New Ltd Company: tax advice needed, IR35, dividends etc

redeye_3

Hi guys,

I've just set up my own Limited Company in order to perform a 12 month computer consulting contract.

My company is paid by an agency, who are in turn paid by the company I'm doing the 12 month contract at.

From time to time, I will have other clients for which I will complete other, much smaller projects.

What things do I need to know about taxation etc in general? What can, and can't I, as director of the company, claim as expenses? My car, car insurance, fuel, mileage allowance etc? Computers etc? Can the company purchase things from me which I previously purchased, such as computers, my car, office equiptment etc?

What about dividends, how do they work? I've heard if I take dividends, the first £10,000 of company profit becomes taxable, wheras it wouldnt otherwise be. How much can I take as dividends? Am I obliged to pay myself or can I rely solely on dividends?

What can I do to avoid or minimise the risk of being hit by IR35? I don't believe I'm a disguised employee because I have none of the benefits an employee would have (paid holidays, sick leave, etc), I am responsible financially for my own training and purchase of training materials such as books, should I need them, and training would be done in my own time, I will have other clients...

Also, I heard somewhere that you can set up an employee benefit trust, into which the company pays money. From this trust assets can be bought and loaned to employees at 0%, but they remain the property of the company. Does anyone have any more info about this?

I guess what I'm looking for is a top down guide to the whole thing, or links to articles or resources which will help me.

Thanks in advance for your time!

Robert_Sterling_3

Ask the Inland Revenue for an appropriate leaflet.

redeye_3

I would imagine the IR want to maximise the amount of money I have to give them.

What I'm looking for are the tips to minimise it.

Pennywise

There are far too many questions to answer here. I'd suggest you look at one of the contractor's specialist web portals.

I would suggest https://www.contractoruk.com

and I would also suggest appointing an accountant with personal service company and IR35 experience as soon as possible

NeilW

What can I do to avoid or minimise the risk of being hit by IR35?

You can't. You are likely already caught by it because you haven't had your contract checked and you are working through an agency. The issue is whether you would have been an employee had you been retained directly by the client. If the client is using an employment agency then what do you think the client sees you as?

I don't believe I'm a disguised employee because I have none of the benefits an employee would have (paid holidays, sick leave, etc), I am responsible financially for my own training and purchase of training materials such as books, should I need them, and training would be done in my own time, I will have other clients...

Good old arguments that have been used by contractors since this first raised its head in 1999. They don't hold any water I'm afraid. On your main contract you are a temporary employee that has been engaged by a fancy sequence of contracts designed specifically to protect the client and agency from any liability in employment or taxation. You, on the other hand, will be right royally stuffed for tax every way up.

Ultimately the question can only be decided in each and every case by a court because every situation is different. However if I were you I'd look at pensions as your tax saving device and forget about any of the other esoteric mechanisms. Your money will come to you via PAYE just like it does for any other temp through an agency.

If you want to know how to get yourself in a position that avoids IR35 for your next contract/renewal, then start here: http://www.pcg.org.uk/freelancing.html

Sorry to rain on your parade, but I'd rather you saw the reality now than in two years when the Revenue is investigating you.

NeilW

Chippy_Minton

I have doubts about companies and organisations like the PCG who say they can draft a contract which will put you outside IR35. It's the reality of your situation that counts as far as HMRC are concerned, not what is written in a contract.

This subject has been discussed before:

http://forums.moneysavingexpert.com/showthread.html?t=77924&
http://forums.moneysavingexpert.com/showthread.html?t=45757

NeilW

The PCG don't say they can draft a contract. What they have is a model contract and if the contractor and the client act it out as written then the contract will be outside IR35.

It's perfectly straightforward to get deal with IR35 in all normal business consultancy arrangements. It only starts getting tricky when you involve employment agents and client HR departments.

NeilW