Starting a Ltd Company

TheStone

rjsterry wrote:

VAT is a separate issue: you can be a sole trader and still be VAT registered. Similarly, I'm pretty sure that at a one off £35K contract, you wouldn't HAVE to be VAT registered as a Ltd. Co., although it might raise a few eyebrows if you weren't.

Good point. For 35k, you wouldn't have to register.

DDD, one other point on taking dividend. If you have other income over the year that takes you into the 40% tax band, you will be liable for the 25% on divds.

As a rough guide, anything in the upper (now middle) band.
Wages = 48-49% total tax
Divd = 41-42% total tax

bigmat

TheStone wrote:

Sketchley wrote:

However, my firm employs 100+ people many on temp / casual contracts but we always handle the PAYE for them as they are low value and we don't use agencies.

Slightly OT, but how does that work legally?

I thought the main reason to use a contract or agency was so you wouldn't have any responsibly towards the 'worker'. Can you pay someone PAYE without also giving them full employment rights?

I suspect even sacking someone in a probation period isn't that easy, but a contract/temp very simple.

My employment law is a bit rusty, but basically you have to work for a certain period to accrue a lot of your rights as an employee - 12 months I think, although the good old Tories were trying to change that to 2 years (if they can't get rid of employee rights altogether).

sketchley

TheStone wrote:

Sketchley wrote:

However, my firm employs 100+ people many on temp / casual contracts but we always handle the PAYE for them as they are low value and we don't use agencies.

Slightly OT, but how does that work legally?

I thought the main reason to use a contract or agency was so you wouldn't have any responsibly towards the 'worker'. Can you pay someone PAYE without also giving them full employment rights?

I suspect even sacking someone in a probation period isn't that easy, but a contract/temp very simple.

The employees on temp / casual contracts still have rights regardless of method of payment, things such as one week equivalent paid holiday every 13 weeks, SSP, that kind of thing. You still pay for those if you go via an agency it just part of the fee. For contracts less than one year any employee has very few rights and virtually no right to claim unfair dismissal other than the right to be paid notice. Hence in "probation period" you can simply pay notice and say goodbye, it's also why it's often the case that there are short notice periods (one week) during probation period. An agency can have a big problem if employee works for them for more than a year, so often contracts won't be for that long. At lot of our contracts are casual contracts, perfectly legal, they work when they are available and when we have work, rights increase somewhat on such contracts only when we promise work on certain days / time or an amount per week, month or year, or we expect casual employee to be available all the time. These kind of contract only work if they are two way, we don't guareenty work and they don't agree to be available and this is accepted by both side. As above they still get holiday pay....

TheStone

Sketchley wrote:

The employees on temp / casual contracts still have rights regardless of method of payment, things such as one week equivalent paid holiday every 13 weeks, SSP, that kind of thing. You still pay for those if you go via an agency it just part of the fee.

So if you give them a contract directly and pay via PAYE, it's you responsibility to give them holiday/sick pay? Otherwise it's with the agency or limited company (themselves).

sketchley

There's other stuff but yes, that correct.

Another one would be making them redudant at the end of the contract (if over a year), or paying them notice to end contract early. If paid via PAYE these cost are employers, if contracted via third party it's third parties responsibility to pay them to the employee. However the employer is still paying it, one way or another, either through higher rates or contracted fees.

t4tomo

Definately go thru an umbrella for that length contract at that pay level. It isn't worth the hassle or fixed cost of setting up your own ltd company. Basically you'll get some tax relief on your travelling expenses and lunch allowance so be a little bit better off than PAYE.

I'm an accountant, have worked in recruitment industry and been a contractor!

daviesee

DonDaddyD wrote:

Is it really that hard?
.....

Just so you don't think I have been ignoring you, but I have been busy.
I think you have a better grasp now and have been getting good advice anyway. :P

Another vote for umbrella company as the rate is low and the term short.

navt

FWIW sell your bikes to your LTD company and get them to claim capital allowances

Set up a R2W scheme for directors so they can replace their bikes every year

daviesee

navt wrote:

FWIW sell your bikes to your LTD company and get them to claim capital allowances

Set up a R2W scheme for directors so they can replace their bikes every year

Seriously,
As a ltd company you can buy company bikes as long as they are used by "all" employees.
Also, if on the Flat Rate VAT Scheme you can claim back VAT on any total order over £2000.
And, the company can supply hi-viz jackets (non-specific on price ), helmets, lights....all safety gear.
Plus the company can supply your cycling employees with a "free" breakfast.

All off the top line so tax free. :P

tailwindhome

daviesee wrote:

navt wrote:

FWIW sell your bikes to your LTD company and get them to claim capital allowances

Set up a R2W scheme for directors so they can replace their bikes every year

Seriously,
As a ltd company you can buy company bikes as long as they are used by "all" employees.
Also, if on the Flat Rate VAT Scheme you can claim back VAT on any total order over £2000.
And, the company can supply hi-viz jackets (non-specific on price ), helmets, lights....all safety gear.
Plus the company can supply your cycling employees with a "free" breakfast.

All off the top line so tax free. :P

But....Tax Avoidance is bad. No?

daviesee

TailWindHome wrote:

But....Tax Avoidance is bad. No?

Tax evasion is bad, legal tax avoidance is fair game.
All the above is basically a Government bribe to get people out of cars and onto bikes.
There is no legal problem and I don't have any moral problem with it either.

mostly harmless

Just as a general note to this thread you shouldn't be afraid of engaging an accountant. Any accountant who is even halfway competent should, at the very least, be able to save you enough to easily offset their fee.

tailwindhome

Maybe I should use more emoticons.

Naw. It's fine as it is.

navt

TailWindHome wrote:

But....Tax Avoidance is bad. No?

Not if it promotes cycling

DonDaddyD

Alright, so I spoke to my Uncle and Aunt who do this and are minted.

Everyone is saying the same thing. Accountant - which the aunt is - and due to the short term, Umbrella is the best way forward.

So, anyone want to point me in the direction of finding an Umbrella company that will sort my collective tax and not run off with all my money?

Kieran_Burns

DonDaddyD wrote:

<snip>

So, anyone want to point me in the direction of finding an Umbrella company that will sort my collective tax and not run off with all my money?

dhope

DonDaddyD wrote:

Alright, so I spoke to my Uncle and Aunt who do this and are minted.

Everyone is saying the same thing. Accountant - which the aunt is - and due to the short term, Umbrella is the best way forward.

So, anyone want to point me in the direction of finding an Umbrella company that will sort my collective tax and not run off with all my money?

I used 'No Longer Limited' about 10 years ago on a short 3 month contract. They've got a different name now.
http://www.crystalumbrella.com/

I don't remember them being especially awesome or bad. They did the job.

I can't remember if I was inside or outside IR35, though it was only equiv of £50k pa for 3 months while I was at uni, so the figures were so small that it probably didn't matter (i.e. I was well below the 40% threshold when you looked at the whole year)

daviesee

TailWindHome wrote:

Maybe I should use more emoticons.

Naw. It's fine as it is.

Could be read a couple of ways so I thought I'd clarify just in case.

By the way......

DonDaddyD

How does one determine if they are inside or outside IR35?

I've read various websites and its not clear.

sketchley

DonDaddyD wrote:

How does one determine if they are inside or outside IR35?

I've read various websites and its not clear.

Just ask yourself if you were being paid directly would you be a full time employee if so then yes IR35 applies. From your pm yesterday I'd say IR35 clearly applies.

tailwindhome

Sketchley wrote:

DonDaddyD wrote:

How does one determine if they are inside or outside IR35?

I've read various websites and its not clear.

Just ask yourself if you were being paid directly would you be a full time employee if so then yes IR35 applies. From your pm yesterday I'd say IR35 clearly applies.

That website you posted earlier (the one with the calculator) explains it pretty well.

This thread may have made up my mind to get the finger out and do the tax exams....

TheStone

DonDaddyD wrote:

How does one determine if they are inside or outside IR35?

I've read various websites and its not clear.

Ignore IR35. Poorly thought out, mostly unenforced, nonsense.
http://www.channelregister.co.uk/2009/0 ... _revenues/

If the govt really cared they'd stop raising the hidden (employers) side of national insurance and raise income tax instead.

It should only really be a concern if you've gone from perm to contractor for the same company.

sufferingpete

I set up a limited company to do Contract Engineering Design. Setting up the company is easy a couple of forms and a cheque to companies house.
Administering the company is hassle - submit annual accounts and administering a payroll. To do this yourself takes a lot of effort especially if like myself you are not an accountant. I paid an accountant to check the books I did the books myself - it costs £60 per year 10 yrs ago but this is an ongoing cost unless you wind the company up. Others pay the accountant to do everything and they send the receipts and invoices I don't know how much this costs.

In addition you have to fill in an annual tax return form. The first one will be a nightmare since you have to read all the guidance. Subsequent years you just update the same questions as last year and it is easy.

If you take on a liability you may risk to consider insurance consultancy requires PI which will have to be continued after the work

3 months is a short period to go through this I would seek alternatives -umberlla or agancies. It's possible to become a director of these type of companies for a short period.

DonDaddyD

Thanks to all for the advice.

I have decided to go with a PAYE Umbrella company due to uncomplicate things.

mtb-idle

DonDaddyD wrote:

Thanks to all for the advice.

I have decided to go with a PAYE Umbrella company due to uncomplicate things.

Which, rather ironically, is quite a complicated sentence.

Mr_Cellophane

A mixture of good, bad and totally wrong advice so far.

1 - I work through my Ltd company and pay myself £620 a month salary. There is no NI or tax on this as it is too low. The NI doesn't matter to me as I have worked for the Man for over 33 years so have reached the limit for pension etc.
2 - Don't pay yourself dividends every month this is far to often and HMRC will see this as a salary and come after you. I only pay a divi when I need some extra money
3 - If you are only earning £620 a month you are well below the threshold to pay any of your student loan back
4 - IR35 rules got tighter in the budget, so read up on the latest changes, might affect everything
5 - You can claim £500 a year for using you home as an office, £25 for your employees and one guest each for the "office party" (you need receipts for this, so a weekend away with the Mrs is as good a way as any, I used to claim taking the kids to the panto and a meal after). all you mobile, internet and home phone bill if they are in the company name, or 80% if they aren't
6 - Get a good pension and stick some money in there
7 - A pool bike which is available for the shared use of all your employees can me claimed along with servicing and any parts. Although if you go that way, you then can't claim 20p a mile for using it for work.
8 - On a daily basis, you can claim meals and travel to your temporary place of work.
9 - Register for V.A.T. as the gains to be made there are worth it. The small business flat rate saves V.A.T. accounting and can prove advantageous.

4 & 8 are the only ones out of the above that you can still get if you go umbrella and in most cases they will take more than an accountant will.

Mr_Cellophane

DonDaddyD wrote:

Thanks to all for the advice.

I have decided to go with a PAYE Umbrella company due to uncomplicate things.

I take it have never seen an Umbrella company pay slip :?