Limited Company Pre-Formation Expenses

kar999

After carefully doing the sums, I have recently formed a Limited Company trading as a Consultant. I know I can claim back certain pre-formation expenses incurred such as the Company Formation Company cost (I used Companyformations247). I also understand this is a one-off non-deductible expense but can be claimed back as an out of pocket personal expense.

The final decision to form a limited company was only made after extensive discussions to secure a contract with a potential client which involved significant travel expenses pre-incorporation.

Does anyone know if these travel expenses can be classifiedas pre-formation expenses? This sites eems to suggest I can.

http://www.contractorcalculator.co.uk/claiming_contractor_limited_company_start_expenses.aspx

Thanks in advance.

Brassedoff

Up to a point in time (usually no more than 8 weeks) as far as I know providing you follow it up with incorporation and registration.

Are you working on IR35 or via the umbrella?

You need to ensure you are working on the right terms far more than worrying about pre-formation expenses. Get it wrong and you will end up being classed as an employee of the firm you contract yourself to.

kar999

I'm working as an independent Limited Company outside IR35.

I'm primarily engaged through an Agency (rather than an umbrella company) having signed their Regulation Opt-Out agreement which endeavours to produce a contract to minimise risk to IR35. I also have other independent clients.

Wywth

kar999 wrote: »

I'm working as an independent Limited Company outside IR35.

I'm primarily engaged through an Agency (rather than an umbrella company) having signed their Regulation Opt-Out agreement which endeavours to produce a contract to minimise risk to IR35. I also have other independent clients.

If you are working through an agency, supplying one end client, what makes you think you are outside IR35? :huh:

Signing an opt-out agreement won't wash with HMRC I'm afraid. They will consider how you are actually operating.

Maybe HMRC will consider you fall within IR35 for some of the work you do, and outside for other?

kar999

I do have multiple clients including the main one through an agency which may as you suggest possible fall within IR35.

I'm medium risk when I did one of the online calculators but if the truth be known I'm not entirely convinced either!!

Wywth wrote: »

Signing an opt-out agreement won't wash with HMRC I'm afraid. They will consider how you are actually operating.

EDIT: The opt-out agreement means that the Agnecy uses a specific contract drawn up by tax lawyers that has been written to minimise the potential impact of IR35. As you say, what happens "on the ground" however still determines the individuals risk to IR35.

InsideInsurance

kar999 wrote: »

I do have multiple clients including the main one through an agency which may as you suggest possible fall within IR35.

IR35 is judged at a contract level not company level. As others have said, you could be found to be inside IR35 with some clients and outside IR35 for others.

If you look online at the number of umbrellas/ agencies etc all claiming to have ex HMRC directors approval or Tax Lawyer experts (the fact they use the phrase lawyer in itself is a worry for a british company) then you'd be confused as to why HMRC have any staff left and how tax lawyers have time to do anything else.

You can buy insurance against IR35 but they will only insure you if they are comfortable with your contract and practices. On the basis they are risking their own money I am more comfortable going with the views of one of those companies than an agency which obviously are going to claim they are the best thing on earth but give you no warranties.

Brassedoff

kar999 wrote: »

I'm working as an independent Limited Company outside IR35.

I'm primarily engaged through an Agency (rather than an umbrella company) having signed their Regulation Opt-Out agreement which endeavours to produce a contract to minimise risk to IR35. I also have other independent clients.

Nah, I am afraid I would have said you are IR35 reading your other post.

Have you sought advice?

kar999

I have spoken to the agency and colleagues. This specific contract is a limited time project which is milestone based to achieve specific business objectives and I operate well outside of their normal employeee T&C's.

The more I read about IR35 the more it seems that it's hard to remain outside of it, certainly from HMRC's point of view.

Interestingly I was reading about an increasing number of specific cases they have lost when trying to enforce IR35 but I suspect there are equally numerous ones where they have won.

JHarlow

My initial advice would be to make sure you are working on the right terms.

Plus I think you should ask your company formation agent about that. I formed my company through RapidFormations.co.uk and whenever i am unsure about something, i ask them. I am pretty sure CF247 offer the same service.

Brassedoff

JHarlow wrote: »

My initial advice would be to make sure you are working on the right terms.

Plus I think you should ask your company formation agent about that. I formed my company through RapidFormations.co.uk and whenever i am unsure about something, i ask them. I am pretty sure CF247 offer the same service.

Is this a plug for your firm? The advice is total nonsense. How would a firm that knocks together just two pieces of the 8 items a company will need over its time know about whether her work is IR35 or not?

Too many of these firms fail to supply the minutes book, stamp, AOA. A copy of the Certificate Of Incorporation is not enough.

kar999

This isn't a plug but CompanyFomations247 Silver package provided me with a
Printed Certificate of Incorporation, bound copy of the Memorandum & Articles of Association, Printed Share Certificates, Hardback Company Register & Minute book etc. (The Company Seal costs extra). After their £50 Cashback from Barclays I'm actually £14 in pocket.

Included is also Free Accountancy Consultancy but I put more faith in advice from the Executive Recruitment Agency I'm using as they have had their contracts drawn up by a firm of specialist recruitment law/tax solicitors and they also encounter IR35 issues with many of the people on their books.