Terry T:
robbo99.:
The £1 an hour extra that the ltd co driver gets is just the beginning of the benefits he / she gains, they draw a minimum salary which incurs no ni liability and no income tax liability, they then offset certain business costs against their tax and also draw remainder of profits (wages) as dividends which has a tax free threshold which once reached is taxed at low rates above and beyond, and no ni to pay on dividends. When full expenses were claimable and the flat rate vat scheme were so generous it was kerching all round. The writing though now is on the wall.You’re looking at it from the wrong angle.
There’s loads of jobs on places like Indeed and Reed offering Class 1 work for £11-12 per hour on days. This sounds like a decent rate until you spot that it’s LTD or Scumbrella.
In the past when I was an engineer when doing the LTD scam (coz that’s what it was/is, a scam) we always got 25% on top of the PAYE guys. Not that there were any. None that I knew anyway but hypothetically. If you subtract 25% from £12 it’s actually quite a poor paying job but drivers only see the biggest figure and think they’re quids in. They then have to make it pay by making untold spurious expenses claims which will probably bite them right on the ■■■ at some point in the future.
Some companies have whole sections of their workforce on this scam. Like DHL drivers at JLR. Most are agency drivers running LTD companies. There’s ads for them on every job site I’ve ever been on. I’d be very surprised if HMRC don’t have them in their sights for a future full on ■■■■■■■ job.
So many drivers willing to do this has pegged the overall wages at the LTD rates which you need to make ridiculous expenses claims to make them look good.
The norm for ltd contractors is to draw a small salary which incurs no NI but gains NI credits and draw the remainder as dividends which also incurs no NI. PAYE pay Class 1 NI. Rightly or wrongly having no NI liability makes a very big difference to pounds in the pocket.