Self Employed vs PLC?

Proppo

Hi, following my last post I'm deffinately considering going on my own as a Multi-Skilled Tradesmen....

I'm currently Registered as Self Employed but I'm just looking for a bit of advice. Can I carry out work on my own as I'm registered as Self Employed? If I surpass £70,000 do I have to register for VAT? Does the £70,000 VAT Bracket take Materials into consideration, is there anyway around it?

If do go Self-Employed, can I use a "trading" name? What if I work alongside my Dad / other Tradesman, can we trade under the same name?

Am I better off creating a Public Limited Company?

I currently have Tradesman Insurance, public liability of £2,000,000 do I require more?

I just want to make sure that I'm covered as I don't want to get any unwanted Tax problems etc. I have an accountant who I've used since being registered as Self Employed....

My biggest concern, is the VAT thing. If I have to charge a further 20% ontop of the job, it could price me out or make it difficult to find work. Would I have to charge VAT on Materials? For example, I buy materials from the supplier, for say £10+Vat (costing £12 total), would I then have to charge more VAT on top of that £12?

Any replies and / or advice is greatly welcomed and appreciated.

GavB79

I should think you would consider a Ltd company first, rather than a PLC.
VAT is on turnover, so yes if you are billing for materials this would count towards the threshold.
There seem to be very many gaps in your knowledge, have you spoken to Business Link or similar?

Proppo

I've just been reading over their website, but the trouble is I think where I'm unsure about it to begin with, it doesn't really make a huge ammount of sense. I meant a Limited Company, don't quite know why I said PLC.

I was looking for their advice meetings, but there aren't any even remotely close to me. I'll look for contact info for them.

From a consumer point of view, would you be put off if you was asked to pay for materials directly? It this allowed? Espescially on the more expensive materials or such, if it helped to keep the price down?

LittleVoice

Proppo wrote: »

Can I carry out work on my own as I'm registered as Self Employed? Yes If I surpass £70,000 do I have to register for VAT? Yes - in fact if you think your TURNOVER looks as though it may be that then you need to register. Does the £70,000 VAT Bracket take Materials into consideration, is there anyway around it? You charge VAT on whatever you invoice. Presumably you pay for your materials and the price your customer pays includes an element for the materials used. Remember it is your TURNOVER that matters, that is the amount you bill, not your profit.

If do go Self-Employed, can I use a "trading" name? Yes - but your need to give your real name on invoices, business letters, credit notes, etc. You are also restricted in what names you can use. What if I work alongside my Dad / other Tradesman, can we trade under the same name? Yes - but if they are partners in the business, their names have to appear too.

Am I better off creating a Public Limited Company? A Public Limited Company requires more capital than a private Limited company. It is supposed to gain you some financial protection in your business affairs but banks or other creditors may want personal guarantees. It is also more time consuming (or costly to pay someone else) to deal with making annual returns.

I currently have Tradesman Insurance, public liability of £2,000,000 do I require more?

I just want to make sure that I'm covered as I don't want to get any unwanted Tax problems etc. I have an accountant who I've used since being registered as Self Employed.... Use the accountant to answer your questions. They should know your business.

My biggest concern, is the VAT thing. If I have to charge a further 20% ontop of the job, it could price me out or make it difficult to find work. Would I have to charge VAT on Materials? For example, I buy materials from the supplier, for say £10+Vat (costing £12 total), would I then have to charge more VAT on top of that £12? You would be able to reclaim the VAT that you paid. Do you mainly work for private individuals or companies who are also registered for VAT?

Any replies and / or advice is greatly welcomed and appreciated. Speak with your accountant.

.........................

Proppo

Well, for 10 years since leaving school me and my dad did a private limited company and 100% of the work was for private individuals. In 2009 when the recession hit, we decided to shut the company down and try to find alternative work. Shortly after, we applied to join a company, which then came as us having to register as being self-employed and we sub-contracted for him. This was for a period of around 2 years (until November 2010) for me. Which was all for Private individuals, but not sure how that's classified?

If I'm NOT working, I'm assuming that I don't need to pay VAT bills if I'm not earning?

Thank you greatly for your reply LittleVoice, the main reason I asked on these forums as it can be quite difficult to get everything down in a phonecall with the accountant. Atleast with these forums if I think of something I've missed I can add it quite easily. I don't intend on inconveniencing anyone by creating this thread and it is hugely appreciated peoples time.

LittleVoice

Proppo wrote: »

If I'm NOT working, I'm assuming that I don't need to pay VAT bills if I'm not earning?
.

If you aren't working then you aren't invoicing anyone, are you?

If registered for VAT but not invoicing anyone then you won't be CHARGING VAT.

If you register for VAT and charge VAT, you have to pay over the VAT you charged (less what you paid) to the VAT-man whether or not you are working at the time the payment is due to HMRC.

runninglea

If you are registered for vat you will still need to complete the relevant vat returns - usually every quarter. Even if nil return

If you bought materials for a job costing £100 then with vat of £20 would cost you £120.

If you billed £200 labour plus £100 materials (net cost) then your total bill is £300 plus vat of £60 equally £360 in total.

Your vat return would be outputs £60
inputs £20

Therefore you owe the vat man £40.

If the company you are working is vat registered then they reclaim the £60

Proppo

I'm assuming that VAt doesn't work like the wage-based tax (I forget what its called), where wage-based tax you ONLY pay the tax over the initial 5000 you earn (or whatever it is)? But if you Register for VAT, regardless of wether you turnover more or less than £70,000 threshold, you have to pay VAT regardless?

Hammyman

Correct. Once you have registered for VAT, all VAT applicable income has VAT applied to it. I highlighted that because there is some income that doesn't have VAT applied such as someone selling used goods who sources them from non-VAT sources, such as private individuals, where the VAT is only on the difference between the price they pay and the price they sell rather than the whole sale price.

VAT can be a minefield and its worth seeking advice from a tax specialist.