Electricians mates vs. Ltd co.

[S for Spark]

Well just decided to go for it.
1) accountant cost £80/month (same as payroll cost) but this I can deduct
2)Insurance cost £180 for a year, only public liability as a mate (because all mates work under supervision)
3)Business bank acc free for first 18m.
I guess everything looks nice and easy before you start, but than........fly right into a fan. I guess we'll see how it goes and definitely I'll give it a go, even if it won't make any difference.

Still, if you have some good advice, what to look out for when running Limited co. please share

 

[Deleted member 26818]

I was Ltd for one year, I found it too much hassle.

I thought I could keep it simple and have my Ltd Co pay me CIS.
My Ltd Co would receive my payments from the agencies, then my Ltd Co would pay that to me.
On paper I would say the Ltd Co had deducted the 20% CIS tax from my payment, then at the end of the year, I would offset the tax owed by the tax already deducted by the agencies.
This would save me about £1000 in payroll fees.
I used an on line company to set up my Ltd Co and employed them as my Company secretary, cost less than £100.
PL insurance was less than £100.
So all in all, I would save about £800.

Problems, were that I had to submit a form every month to CIS telling them I was employing myself.
I submitted the first one on line and didn’t receive the next month’s form, so got fined £100.
It turns out, that if you submit the form on line, they don’t send you any more forms.
In the end they had to squash 26 £100 fines.

I started my year at the beginning of the tax year in April.
Corporation Tax and Companies House start your year at the end of the month you start your business in.
Not insurmountable, but a bit of a pain.

The CIS/PAYE people don’t send you a form automatically to offset tax deducted at source, so I started off owing them money. When I got hold of the form and sent it back, they reckoned I still owed them some money?

The Corporation tax people wouldn’t accept my accounts initially, as they didn’t list any expenses (didn’t have any), assets (again didn’t have any) or profit or loss.
I spoke to the guy and explained my situation, he then asked me to put it in writing as some kind of company statement of intent.
I closed the company down.

 

[S for Spark]

@spinlondon oh men I feel your pain and frustration.
My accountant told me, that she will sort out all that stuff for me, as long as I provide her all details she asked me for.
Also she said that it is better to employ myself on PAYE, don't really remember why. She isn't going to be my secretary, apparently my ltd co. doesn't need one, for £80 per month she will be sorting out my papers, tax returns, corporate tax, contacting HMRC on my behalf etc etc and I think it's a good deal £960 for running my books, which she'll include as my expense
I just hope everything will go as planned.

 

[Deleted member 26818]

@spinlondon oh men I feel your pain and frustration.
My accountant told me, that she will sort out all that stuff for me, as long as I provide her all details she asked me for.
Also she said that it is better to employ myself on PAYE, don't really remember why. She isn't going to be my secretary, apparently my ltd co. doesn't need one, for £80 per month she will be sorting out my papers, tax returns, corporate tax, contacting HMRC on my behalf etc etc and I think it's a good deal £960 for running my books, which she'll include as my expense
I just hope everything will go as planned.

Yeah, they changed it so you no longer need a Company Secretary, just when I decided to shut down.

You just need to find agencies that will pay your Ltd Co direct and not through a payroll company.

 

[Squid]

Every month I filled out a spreadsheet and sent it my accountant, the agency was billed by an "affiliate" company of the accountants and I was paid "directors" dividends every month as there where 12 shares in the company, funny that it matched how many months in the year there where.

It was handy that one of the partners of the accountancy firm was an ex HMRC tax inspector.

 

[45140]

It may be worth clearing up a few inaccuracies here.

Firstly IR35
IR35 will apply where a person is to all intents and purposes an employee. This means that they have to work at certain times, are under the control of someone, have an allocated desk, are paid when on leave or when sick, and most importantly of all have what is called mutuality - in simplicity this means the employer has to offer work and you have to accept it. You are therefore NOT free to refuse work. IR35 was set up to capture the IT population who were in effect working a loophole in the system and the Government response to that was draconian. There is an HMRC test for IR35 which you need to take to confirm you are outside. If you fall inside and do not pay the relevant tax then the Employer (employing company is liable for that and for potential prosecution for tax evasion).

Any large Company employing a contractor therefore has two basic routes - either IR35 style where tax and NI are deducted at source, or through a Ltd Company basis. Using the Ltd Company is fine provided that it is a genuine Ltd Company in that it has a whole variety of different clients. HMRC generally look to see more than 10 otherwise it will then potentially be judged to be under IR35

The reason that umbrella companies are so popular is that they remove the liability from the Employer for tax and NI. In addition it is cheaper for the employer to send one lump sum to the Agency rather than pay x-number of different Ltd Companies each week/month. It has gotten nothing to do with maximising profits at all. An Employer who engages a Contractor who operates Ltd Company and is then deemed to be IR35 is liable to prosecution in addition to being fined for tax and NI avoided.
HMRC state that it is the legal responsibility of the Employer to establish the correct tax status of a Contractor.
Anyone now working for the public sector is automatically required to be treated as IR35 UNLESS there is an individual Contract in place and the Contractor is an employee of the Company. Single director Ltd companies set up to exploit the dividends route will still fall under IR35 and must be paid net of tax and NI.
The old arrangement of claiming for expenses under IR35 is now gone. HMRC stipulate what can be legitimately claimed and it aint much. Specifically it prohibits travelling time and lodging away costs being paid free of tax.
As from this month single person Ltd Companies working in the private sector were due to fall under automatic IR35 but I believe this has been deferred.
To be honest an umbrella company is as good a way of being paid (indeed in some cases the only way) except for the fact that under IR35 you are no longer able to sick pay or holiday pay.
If you are able to work Ltd Company then do yourself a favour and pay a minimum wage. HMRC now mark up for investigation those who pay nothing and live of dividends.
Remember also that as far as dividends are concerned, in addition to the Corporation Tax paid by the Company, dividends above £2000 are personally taxable at 7.5% at the lower rate and 32.5% above the higher rate

 

[Squid]

I remember mentioning to someone that I was on £640 pcm, they said I should claim benefits lol................

 

[Deleted member 26818]

I remember mentioning to someone that I was on £640 pcm, they said I should claim benefits lol................

Yay, universal credit.

 

[Squid]

Yay, universal credit.

I did it for a while for a giggle when I was strapped for cash and was annoyed about something, jeeeeez its so soul destroying I just took the pee pee out of the retards that had to work there.

 

[Pete999]

I did it for a while for a giggle when I was strapped for cash and was annoyed about something, jeeeeez its so soul destroying I just took the pee pee out of the retards that had to work there.

Not a nice environment to work in Mate I agree, but retards is harsh, unnecessary and insulting. That's why I gave your reply a dumb, that is if you are at all interested.

 

[Squid]

Pete, I told them all I wanted was free prescriptions and that I had paid enough in to the system and would be paying more in 6 months time but the retards couldn't work that one out that I wanted something out of it.

To be honest it was fun, you also realise that's its the losers in life that end up working at the Job Centre..........

 

[Charlie_]

You really like using that word don’t you..

 

[Squid]

You really like using that word don’t you..

Losers or retards?

Listen, this country is full of opportunity you can arrive here with nothing and make something of yourself through hard work, education and going the extra mile, I have absolutely no respect for the ones who sit on their arses and don't make an effort and all they do is complain about the "foreigners taking our jobs" screw them.

Have a nice Easter ;o)))))

 

[Charlie_]

Thanks..
I’m doing some charity work for local special needs kids, will give them your sentiments