skoobidude

I've always been fully employed by the companies I have worked for in the past. I now have the opportunity to go "contracting". I've had an offer via an agent to work for an engineering company on a long term contract.

There are 2 ways that I could go about doing this:-
1. PAYE
2. Set up my own Ltd Company

Option 1 works out that I would be no better off financially.
Option 2 offers higher hourly rate and tax benefits.

I'm told that if I set up a Ltd company that I would need a 2nd person involved as I'd need at least 2 Directors. Agent advised that I use my misses. Problem is that she already works.

I spoke to an accountant last week and he advised that I go Self Employed but today the agent says that I can't do that as laws have changed slightly blah blah blah....

Question is:- how do I go about setting up Ltd? I realise that I would need to open separate Bank/Building society Account. I'm also told that I would benefit from reclaiming some tax back by keeping all receipts like petrol and any other work related expenses.

I will be contacting my accountant again on Monday to tell him that I need to go Ltd. But in the mean time guys....
Please help, this is doing my head in!

thanks in anticipation.

Nick

SyHightower

iTrader: (1)

your accountant will do the setting up of a company through companies house, but u need to open a business account yourself, u will need the certificate of corporation to do so.
Your accountant was refering to the IR35 tax law. If hes any good you should blag your 1st year non-ir35, and pay yourself dividends. Claim for everything, petrol, mobile phone, home office costs etc... i even rented my car to my ltd company and made a massive saving. im sure others will be along to offer more advise...

Simon

SyHightower

iTrader: (1)

if ur not sure what IR 35 is look it up on the web. basically means paying the same tax as a permenant member of staff.

HankScorpio

There are a few companies around who will sort everything out for you, I used http://www.accountingit.co.uk for years...

They used to have a spreadsheet on their web page where you could check out differences in routes, not sure if it's still there

HankScorpio

D'oh!

Just checked and it is there.

http://www.accountingit.co.uk/download.htm

muppet.

lubo

I'm in Scotland so it may be different but here you only need a director and a secretary but the shares (usually 2) i think have to be split. Accountants can register ur company etc and that should cost around £100. Tax benefits are far better than if your self employed but only if you earn above a certain level!

Brit_in_Japan

As lubo said, you need 1 director (you) plus 1 company secretary (missus).

If you can get a contract which is IR35-proof, the financial benefits are likely to be better. IR35 was introduced to try and deliberately close what the tax office saw as a loophole where independent contractors pay less overall tax (income tax & national insurance) by paying dividends instead of salary. There are various criteria they employ to decide if you are subject to the rules of IR35. For example the right of substitution (do you have the right, as defined in the contract, to send someone else to work the contract instead of you), do you need to supply your own tools/equipment etc. I am sure if you do a search you will find plenty of information about IR35 and what the current state of play is. Some of IR35 has been challenged in the European courts, with limited success it must be said.

If the contract is worth more than a certain amount you have to register for VAT, which adds another set of paperwork. You can of course claim for expenses such as mileage allowance.

There is another option you can consider, check out "umbrella companies". These are composite companies which can pay you dividends instead of salary and which take care of all the paperwork, tax, VAT etc. They get either a flat rate fee or a % of the contract income for doing all the paperwork, but you can claim expenses when working for an umbrella company.

HTH.

skoobidude

My misses already has full-time job. So I guess she could not become my "secretary"?
Her job is well paid too so I would never expect her to leave it for this.

Nick

JayPSC

I'm actually going onto contract from the end of the month too, can anyone reccommend any umbrella companies?

workshy_fopp

My Mrs is my co. secretary (unpaid) and has a real job so no problem there.
Don't pay someone £120 for a company formation.
I got my last one here, same day for £35
http://www.uk-plc.net/companyformation/


Don't go the umbrella route, that's giving away money.
All you need is a registered company, a bank account and an accountant. You can register for vat and paye 3 months later. I pay about a grand a year for my accountant. Get a recommendation for a local accountant.

BAH

Just go under an umbrella company , much less hastle and they do everything for you..

AndyBrew

IR35 has been brought out to stop people doing exactly what you are proposing so be very careful, the Inland Revenue are a rule unto themselves and if they think your taking the **** they WILL shaft you regardless of what a contract says!

Basically if you only have a single source of revenue then they'll have alarms going off all over the place, if they do decide your a IR35 dodger you will then be liable for all the Income Tax both personal and company!

Also there is no longer a £10K tax free corporation tax incentive as there used to be hence all dividends are subject to corporation tax at some rate.

Plus you can't just claim anything through your business unless its a valid business expenses e.g. Petrol Receipts, you have to claim 40p/mile for 10,000 miles then it drops down to 25p/mile thereafter. Obviously dependent on your accountants level of integrity you'll get away with different things, and then its all down to how easy you wish to sleep at night

tread careful!

skoobidude

Thanks very much. Just formed my own Ltd Company online. Cheers all for great advice.

Now, if anyone wants a good massage, then come down to.....
Just kidding

Nick