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    • mgp1000
    • By mgp1000 16th Oct 17, 6:08 PM
    • 4Posts
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    mgp1000
    Contract work and Limited company
    • #1
    • 16th Oct 17, 6:08 PM
    Contract work and Limited company 16th Oct 17 at 6:08 PM
    Hi,
    My wife was recently offered a job which involves her contracting herself out to a company. She has contacted In Touch Accounting to handle her accounts, and she has been advised to set up a limited company for this purpose. They have also advised her that it would save me some tax if I become a partner in her limited company, since I earn less than £40k (i think).
    The contract is for 3 months, with a possibility of extension since the whole project is a long term one.
    Does anyone have an idea about setting up a limited company for the purpose of contracting yourself out?
    If she decides, in th future, to stop contract work and takes on a permanent role , how does this affect her (and me)? Can she simply shut down the company?

    If anyone has any guidance regarding this, it would be a great help!

    Thanks in advance
Page 2
    • motorguy
    • By motorguy 21st Oct 17, 6:16 PM
    • 15,662 Posts
    • 8,973 Thanks
    motorguy
    I don't really want to disclose that, but they wouldn't progress the contactor application until a choice had been made from their approved list.
    Originally posted by happyandcontented
    You really need to get it clear in your head whats happening here.

    Your husband is engaging with the "big name" company through an agency. That agency is taking a fee - possibly monthly, probably off his day rate by billing the "big name" company a bit more than they're giving your husband.

    Neither the "big name" company nor the agency will engage with your husband unless its through his own LTD Co, or as an employee of an Umbrella company. There are various reasons for that. Some of them financial (they dont want to pay Employers NI) and some of them contractual (they dont want your husband accruing rights).

    Your husband will then pay an accountant - either on a year basis (as i do mine) OR on a monthly basis as per what the O/P is describing.

    You've got agency and accountant confused.

    Not one !!!! will the "big name" company give about who your husbands accountant is.
    Last edited by motorguy; 22-10-2017 at 9:37 AM.
    You are not special. You are not a beautiful and unique snowflake.
    • happyandcontented
    • By happyandcontented 22nd Oct 17, 2:00 PM
    • 827 Posts
    • 1,663 Thanks
    happyandcontented
    I am just telling you what happened and I assure you I am not confused.

    I am aware of the differences you mention re agencies and accountants and the company concerned only work via one agency, and they then specify from an approved list both umbrella companies and accountancy firms for their contractors.
    • motorguy
    • By motorguy 22nd Oct 17, 2:16 PM
    • 15,662 Posts
    • 8,973 Thanks
    motorguy
    I am just telling you what happened and I assure you I am not confused.

    I am aware of the differences you mention re agencies and accountants and the company concerned only work via one agency, and they then specify from an approved list both umbrella companies and accountancy firms for their contractors.
    Originally posted by happyandcontented
    So you're saying that a company can tell you who to use an accountant?

    They may well specify the agency, sometimes the umbrella if you're using one - but even at that why would they care? They are engaging with the agency - but definitely not who does your books at year end.

    Nope. I've worked with many "big name" companies - IBM, Computacenter, Capita, some of the biggest councils etc and never have they asked or cared who my accountants were. Thats frankly laughable. So you're saying this "big name" company expects your husband to change accountancy firms for the duration of his contract? Which might be say, 3 months????

    Sure technically you only engage with your accountant at year end and by that point you'd be long gone from the "big name" company.

    Not a pups chance would i ever let a company specify who my accountant should be. !!!! that for a game of soldiers.

    Nah - sorry, but you've got the wrong end of the stick somewhere OR your husband works in some very niche role for a very niche organisation but its by no means "the norm" or anywhere near it that a company can tell you what accountancy firm to use.
    Last edited by motorguy; 22-10-2017 at 3:31 PM.
    You are not special. You are not a beautiful and unique snowflake.
    • happyandcontented
    • By happyandcontented 22nd Oct 17, 2:31 PM
    • 827 Posts
    • 1,663 Thanks
    happyandcontented
    So you're saying that a company can tell you who to use an accountant?

    They may well specify the agency, sometimes the umbrella if you're using one - but even at that why would they care? They are engaging with the agency - but definitely not who does your books at year end.

    Nope. I've worked with many "big name" companies - IBM, Computacenter, Capita, some of the biggest councils etc and never have they asked or cared who my accountants were. Thats frankly laughable. So you're saying this "big name" company expects your husband to change accountancy firms for the duration of his contract? Which might be say, 3 months????

    Sure technically you only engage with your accountant at year end and by that point you'd be long gone from the "big name" company.

    Not a pups chance would i ever let a company specify who my accountant should be. !!!! that for a game of soldiers.

    Nah - sorry, but you've got the wrong end of the stick somewhere - the only remote possibility i can think of is your husband works in an incredibly niche role for a high risk / high security firm which isnt the case here anyway.
    Originally posted by motorguy
    Yes, that could be it. The contract will be 2 plus years.
    Last edited by happyandcontented; 22-10-2017 at 2:34 PM.
    • motorguy
    • By motorguy 22nd Oct 17, 3:54 PM
    • 15,662 Posts
    • 8,973 Thanks
    motorguy
    Yes, that could be it. The contract will be 2 plus years.
    Originally posted by happyandcontented
    Genuinely can think of absolutely no reason why the client would give a monkeys as to who the end contractor use as an accountancy firm.

    Employer engages with Agency engages with Limited Company have the Contractor as an employee, Limited Company employ the services of an accountant to submit HMRC returns. In fact you dont even need to do that, you could do them yourself.

    Why would the client care?

    I could understand if the agency suggested Umbrella companies or accountancy firms, but i cant see why the client would insist?

    I can understand it actually that you'd have to have a Ltd Co or Umbrella Co in place before the agency can engage with you but they've no right to insist or make it a pre-requisite that you use any particular accountant.

    Even IF they have made your husband do that then its certainly not the norm
    You are not special. You are not a beautiful and unique snowflake.
    • mgp1000
    • By mgp1000 13th Nov 17, 6:08 PM
    • 4 Posts
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    mgp1000
    Hi, I've contracted in this way on two previous occasions. You wouldn't be a partner in her company, you would be a shareholder.

    Setting up a limited company for this purpose is very easy, and costs very little; £10 with quickformations.co.uk, who I've used in the past.

    Your wife needs to read up on IR35, and decide whether the contract being offered will be caught by the IR35 rules, to make sure she knows how much she needs to pay herself. (What isn't paid out of the company as expenses is paid out as dividends to the shareholders.)

    If the contract is caught by IR35, she will need to pay out her income mostly as PAYE and NI, which will mean that there will be minimal dividends to pay to you and very limited savings in tax.

    If the contact is outside the IR35 rules, she can pay herself a minimal salary, just enough to pay enough NI to count towards the State Pension, and take the rest as dividends, split with yourself to save tax.

    If in the future she wants to stop contracting and take a permanent job, she just winds the company up. You then cease to be a shareholder. You might also consider becoming a director or company secretary depending on whether you want to take responsibility for the operation of the company. I would avoid becoming a director or company secretary if you can.

    From your point of view, the biggest impact is that you will have to complete a Self-Assessment for Income Tax (unless the dividends you receive are below the personal dividend allowance).
    Originally posted by tacpot12
    Thank you for your reply.

    At the risk of sounding dense, can I ask what advantage it would offer me to be a shareholder or a director of her company? I work for the NHS full time on a permanent contract.
    • tripled
    • By tripled 13th Nov 17, 8:27 PM
    • 2,441 Posts
    • 1,098 Thanks
    tripled
    Thank you for your reply.

    At the risk of sounding dense, can I ask what advantage it would offer me to be a shareholder or a director of her company? I work for the NHS full time on a permanent contract.
    Originally posted by mgp1000
    You get a tax free dividend allowance of 5k per year (possibly dropping to 2k from next April), so between you, you can take out 10k tax free. Plus you can distribute the income between you to get as much out at a lower tax rate as possible.
    • Pennywise
    • By Pennywise 14th Nov 17, 8:23 AM
    • 9,321 Posts
    • 16,919 Thanks
    Pennywise
    You get a tax free dividend allowance of 5k per year (possibly dropping to 2k from next April), so between you, you can take out 10k tax free. Plus you can distribute the income between you to get as much out at a lower tax rate as possible.
    Originally posted by tripled
    But if you're already a higher rate taxpayer, or your income is already close to the H?R threshold, then these opportunities are far smaller and less useful.
    • Firegirl
    • By Firegirl 16th Nov 17, 1:51 AM
    • 721 Posts
    • 2,888 Thanks
    Firegirl
    I’m a contract Test Analyst. If you think the project is gonna last a long time set up limited. My accountant did it all for me and the only hassle was setting up a bank account and insurances. Prior to going Limited I used Parasol umberella company and it was Really easy to set up. For umberella, you are employed by the umberella company and they pay you into a personal account.

    If she’s going through an agency to get the job they will usually help you with knowing what you need to do if you decide to go Limited.
    Mortgage balance Feb 2015 start of MFW Journey-£245316.06/Aim to be mortgage neutral 2022
    Current Mortgage Balance £198, 112
    Target for May 2018 - Somewhere inbetween 2 figures below!!
    19 Year Target Balance MF55= £205, 020
    14 Year Target Balance MF50= £191, 314
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