Going Ltd?

gb12345

RoxieW wrote: »

"If you are married then your spouse could also receive dividends (depends on their income from other sources) again below HRT limit"

Please could you expand on this further. I am married, yes, and my husband works for an architect's practice (soon to become a self-employed partner but currently salaried at £38k. He also helps me out with keeping records, proof-reading and my 'IT support' as he calls it

The company could be set up so that both you and your husband were shareholders and therefore would both receive dividends. It is probably not really worth doing in your case, as your husband is already relatively close to the HRT limit, so you would always be having to keep an eye on the dividends you paid otherwise his might get taxed.

It is also not worth you paying him a salary for the "work" he does for you as he would automatically be taxed at basic rate tax and it would just cause you additional work (or accts costs) having to sort out his PAYE.

WHA

Mistral001 wrote: »

Good points, but how can you find out which VAT scheme prospective clients are on? Would prospective clients give out such information? I am thinking mainly of the flate-rate scheme in particular.

You've got to look at your client base. If they're mostly large firms, i.e. with 5 or more staff etc., then they'd probably be outside the thresholds for the flat rate scheme. If they're mostly "one man" firms, such as IT contractors, tradesmen, small shops, etc., then they'd probably mostly be in the flat rate scheme. You could also ask a sample of your clients who you're on good speaking terms with - i.e. "If I was registered for VAT, would it affect you, would you be able to reclaim it?".

WHA

Mistral001 wrote: »

I have read books on "keeping businesses small" but i am not convinced that it can be done without becoming stale. For example, one way of staying small in your case would be to get rid of your freelancers, but do you get fresh ideas and thinking from them that helps you in your own work?

I'm a "one man" business, deliberately keeping turnover below the VAT threshold with no staff etc. I don't do much basic, low value work such as payroll and book-keeping and instead concentrate on the higher value tax planning and business development work. Other than small office overheads, all my income is my own.

People often mention about lack of work colleagues, etc., but I've never found that a problem. I use forums such as these a lot, so that I keep an eye on current trends, problems, etc. - I've learned a lot from forums and hopefully given a lot back in answering questions. Also, a lot of my clients are similar professionals, such as independent financial advisers, solicitors, health professionals, interpretor, web designers, and book-keepers/virtual assistants, so I may not work in the same office, I still have a "network" of people I can talk to and bounce ideas off, either in person, by phone or email.

I'd say that via the forums and a professional network, I'm more "in tune" with the business market because it's almost an infinite amount of real life experience that I can tap into. I don't think that having work colleagues and dealing with a bigger fixed customer base would be any better - probably worse.

Currently, I'm working on a new direction to "gear up" the business - hopefully to keep the same income levels (just under £79K ) but working fewer hours to achieve it, and also create a more sell-able business (and at a higher sale value) for when I come to retire in a few years time. This will again be by releasing some of my time spent on the less profitable work so that I can spend more time on more fruitful higher grade work.

I really don't think that my business is stale.

jkpd

Hi Roxie and well done, I have a ltd vat reg company, from a tax point of view, you need to form a ltd asap.
Their is no extra paperwork involved for me as a ltd because my accountant does it all for me, all we do is sign the paperwork.
Regarding vat, my accountant has my books every quarter and sorts it all for me, this cost's me £130. I pay my accountant around £2000 per year in total.
Our tax bill is always due around 9 months after our year end.

registering for vat, as has been said already, this will depend on your clients, as a building contractor it has pro and cons, but for me mostly pro's.

Also make sure you have a accountant you can trust to give you good advice, thanks to my previous accountant's bad advice I paid an extra 50k tax over 10 years due to not being ltd . Regards and well done!!

AbbieCadabra

As a ltd. vat reg. company, we used to pay a local accountant approx £1400 net per year for yearly accounts & 2 directors tax returns (i do monthly accounts, vat returns, payroll & annual return which only takes about 5 hours a month). We now pay an online accountant approx £540 net for exactly the same service.

notanewuser

DH and I have a ltd, vat registered company that turnover around £120k per annum (so far). We pay £1000 per year for an accountant, who does everything except the vat returns, which I do myself.

I spent a fair bit of time at the beginning setting up spreadsheets etc, so now it takes about an hour a fortnight to invoice and put the info into the spreadsheet. We're on the flat rate scheme, so we charge 20% of the net charge and pay 13.5% of the total invoice (including the vat). Every 3 months it takes about 20 minutes to check the figures and submit the vat return online.

It took me about 2 hours to get everything ready for the accountant to do the accounts.

We'll pay around 10% in tax, compared to 35-40% if we were working PAYE.

Suarez

This may be a stupid question but what if 2 Ltd companies were setup like My Company (East Countyshire) and My Company (West Countyshire) then you wouldl't need to register as the income would be split.

WHA

Suarez wrote: »

This may be a stupid question but what if 2 Ltd companies were setup like My Company (East Countyshire) and My Company (West Countyshire) then you wouldl't need to register as the income would be split.

Google "HMRC VAT artificial separation" and you'll have your answer as to why this idea doesn't work.

DJBenson

I'm confused why anybody would want to avoid VAT registration, especially if signing up for the flat rate scheme as you effectively make a small profit on every pound of VAT charged on to the client/customer.

I've been an IT contractor since August last year, I decided to go LTD and VAT registered from the off and have already made decent amount from the FRS and also claimed back the VAT on a large capital purchase (spending £2k of the companies money cost "me" £1400 after VAT and offsetting of corporation tax).

Also, I pay £125+VAT for my accountant and they ensure I am as tax efficient as possible - my current tax efficiency is around 12% which I think justifies the monthly accountancy fees.

Mistral001

DJBenson wrote: »

I'm confused why anybody would want to avoid VAT registration, .

Here is one good reason:
https://forums.moneysavingexpert.com/discussion/4564569