Using a personal service company - where to begin?

jd87

Hi all, I'm posting this on behalf of my other half. He works as a locum veterinary surgeon and currently does this through an umbrella company. Doing it this way his take home is about 68%. We know that the most efficient way to do this type of work is by setting up a Limited Company (by which his take home could go up to 80%) but neither of us knows where to begin.

Most of the advice online applies to either locum doctors (where issues like VAT are different) or people doing jobs like consultancy or IT (where I believe IR35 is less of a problem). There is very little advice for locum vets. We know there are agencies that claim they will do the whole lot for you (incorporate the company, write your contracts, do your accounts, tax returns, provide insurance, etc). Presumably going with one of these "everything included" agencies is not the most cost effective way?

I think we both have the brains and time to do some of the leg work ourselves once we have the required information. How much can realistically be done without the help of a professional, and is it worth it? If we aren't interested in squeezing every single penny of expenses, and just want to reduce tax and national insurance, then can we do all of it ourselves, without even an accountant? A self-assessment tax return can't be that hard... can it?

If we do definitely need an accountant then where do we begin? We've found specialist IR35 accountants who say they will review your contracts to make sure you are IR35 compliant, etc, but who actually writes the contracts? Are we supposed to know how to do that? The umbrella company and locuming agencies do everything at the moment.

chrismac1

Lots of questions here.

VAT
Locum doctor services are usually exempt from VAT under Schedule 9 medical services, though HMRC have been at times challenging this. Vet services are normally standard rated. You MUST register when you've made taxable supplies in the previous 12 months over £79k. You MAY register at any point, and depending on your customer base it is possible to make a tidy profit from VAT in the flat rate scheme, vets have a very favourable 11% rate in this.

Leaving that aside, I suggest that all of the other areas where HMRC have had a go at doctors in the past 3 years or so - travel costs, place where work carried out, IR35-type issues relating to direction and control - apply to a locum vet. So whilst not a direct precedent it would be sensible to seek to operate in such a way that you can robustly defend such challenges.

It is pretty well essential in my view to operate a limited company in a situation like this. This puts a vital layer - the company - between the person performing the vet. services and the ultimate employer. Given that, you then need to ask yourself if it is worth the time and effort learning the Companies Act and HMRC requirements for filing corporation tax, when you could get the accountancy services provided to you for £800 plus VAT or so per year.

When it comes to the contract, you are correct to state that it is vital to get this right - but it is even more important to operate it correctly. Most of my "IR35 risk" clients come through large agencies, there is no way any given client can turn around and say "I would like you to change this clause please."

If you look at another of my posts on IR35 made in the past week, I have a 4-point defence plan and the first of these is a formal contract review. One reason for this is that if that review highlights weaknesses, you can be mindful of these as the contract progresses. This "IR35 diary" builds up over time and in my view any sensible Inspector seeing this in my initial reply to his or her enquiry would realise that prospects of an HMRC victory were similar to the prospect of Man Utd. winning the 2014 league title.

If you want more detailed discussion, please PM me your contact details.