to be pissed that a co worker has suddenly got three times my wage and has started avoiding tax

[underpaidworker]

At work another person with the almost identical job as me has just gone to being contractor.

I thought it was just for a few weeks to tidy stuff up but turns our they've signed for a full year!

They now have less responsibilities than me but get paid three times as much. He also is nowpaying less tax and hardly any Ni due to running it through a private limited company. I'm unable to do the same as he is now taking so much of the budget.

Aibu to be seriously pissed off? Less work and more money.

No one else had said anything but I think everyone else is annoyed.

He has made the mistake of looking at his hourly rate and thinking that he will be raking it in.

Once he works out exactly what it is costing him, then I very much doubt he will be any better off.

Look at it this way, your company would not do this if it would cost them more than employing him would. So they are definitely saving something somewhere, probably the holiday pay and pension contributions and any future redundancy payments.

You don't pay tax on the first £39k worth of dividends though.

Well he's gone from about 140 a day permie rate to 425. I really can't see how he won't be much better off. Sure I get some perks but costed in its not much, pension they contribute 5%.

Depending on the type of contracting he could make money on the VAT.

Take out his tax which he will need to save for, all work related equipment he may need, savings to cover periods of sickness and holidays plus any non working time, accountancy costs, pension contributions etc and his bottom line probably wont be any different to yours.

He's an office worker so no equipment.

He won't get any downtime for a year as has signed a years contract. He could have a whole year of not working and still earn more than me doing the same job.

£425 a day is £98k per annum, give or take (including 6 weeks off).

Salary of £8k
Costs of £20k (travel, private pension, private healthcare, accountant)
Corp tax on £70k = £14k
NI = £300
Leaving around £55.5k that can be withdrawn as dividends, £39k of which would be tax free.

So that's private pension and healthcare paid for and £63k tax free in his pocket each year.

More if he has a non-working partner.

63k after tax? That's well over double!

What transport costs did you calculate? The commute will still be the same

He can claim for those miles. It's a guess though.

Ah OK so claiming milage adds to his take home?

He is probably still on a week's notice, even having signed a contract!

My understanding is that you can't just transfer to the same job as a contractor under a limited company. He would need to have contracts / work with at least one other company. If it's a straight swap he is effectively still an employee. It's not allowed. See info on IR35.

If this is the case and you are really annoyed you can always report it.

But Gerti these are also things that a permanent member of staff is required to do as well.

I'm not saying that contracting is for everyone, but really in some cases it's definitely much more profitable than permanent working.

I laugh in our office, the contractors will drag themselves in with bubonic plague like symptoms, coughing and spluttering all over everyone, sometimes barely able to stand. Meanwhile if the permies have a sniffle, they're off for a week until they need to get a doctors note or come back and then they invariably make it in on the following Monday.

Me - I'm permie and p/t and take full advantage of unpaid parental leave and other benefits ( except sickies - never pull 'em). We have the best of both worlds with Dh as a contractor.

He can't claim mileage and he doesn't get paid for every day, only every day that he works. Honestly people, it's six of one and half a dozen of the other. I've done both, I know.

I wish people on here would realise that not everyone is on PAYE and not being on PAYE doesn't necessarily make you either better off or a tax dodger .

He absolutely can claim mileage. And meals.

He will pay 20% tax on his wage, which is presumably just enough to pay NI.
If he has a ltd company he will also pay 20% corporation tax on company profits, which will be his income after all his deductions for expenses etc and he will earn a lot more as a contractor than a permie.
However, this is not strictly allowed as he has switched within the same company and I imagine HMRC will take the view that he is still actually an employee.
If you want to report this to anyone then it would be them but it would probably result in a fine for the company at least.

He won't pay 20% tax on his wage and 20% corp tax unless he's a complete idiot with a shit accountant.

And yes, you can have an existing employer as a client without a break with no problems.

You start paying NI at about £8.5k. You don't pay income tax until £10k. So why would he pay tax on his income if it's "just enough to pay NI"?

Not a chance will he get away with claiming mileage...and if he has left one day and come back the next doing the same job as a contractor 9-5 at the same desk he will be well and truely caught by IR35. Even the most gung-ho contractor friendly ready of the regulations will give him absolutely no get out!

It won't be a fine for the company though - I can almost guarantee that there is a clause in his contract that says that he will be liable for any NI/tax due if an IR35 investigation catches him. And that he has absolutely no claim for employment rights if it does.

£98K for doing office work, I'm obviously in the wrong office