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EDITIONS
Working Lunch Tuesday, 1 April, 2003, 15:38 GMT 16:38 UK
Milkmen choose company status
Milkmen are looking to save money
Dairy Crest's 900 milkmen and 10 milkwomen are being encouraged to turn themselves into one-person companies.

They have been told that they could end up paying little or no tax.

Each milk round is run as a franchise, which individuals take on from Dairy Crest and operate for a profit. Until now it has been the norm to work as a self-employed sole trader, paying personal tax in the usual way.

Dairy Crest
Dairy Crest offer subsidised bookeeping

But Dairy Crest's panel of accountants has been informing milkmen that they can take advantage of "opportunities" introduced in Gordon Brown's Budget last year.

All they have to do, they have been told, is to conduct their business through a new limited company.

The company pays the milkman a salary roughly equivalent to the annual personal allowance of 4,615, which is tax free.

The first 10,000 of profit which the milk round company makes on top of that is also free of tax, under Gordon Brown's new rules. The milkman can take that money as a dividend.

Christine Purnell, whose husband is a milkman in Somerset, alerted Working Lunch to the dilemma families like hers are facing.

My husband wants to go forward with it, but I still feel a bit edgy about it.

Christine Purnell

Although the gains sound impressive, she is worried about accountant's fees, which add up to 800 in the first year. And she fears that some business costs, such as phone calls, will not be chargeable against tax in the same way.

200 Dairy Crest deliverers have taken the suggestions on board and started their own companies.

However, Bob Rothenberg, partner in the London accountancy firm, Blick Rothenberg, warns sole traders to think carefully before making the the move.

There are a number of statutory requirements which are your responsibility.

Bob Rothenberg, Accountant

Dairy Crest told Working Lunch in a statement, "One of the business services we offer franchisees is subsidised bookkeeping via a list of approved accountants.

"These independent accountants therefore wrote to all franchisees advising them of this opportunity but making it clear that it was entirely each individual's choice."

Because of the franchising of milk rounds, a Dairy Crest milkman exists in a peculiar business structure. But other sole traders will be anxious to discover if they can take advantage of the same tax break.

Freelance contractors in the information technology industry have pointed out that they were prevented from exploiting a similar opportunity 3 years ago.

The Inland Revenue introduced a new rule, called IR35, which allowed the taxman to bypass one-person limited companies and tax the worker in the normal way.


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