Changing from Self-Employment to Limited Company

norsefox

I am in the unusual position of considering a move from self-employment to a limited company.  This is despite income and profit being below the values one would normally consider for such a move, and where being limited is of little additional benefit.

In short, I am a football referee and have completed self-assessment for a number of years.  There is no prospect of ever being deemed to be an employee, nor any opportunity to become so.

Annual income is around £5k, with profits around half that (scaling at approx. that proportion - the vast majority of expenses are unavoidably travel).  There is likely scope for those values to double (or greater) in FY23 and beyond.  In most years, I am in a net tax overpaid position as I reclaim pension tax relief through SA (my employer contributions are pitiful, so my gross personal contributions are significant).

Through my normal employment, I will nudge up to £100k PAYE in FY23, and most definitely into FY24.  I use tax-free childcare, and will continue to do so for a number of years (even without any additional children).  For that reason (never mind 60%+ marginal tax), I need to keep my salary below £100k.  I will have SS options in my main employment through pension and possible an electric vehicle.

The reason for considering a Ltd, is flexibility and reduced tax burden (accounting for corporation tax, and tax-free £2k dividends).  My partner is an accountant, so cost and complication from that angle is reduced.  I would also expect to make her a director.

She might take a low salary (£100 or less per month), in addition to a small amount of dividends per year.  Should the profitability increase, we would either consider making/increasing pension contributions direct from the Ltd, or else hold revenues within the company.  Given that being a match official has a limited shelf-life, and with promotion/relegation being a subjective matter outwith my complete control (never mind injury), I have never relied on it as income.

There are no other avenues for income, and there would be negligible assets.

Are there any pitfalls, or complications I am not considering? 

Grumpy_chap

Your reasons to go Ltd Co seem sound, assuming the football league will be happy to engage your services via that structure.

The proposed salary to your wife seems reasonable for providing the accounts service that she will be.

uknick

What does your partner say?   Or, are you here for a 2nd opinion?

norsefox

uknick said:

What does your partner say?   Or, are you here for a 2nd opinion?

I am here for a second opinion on the sense of it.  

My partner is flexible.  The accounts that would require maintenance and filing etc are on the very simplistic end of the spectrum. My day-to-day job involves finances, though I am not an accountant, so I keep a track of everything in significant detail already.

I have no contract with the football association, and I do not invoice for services rendered.  I complete an expenses form for each match and it's paid monthly.  I presume that wouldn't complicate matters?

Their position relative to me is explicitly not as an employed worker.  Presumably, (again, checking here) that how my own finances are setup are is down to my choices?

norsefox

Grumpy_chap said:

Your reasons to go Ltd Co seem sound, assuming the football league will be happy to engage your services via that structure.

The proposed salary to your wife seems reasonable for providing the accounts service that she will be.

For point one, I have no contract and so any structure that I have (self employed or otherwise) isn't stated.  The explicit view in all documentation is that our tax affairs are our own responsibility (standard clause for these types of affairs).

Assuming that I am simply paid for services rendered (as it currently is, and can even simply be cash-in-hand at some levels of the game), are my own structures simply down to my own preferences? 

Grumpy_chap

norsefox said:

I have no contract with the football association, and I do not invoice for services rendered.  I complete an expenses form for each match and it's paid monthly.  I presume that wouldn't complicate matters?

Do you get paid for your time, or do you only receive expenses?
If the latter, it is possible that there is no tax liability arising, though I assume you would have checked that with your wife.

norsefox

Grumpy_chap said:

norsefox said:

I have no contract with the football association, and I do not invoice for services rendered.  I complete an expenses form for each match and it's paid monthly.  I presume that wouldn't complicate matters?

Do you get paid for your time, or do you only receive expenses?
If the latter, it is possible that there is no tax liability arising, though I assume you would have checked that with your wife.

Match officials are either paid:

A fixed match fee (dependent on competition) plus travel expenses
A fixed match fee (dependent on competition) without any travel expenses

No payments are made on the basis of minimum wage, hourly pay, or otherwise.  No payments are made for travel time, only 45p per mile (and accommodation if applicable)

Pennywise

norsefox said:

I have no contract with the football association, and I do not invoice for services rendered.  I complete an expenses form for each match and it's paid monthly.  I presume that wouldn't complicate matters?

The question still remains whether the FA will engage your limited company to provide the service rather than you, as a person.  You'd need to check with them.  Basically, the name on the "expenses claim form" needs to be the limited company, rather than you, as a person.  If it's all in your personal name, then you fail to get the income transferred from yourself to your limited company and it continues to be taxable on you as a sole trader.

norsefox

Pennywise said:

norsefox said:

I have no contract with the football association, and I do not invoice for services rendered.  I complete an expenses form for each match and it's paid monthly.  I presume that wouldn't complicate matters?

The question still remains whether the FA will engage your limited company to provide the service rather than you, as a person.  You'd need to check with them.  Basically, the name on the "expenses claim form" needs to be the limited company, rather than you, as a person.  If it's all in your personal name, then you fail to get the income transferred from yourself to your limited company and it continues to be taxable on you as a sole trader.

Thanks. That’s useful to know