Sole trader to Ltd company

JasonLVC

--Tony-- wrote: »

At the moment the insurance says "me trading as xx gas" when I called my broker they said they could amend the policy so I would be covered for both companies, I'm not sure but guessed the mean "me trading as xx gas & yy gas Ltd".

From what you guys are saying this is bad as it's one policy for both companies, I'm not sure what the answer is because I don't really want to pay for two policy's.

Its back to risk vs reward.

Insurance in dual names does create an economic link, but that one thing alone is not enough for HMRC to pounce, they need all three (economic, organisational and financial) links to build a strong case.

Forget about VAT, you need to be insured, presumably as part of your GasSafe registration, but you need to appreciate "you" are "you" when wearing your sole trader hat, so when you do a job it is you doing the job, in your own name, you are personally liable for any problems.

But when you are wearing your Ltd hat "you" do not exist as a person, its the Ltd company which is now the person, the Ltd company does the job, the Ltd is liable for any issues.

Yes, you are still fitting a boiler regardless fo which hat you wear, but you do so as an employee of the Ltd, not as you the person. It's a common issue to get your head around but you/sole trader is one "person" and you/Ltd is a different "person". Thats the point of a Ltd, any debts you as the person are not liable, the Ltd is, because the Ltd is seen as a separate person to you.

So I think you need to have two seperate insurance policies, one for each hat or you can have a single policy covering both hats but might raise an HMRC eyebrow but not enough for them to kick-off plus you could always have a modest recharge of the insurance policy to remove the financial link (ie, if dual policy is say £500 then just recharge £150 or so to the other business and then HMRC cannot argue the businesses are economically dependent upon each other, because you could get separate policies but its just easier to get one and recharge.

Just think about the customer scenario. The multinational is sorted with the current policy you have, if your handiwork leads to a death when you are doing the job under the Ltd/for the multinational, you are insured.

If you go and install a boiler for the old lady down the road, she chose you because you are "Gas Safe" and presumes you are insured, but you are not, the Ltd is. So if something goes wrong and she dies from a gas leak, when the lawyers turn up, you'll find "you" are not insured (your company is), but the old lady job went through your sole trader bank account and the invoice doesn't mention the Ltd either, so the insurers will not cover you and the lawyers will fleece you personally for every penny you have.

Not meant to scare you or suggest you would do bad work, I mean to try and explain and reinforce the difference of sole trader/Ltd and "who do I sue" usually helps clear up any confusion.


That a joint insurance policy might put HMRC on your radar comes back to risk vs reward, if the risk of a joint policy is very very low and everything else stacks up nicely then no worries.

JasonLVC

--Tony-- wrote: »

That is exactly right, although turnover is low my fuel spend is huge and to be able to claim 20% of my fuel back makes it worth while in my eyes, the accounting for the Ltd company will be dead simple.
Because I don't have a workplace my first job is always driving to my first customer but I do drive home at the end of the working day. I guess as I don't have a workplace and we collect materials and parts from the Royal Mail sorting office I could conveniently restock each night as the sorting office is 1 mile from my house.

You cannot reclaim all the VAT back on fuel, only business mileage (to and from jobs), and these jobs would all be for the multinational only as you do not use the van for your sole trader jobs.

Don't be tempted to fill your car up and put that cost through the Ltd and reclaim the VAT, its probably difficult for HMRC to spot if you are sensible but when you get greedy and put all the car fuel through the Ltd, the problem we'll have then is HMRC will see your one van burning up so much diesel that it would mean you get 3mpg out of the van, which is nonsense.

Not suggesting you were going to do this, just I've seen it too many times before. If you go for the 4 fills ups for the van, 1 for the car, its still not legal but unlikely to ever get spotted, but if you go for one fill up for car, one for van, the fuel expenses will be disproportionate. If your van has 50,000 miles on the clock say, HMRC can work back using published mpg rates for the van and figure out your true fuel spend. Very very unlikely would HMRC spot this imho, so we're back to risk vs reward again!

--Tony--

JasonLVC wrote: »

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Thank you so much Jason, you have really helped me get my head around this and I can see my clear choices, I have a little time to decide so I just have have to work out which way to go.

A further complication is I would have to have separate Gas Safe registration for each business which is an additional cost but I guess it helps to remove a link too.

The final option is to use a company called Pontoon which they say they have partnered with, it's an unbrella company and all I know so far is this:

No admin required
No charge for service
Employee status
Holiday Pay
Tax and N.I. deducted, no tax bills
Less take home pay

I have to understand what the costs of using Pontoon are to me, they say there is no charge for the service yet they will administer everything and pay me holiday pay, makes no sense yet, I'm sure they will be skimming a percentage as they have to make a profit too.
It's probably going to be no fee for the service but a processing fee for each payment received (smoke and mirrors).

Pennywise

--Tony-- wrote: »

Thank you so much Jason, you have really helped me get my head around this and I can see my clear choices, I have a little time to decide so I just have have to work out which way to go.

A further complication is I would have to have separate Gas Safe registration for each business which is an additional cost but I guess it helps to remove a link too.

The final option is to use a company called Pontoon which they say they have partnered with, it's an unbrella company and all I know so far is this:



I have to understand what the costs of using Pontoon are to me, they say there is no charge for the service yet they will administer everything and pay me holiday pay, makes no sense yet, I'm sure they will be skimming a percentage as they have to make a profit too.
It's probably going to be no fee for the service but a processing fee for each payment received (smoke and mirrors).

You'll receive all pay as an employee, so you'll be paying income tax, employees NIC and employers NIC, so worrying about their fees is probably small fry compared with circa 25% national insurance deducted from your wage.

kidmugsy

--Tony-- wrote: »

everything I see on the net suggests they just register as a Ltd company and become an employee of that Ltd company.

Not quite. They become a director of that limited company.

I suggest you seek an accountant experienced in the field. Personal recommendation is best. In my family's experience they can be good value as long as you don't pay London prices. It's easy to deal with someone in the North by phone and e-mail.

--Tony--

Pennywise wrote: »

You'll receive all pay as an employee, so you'll be paying income tax, employees NIC and employers NIC, so worrying about their fees is probably small fry compared with circa 25% national insurance deducted from your wage.

But the downside has dawned on me, as an employee I will be unable to reclaim any fuel so I will be £1000's per year worse off.
This is really not an option.
Why is life not simple!

Pennywise

eggha wrote: »

yes you can - sorry but it appears you are still not understanding the distinction between "you" (the real person called Tony) and the Ltd Company

There are 2 possibilities.....

1. The company owns the van as a company asset and allows you, its employee, to use it for company business. The company agrees that it will pay all the fuel costs and so provides a fuel card to Tony, its employee, to enable him to purchase fuel and for the charge to go direct to the company

or

2. Tony (the employee) owns the van as a personal asset and uses it on company business. The company agrees that you, its employee, can claim the costs of any such business related trips you make in your own van using the HMRC approved mileage rates. Tony (the employee) therefore submits an expenses claim to the company and the company reimburses its employee on that basis. The company has therefore incurred a valid business expense relating to the travel undertaken by its employee, and its employee has been reimbursed in full for the cost paid out by the employee.

I think Tony was referring to going through the umbrella rather than his own limited or an employee. He "may" be able to claim his mileage under his SA return, but that's only for tax - he'd get no relief for the double NIC suffered.

--Tony--

Pennywise wrote: »

I think Tony was referring to going through the umbrella rather than his own limited or an employee. He "may" be able to claim his mileage under his SA return, but that's only for tax - he'd get no relief for the double NIC suffered.

Yes, indeed I was, I could not see the downside to the Umbrella company (it is in fact not an external company but an arm of the existing company just created), there really are no fees and I started thinking it was the simple and easy way to go...... until I realised being on PAYE means I can't offset my fuel against tax as a expense the way I currently do as a sole trader.

For information: They pay the holiday by holding back a small amount of the hourly rate and then paying it back when you book holiday. I would not really be getting paid holidays as I am paying my own holidays, a clever trick to comply with the law on holiday pay for employees.

Makkusu

--Tony-- wrote: »

Yes, indeed I was, I could not see the downside to the Umbrella company (it is in fact not an external company but an arm of the existing company just created), there really are no fees and I started thinking it was the simple and easy way to go...... until I realised being on PAYE means I can't offset my fuel against tax as a expense the way I currently do as a sole trader.

For information: They pay the holiday by holding back a small amount of the hourly rate and then paying it back when you book holiday. I would not really be getting paid holidays as I am paying my own holidays, a clever trick to comply with the law on holiday pay for employees.

Hi Tony,

Umbrella vs Ltd really boils down to tax efficiency, an Ltd is far more tax efficient for many reasons.

The only time I'd ever recommend Umbrella is for shorter contracts, say 3 months in length, or for salaries under £25k. Anything above £30k really is a no brainer.

To complicate matters further there's a piece of legislation called IR35 which a good contractor accountant will guide you through to ensure you're compliant. Along with many other complex legislations, one of which prevents you from claiming all travel and subsistence via an Umbrella company from April 16 onwards.

Be careful of recommended companies who are 'partnered' because like every commercial partnership, it suits them, but it might not be the best choice for you, and the contractor field is running rife with marketed umbrellas at the moment.

Lastly, if you're planning on working at the same company as you have been for the past 10 years, I'm afraid you'll have to scrap the hope of claiming any sort of travel expenditure for three reasons (where only one is required to rule it out):
(i) You are caught by the 24 month rule and it is deemed a permanent workplace,
(ii) You have worked there for a significant time therefore the nature of your work can fail the test of being that of a 'true contractor' which should be temporary, project based work, and
(iii) per the 2nd point you will most likely fail the test of 'supervision, direction & control' and therefore cannot claim travel or food costs due to legislation changes last year.

Get a contractor accountant and make sure you are aware of everything. Your employer might recommend this or that, but at the end of the day, when HMRC come knocking on your door for 15 years of incorrectly paid tax... it is you who has to cough up every penny... plus penalties... plus interest.

--Tony--

Makkusu wrote: »

Hi Tony,

Umbrella vs Ltd really boils down to tax efficiency, an Ltd is far more tax efficient for many reasons.

The only time I'd ever recommend Umbrella is for shorter contracts, say 3 months in length, or for salaries under £25k. Anything above £30k really is a no brainer.

To complicate matters further there's a piece of legislation called IR35 which a good contractor accountant will guide you through to ensure you're compliant. Along with many other complex legislations, one of which prevents you from claiming all travel and subsistence via an Umbrella company from April 16 onwards.

Be careful of recommended companies who are 'partnered' because like every commercial partnership, it suits them, but it might not be the best choice for you, and the contractor field is running rife with marketed umbrellas at the moment.

Lastly, if you're planning on working at the same company as you have been for the past 10 years, I'm afraid you'll have to scrap the hope of claiming any sort of travel expenditure for three reasons (where only one is required to rule it out):
(i) You are caught by the 24 month rule and it is deemed a permanent workplace,
(ii) You have worked there for a significant time therefore the nature of your work can fail the test of being that of a 'true contractor' which should be temporary, project based work, and
(iii) per the 2nd point you will most likely fail the test of 'supervision, direction & control' and therefore cannot claim travel or food costs due to legislation changes last year.

Get a contractor accountant and make sure you are aware of everything. Your employer might recommend this or that, but at the end of the day, when HMRC come knocking on your door for 15 years of incorrectly paid tax... it is you who has to cough up every penny... plus penalties... plus interest.

I have 100% no 'supervision, direction & control' I work in my clients customers private homes without supervision, direction or control, nobody is present or sees me working and I have no workplace as I work in private homes.