IR35 and Leverage: Difference between pages

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imported>Doug Williamson
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''UK tax''.
1. <br />
Debt divided by Debt plus Equity = D / (D + E).<br />
<br />
<b>Example</b><br />
If the amounts of debt and equity were equal then leverage under this definition would be calculated as:<br />
1 / (1 + 1) = 50%.<br />
<br />
2. <br />
The term 'leverage' is also used in a broader sense to refer to the amount of debt in a firm's financial structure.<br />
Used in this broader sense, 'leverage' means very much the same as 'gearing'. <br />
However, leverage and gearing are normally quantified by different calculations.<br />
<br />
3. <br />
To increase the level of gearing in an operational or financial structure.  The intention of leveraging is to improve expected net results.  <br />
A consequence of leveraging is normally to increase financial risk.<br />
Many financial disasters have been a consequence of leveraging up excessively in this way in earlier periods.
<br />


Legislation designed to combat the avoidance of tax and national insurance contributions by nominally independent contractors deemed to be effectively employees.


Additional Income Tax and National Insurance is payable, as if the contractor had been employed directly by the client.
== See also ==
* [[Debt]]
* [[Deleverage]]
* [[Gearing]]
* [[Leverage ratio]]




== See also ==
===Other links===
* [[Income Tax]]
[http://www.treasurers.org/node/8012 Masterclass: Measuring financial risk, The Treasurer, July 2012]
* [[National insurance contributions]]
 
* [[Tax avoidance]]
[[Category:Corporate_finance]]

Revision as of 12:12, 29 May 2015

1.
Debt divided by Debt plus Equity = D / (D + E).

Example
If the amounts of debt and equity were equal then leverage under this definition would be calculated as:
1 / (1 + 1) = 50%.

2.
The term 'leverage' is also used in a broader sense to refer to the amount of debt in a firm's financial structure.
Used in this broader sense, 'leverage' means very much the same as 'gearing'.
However, leverage and gearing are normally quantified by different calculations.

3.
To increase the level of gearing in an operational or financial structure. The intention of leveraging is to improve expected net results.
A consequence of leveraging is normally to increase financial risk.
Many financial disasters have been a consequence of leveraging up excessively in this way in earlier periods.


See also


Other links

Masterclass: Measuring financial risk, The Treasurer, July 2012