all, even VNA, do it if we were in a position to, it's just that most of us aren't.
If I was to take out a loan to buy equipment that I need to do the work, I could claim the interest on that loan against tax. This is how I understand F1 does it. They take out a loan to provide operating capital and the interest payments on that loan are claimed as a legitimate business expense so they are not taxed on that amount. The fact that the loan comes from another, legally separate, company within the same group is irrelevant but it does mean that the money all comes out of the same bucket and doesn't actually go anywhere.
There's a big difference between tax evasion, which is illegal, and tax avoidance by playing the system which isn't. As I previously said, we would all, even VNA, do it if we were in a position to, it's just that most of us aren't.