Full time employee and becoming a ltd company

Jeremy535897

I still think I'd prefer to find an alternative, by finding out why the customer insists on a limited company.

oldbikebloke

Jeremy535897 said:

I still think I'd prefer to find an alternative, by finding out why the customer insists on a limited company.

normally due to fear of "disguised employee" issues
That said, the new focus on IR 35 does weaken that favour for Ltd and reintroduce the possible benefits of directly employing. However, as OP has not even hinted at that possibility I agree with you, a Ltd for a one off 2-3k is simply not worth the effort.

scoops82

Thanks for your replies so far.
FYI I am an assistant accountant but deal with management accounts (but never dealt with tax). 

The work I’m being asked to do is excel based but haven’t been given any specific details as yet. The fee between £2-3k is my estimate based only My friend saying there was about 100 hours of work. 

I do have some friends who have ltd companies and did think of hat but is it as straight forward as my invoicing as a sole trader and then taking a management fee? They are based in a Completely different field.
id I could charge £3k and come out with £2k after expense is probably take that but not If I charged £2k and came out with £1k.

S

oldbikebloke

even a management accountant (LOL) should be capable of preparing financial accounts for the nature of your business and filing them in statutory format so the largest cost to being Ltd (accountancy fees) is removed.

On that basis I withdraw my comment and amend it to say yes, go for Ltd, take the income as dividends (assuming you have no other equity investments to your name yet - and that in itself is a poor situation!), and subsequently place the company on dormant accounts (£13 per yr Co Hse fee) until you need it again.

Jeremy535897

oldbikebloke said:

even a management accountant (LOL) should be capable of preparing financial accounts for the nature of your business and filing them in statutory format so the largest cost to being Ltd (accountancy fees) is removed.

On that basis I withdraw my comment and amend it to say yes, go for Ltd, take the income as dividends (assuming you have no other equity investments to your name yet - and that in itself is a poor situation!), and subsequently place the company on dormant accounts (£13 per yr Co Hse fee) until you need it again.

There is also the corporation tax return to do, of course, but it becomes more realistic, I agree. I don't think a friend's company is practical, as to get the funds from the company you will have to send it a bill, and there is the risk your putative customer presumably wishes to avoid of you being treated as an employee (obviously you could not take a dividend as you wouldn't own any shares).

scoops82

Thanks for your comments. I don’t have any other investments other than a rental property I stats at the start. 

i had read that as a FT employee elsewhere I would need to set myself up with payroll on the ltd company and submit monthly payroll returns to HMRC. Is thy not correct.

I can gather only costs are
Set up fee of ltd company £20 ish
Annual Accounts (should be free)
corporation tax at 19%

The rest can be paid as a dividend - assuming I don’t have to do monthly salary returns 

Is that right?
S

oldbikebloke

scoops82 said:

Thanks for your comments. I don’t have any other investments other than a rental property I stats at the start. 

i had read that as a FT employee elsewhere I would need to set myself up with payroll on the ltd company and submit monthly payroll returns to HMRC. Is thy not correct.

I can gather only costs are
Set up fee of ltd company £20 ish
Annual Accounts (should be free)
corporation tax at 19%

The rest can be paid as a dividend - assuming I don’t have to do monthly salary returns 

Is that right?
S

you would be creating a "PSC" = personal service company
A company must have a director under company law. A PSC typically comprises a single human being who "sells" their services, rather than selling physical goods.  The human is the director and a director is NOT "required" to be on a payroll at all since a director is not necessarily remunerated under a contract of employment. A director is an officer of the company, so there is no requirement that they also be an employee of the company, unless of course circumstances require it - for a PSC such circumstances would never arise, since you control how you take the money from the company, you don't require to be paid under a contract of employment in order to get money out.

Since you are in FT employment already, there is zero point in you drawing any salary at all from the company since that would be PAYE at your marginal rate, and therefore outweigh the Corp Tax saving for the company by having an employment cost on the P&L

As you set the company up, patently you will also be its sole shareholder, and therefore able to take profits purely as dividends - as you say, at the £2k zero tax rate "band"

annual accounts filing fee with Co Hse = £13

as you will be working from home, you could claim the use of home cost to give yourself a personal tax free amount each month which would be a valid P&L expense and so save a few pennies of CT 

be careful with claiming other expenses, it would be realistic that the company has some, but remember the golden rule: wholly, exclusively, and necessarily incurred in the performance of the company work, 

PS my comment re other investments is because I was assuming you were old enough to have some savings to your name. The fact you have chosen to investment "everything" in property is of course your personal choice and not one we can judge. My comment was simply to remind you that the £2k is total from all sources, not just an allowance per shareholding - I tend to forget that most people don't have equity investments to their name as the 1980's public sector sell off is of course now ancient history so today's homeowners no longer own "Sid", BP, banks or their utilities etc 

Jeremy535897

Just a couple of points:

• you will have to do a corporation tax return, online, and you may want or need to seek advice on how to do this
• expenses incurred by the company have to be wholly and exclusively for the purposes of the company's trade to be deductible for CT. Expenses incurred by an employee have to be wholly, exclusively and necessarily incurred for the performance of the duties to be deductible (there are special rules for travel expenses).