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Thread ID: 82149	2007-08-17 02:54:00	What are the Tax rules on a company which contracts?	sweetinnocence (7223)	PC World Chat

Post ID	Timestamp	Content	User
581885	2007-08-17 02:54:00	Hi Everyone, I can't seem to find anything in plain english which explains the rules on tax for companies contracting as opposed to say a Sole Trader contracting. As i always believed that a sole trader undertaking contracting was taxed at 39 cents in the dollar ... ... and a company wasn't, and would only be taxed at 33% ... . ... can anyone clarify this for me as my partner and i are looking at solely contracting through our exisiting limited company. Thanks	sweetinnocence (7223)
581886	2007-08-17 02:57:00	My understanding is that a limited company is a separate entity, the company income is taxed at the lower company rate, but... The money that you and your partner take out (in wages/living allowance or whatever) is taxed at the personal tax rate 33-36% depending how much you make a year as individuals. PS a 'sole trader' will be taxed at the appropriate rate the same as a salary and wage earner. It's tied to the amount of income per annum, not the company.	Shortcircuit (1666)
581887	2007-08-17 03:53:00	Thanks Shortcircuit, just what i thought.... my accountant is stupid, she was saying that she had set up a contracting code for me, but i would be taxed at 39% and that i could be in some trouble if i got audited.... also as my partner was having to pay out rediculous Child Support payments on two kids, it made sense that we did the contracting thing and left his name out of it. Nothing IRD can do as far as i am aware, many couples do this to minimise the liability	sweetinnocence (7223)
581888	2007-08-17 06:39:00	As a sole trader you will be treated exactly like an ordinary taxpayer, ie at the end of the financial year, your earnings will be taxed in accordance at the tax rate and tax breaks for your taxable income.(ie Gross income less allowable expenses) With the company tax regime there are some advantages - mainly in what you can reasonably claim as expenses, however you need to be careful that you don't create a liability for Fringe Benefit Tax - particularly with a car, this FBT liability does not occur for sole traders or partnerships.	KenESmith (6287)
581889	2007-08-17 06:59:00	39% is only on income over $60k	wotz (335)
581890	2007-08-17 07:08:00	39% is only on income over $60k"39% is only on the portion of income over $60k" - wee bit of added clarification there. So if you earned $61k, the tax on the $1000 over the $60k mark would be taxed at 39% - NOT the under $60k amount... If you're unhappy with or lack confidence in your accountant, you should perhaps consider talking (and maybe taking your business) to another one - perhaps one that someone you know can recommend...	johcar (6283)
581891	2007-08-17 11:26:00	Bear in mind that your accountant (the one who I'm assuming is qualified and all- no disrespect to the other posters here) will know all the facts, as opposed to what you have posted here. I'm not saying that you are hiding anything, but you may not put relevant facts in this thread thinking they are irrelevant. As an aside, if you don't like your accountant, then change to another one. Alternatively, how about asking your accountant to spell out your options for you- that is what you pay them for. Just saying...	Sick Puppy (6959)
581892	2007-08-17 12:20:00	You will find that many so called 'accountants' are not much more than book keepers. Sweetinnocence, check your PM.	techie (7177)
581893	2007-08-18 03:36:00	Your question is a little more complex than yopu realise. If your form a Loss Attributing Qualifying Company (LAQC) then tax losses can be used by you personally against your personal income. The downside is that if the company does well, then you might find the profits flowing into your hands and raising your personal tax rate. A company looks attractive because the maximum rate of tax is 33%, dropping to 30% soon. However you still need to get the money out of the company somehow so you can spend it - and generally that is your personal income - and taxed as such. You see, the company can't pay for your groceries and personal living expenses - that is drawings or wages.	Winston001 (3612)
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