Full time employee and becoming a ltd company

scoops82

Hi
Any advice on the scenario below would be most helpful.

i am currently in FT employment and pay tax On my salary of £35k pa through my employer. I also have property rental income of about £5k pa less expenses which I pay tax on through self assessment.

I have been offered potential one-off work Of about £2-3k but to get the work I would need to be set up as a ltd company. 

What issues might this cause and with tax and getting this income paid to myself? After the job I am unlikely to need the company and would look at winding it down? There Might be other one off jobs but this is unlikely.

Any help or advice  is appreciated .
Thanks
S

Grumpy_chap

First off, does this other work conflict with your contract of employment in your primary job?

scoops82

I don’t think but I know I need to double check it 

Dazed_and_C0nfused

I have been offered potential one-off work Of about £2-3k but to get the work I would need to be set up as a ltd company. 

What issues might this cause and with tax and getting this income paid to myself?

By the time expenses have been deducted you may well find the profit is < £2,000 so if that was taken as a dividend it would be taxable income for you to declare but would be taxed at 0% so no material impact (assuming your only other taxable income is the £35k salary).

Jeremy535897

I seriously wouldn't bother. I doubt you'll see anything out of it by the time you have formed the company, paid to have its accounts and annual return done, paid to have its corporation tax return done, and then gone through all the bother of striking it off.

oldbikebloke

Jeremy535897 said:

I seriously wouldn't bother. I doubt you'll see anything out of it by the time you have formed the company, paid to have its accounts and annual return done, paid to have its corporation tax return done, and then gone through all the bother of striking it off.

agreed,
for a one off 2-3K, a company would be uneconomic 

scoops82

Thanks, I thought as much

Jeremy535897

You could ask them why they need you to form a limited company. If it is just the employer's NIC, offer to take say10% less. That would cost you £300, way less than the costs of the company. As has been said before, make sure it is not in breach of your main employment contract.

Grumpy_chap

I disagree with Jeremy and OBB.  Subject to not risking my main employment, I would do the one-off-job at £3k. 

[Is the work in the same field as the main employer?  I would probably not ask my main employer either unless I though they would find out anyway.]

If the OP turns this work down, which is stated as 'one-off', the OP is turning this work down with that company forever.  In my experience, many 'one-off' activities have a habit of repeating but if company needs to find someone else this time, then that someone else is first in line next time and the OP won't receive a call.  The OP will be forever asking the proverbial "what if?" by not taking the opportunity.

For this piece of work, while £3k is not to be sniffed at, the money is a kind of "bonus" extra over the OP's normal, regular income.  So, if the first 'one-off' is not wonderfully lucrative because of 'start-up' costs, it is not the end of the world.  The main thing is that the OP can do this and not lose money.  The OP also needs to be satisfied that the £3k is a fair rate for the amount of hours the work will require (after risk / overrun allowances).

I agree that setting up a Ltd Co for one-off work is a lot of faff but, based upon my Accountant's charges, I'd estimate the costs will be £1k or so.  The harder thing will be getting the business bank account (particularly if banks are being extra cautious in these current times as several threads on here indicate).  Anyway, £3k job, £1k costs is deductions of only around 30% and that compares quite satisfactorily with PAYE tax if the extra work was considered as regular over-time.  From the £3k gross, the £2k after costs can likely be taken tax-free using the dividend allowance, as Dazed&Confused said.

Having set up the Ltd Co, I would probably not wind it up straight away but keep it existing so I am ready if any more of these 'one-off' jobs arise.  Where the company has said "There Might be other one off jobs but this is unlikely" I suspect that is more about them managing expectations than being at risk of interpreted as false promises.  A dormant company can be kept for a couple of years quite simply and cheaply.

The other alternative is, does the OP have a friend that will put the 'one-off' through their Ltd Co. in return for a nominal 'management fee' (say 10%) and then either remit the OP as a Sole-Trader or via payroll (which would need a further 'management fee' to cover employer's NI).?

Out of interest, what field is the OP working in (main job) and what is the 'one-off'?

Jeremy535897

You disagree because you assume the facts given are incorrect (it not being a one off job like OP believes). You may be right, but I try only to answer the question asked, unless it needs clarification.

Grumpy_chap

Not solely.  On my assessment the OP can still achieve take home at 60-70% of gross, so worth doing, even for the one-off job.  I understood your assessment was that doing the one-off job wouldn't give a suitable financial return.