Discuss Electricians mates vs. Ltd co. in the Electrical Forum area at ElectriciansForums.net

Stan Barwik

Spark mate
Messages
10
Location
Glasgow
Hello everyone,

I know that I'm just fresh in here, but....we all have to start somewhere.
This post is directed mostly to Spark mates/improvers who can share some of their knowledge and experience with "going" LTD.
Yes, yes, I have seen threads about CIS (used to do some time through CIS), about that how agencies are bad and Umbrela (ultimate scam)...don't let me even start.

If it's possible, I would like to ask you people, how does it go with LTD for spark mates?
I realize that system, agencies etc try to discourage people going this way, because it is more complicated than CIS because you need accountant(it really is recommended), insurance etc. But I also know that, they are afraid that more and more people will go Ltd and the tap with warm blood of honest people will dry out.

I have an idea about opening Ltd co. opening business bank acc. my main concern is with business insurance. I have asked about it and that is what they require from spark mate (for one of the contracts):

-Employers Liability : £10M - well, my Ltd would be only me director who employ meself....don't think it is actually possible to get eployers liability insurance if I do not employ anybody but myself?

-Public Liability: £2M - that's not a problem, standard I would say.

-Professional Indemnity: £2M - this option is only available to buy with insurance, when you answer YES to question: "Do you offer advice, design or certification in your business activities".
Now big problem as always is .....money, insurance with Professional Indemnity put your insurance premium sky high.
Agencies won't hire any mate/improver through CIS because apparently, we only work under supervision :tearsofjoy:, and from mate working through own Ltd they want us to do what fully qualified sparks do?

Is that practise (Professional Indemnity) a standard for Ltd mates , or it depend on a contract for different jobs?

That is my main concern which holds me back from going Ltd.

If any of you could put some inside and own experience to the subject, that would be great.
Also if any of you fellow Electricians mates/improvers and fully qualified Electricians, encountered other worrying aspects of going Ltd, please comment. I believe that forum will only enrich with your advice:blush:

Thank you all

Ps. Quite a subject as for first post :tearsofjoy:
 
D

Deleted member 26818

Ok, you will only need Public Liability.
If the Agencies say different, then it’s just because they don’t want to use you through a LTD company.
You’re a mate so not qualified.
This means your advice as an unqualified person, legally holds no more weight than that of any other unqualified person.
If you do decide to go LTD, you should also steer clear of an agencies that want you to be paid through a payroll company.
The agency excuse of IR35 doesn’t work for LTD companies.
 
OP
S

Stan Barwik

Spark mate
Messages
10
Location
Glasgow
@spinlondon thanks for info.
have you ever seen anything like that ?
"Our records show that we don’t have confirmation that you wish to opt out of ‘The Conduct of Employment Agencies and Employment Businesses Regulations 2003’."
is this what you are talking about with IR35 ?
 
D

Deleted member 26818

Hmm. No not really.
Agencies have for some time now used IR35 as an excuse not to pay direct. Their reason being: that they would have to employ you after a couple of months.
Instead they pay through pay roll companies which they invariably own, and charge a fee.
 
OP
S

Stan Barwik

Spark mate
Messages
10
Location
Glasgow
It's not a news, that they want squeeze from people as much as they can.
Is there any way to fight it, or we can just try, and tell them that we are not OK with payment through pay roll companies?
For most cases, that would probably mean: we just do not take the job, and keep looking...
 
D

Deleted member 26818

I think all agencies now use payroll companies.
Only way round them is to go LTD.
I tried for a year, but there was too much paperwork for me.
Other option is to try to work direct for companies.
 

SWD

Gender neutral
Electrician's Arms
Messages
5,908
Location
London
LTD is only worth it if you are earning a decent wedge and what you can claim for as "allowances"
 
OP
S

Stan Barwik

Spark mate
Messages
10
Location
Glasgow
@spinlondon & @SWD , thanks for your suggestions ;)
If I understand correctly, despite that being on your own in your Ltd, having Tax return from every year (extra money), not paying double NIC for agencies and extra £15-£25 from each week pay (well that's how much accountant would cost me, but Ltd can deduct their costs), actually Ltd can claim nearly everything except corporate TAX...

is it still better to go through Umbrela on a mates wages average gross £500-£540 a week? and not being able to claim any travel expenses, because that is what I hear from agencies.
 

SWD

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When I worked in IT the guys under Umbrella rules would upload receipts for travel and subsistence but that was a few years back and I know HMRC have tightened down, if you are on £500 per week there is no point in going limited you need to be on about £40k to make it worthwhile now, yes you can claim for loads of stuff I claimed for computer equipment an office at home travel, lunch, a couple of biles, £125 per year for a Christmas outing and even a Christmas tree for the "office" which was in my house........
 

SWD

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Agencies don't want people "self employed" as they push them towards Umbrella status they make money out of it.
 
D

Deleted member 26818

I don’t think you quite understand SWD.
Umbrella means paying Tax, NI, employers NI and the payroll company fee.
Ltd means just paying 20% CIS tax
 
OP
S

Stan Barwik

Spark mate
Messages
10
Location
Glasgow
@spinlondon I think SWD just shortened the story. As he said, he used to run through Ltd and he can see more sense in doing that with higher turnover, about £40k.
I still see other benefits from running own business, even with small difference on + overall, just for a reason, all NIC payments go to MY pensions scheme, not someone in the middle.
Hope that will make more sense.
 

SWD

Gender neutral
Electrician's Arms
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London
I don’t think you quite understand SWD.
Umbrella means paying Tax, NI, employers NI and the payroll company fee.
Ltd means just paying 20% CIS tax
I have a LTD company, going Umbrella means that you are technically self employed working as PAYE and being screwed over by the agency.
 
D

Deleted member 26818

I have a LTD company, going Umbrella means that you are technically self employed working as PAYE and being screwed over by the agency.
Yes.
The OP could save himself somewhere in the region of £170 - £180 per week by going Ltd.
Less whatever his fees for being Ltd would be.
 
OP
S

Stan Barwik

Spark mate
Messages
10
Location
Glasgow
@SWD I understand, maybe that what I could save for 7 working day week.
But still, even if from standard week I could save £50 a week, that's gives me £200 a month, which is at least £2k a year...
Now, for me as a Spark mate it is good money, maybe for some people it isn't worth a hassle, but I bet that for most of people it would be, even if I would spend it on charity rather than sponsor some Umbrella bosses.
 
D

Deleted member 26818

On a wage of £540 pw?
£90 to £100 a day is a bit low I agree.
I’ve seen adverts for Mates for £150 to £180 per day.

My first pay slip or remittance advice under the Umbrella scheme for £135 per day showed my gross as being £602.
That’s £675 less the payroll fee and the Employer’s NI.
 

SWD

Gender neutral
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@SWD I understand, maybe that what I could save for 7 working day week.
But still, even if from standard week I could save £50 a week, that's gives me £200 a month, which is at least £2k a year...
Now, for me as a Spark mate it is good money, maybe for some people it isn't worth a hassle, but I bet that for most of people it would be, even if I would spend it on charity rather than sponsor some Umbrella bosses.
Setting up a company etc etc then having to file returns, accountancy fee's soon all add's up. Have a proper look in to it the best way it to speak to an accountant and not a load of grumbling old sparks ;o)))))
 
OP
S

Stan Barwik

Spark mate
Messages
10
Location
Glasgow
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:tearsofjoy:)
3)Business bank acc free for first 18m.
I guess everything looks nice and easy before you start, but than........:pileofpoop: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 ;)
 
D

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.
 
OP
S

Stan Barwik

Spark mate
Messages
10
Location
Glasgow
@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.
 
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D

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.
 

SWD

Gender neutral
Electrician's Arms
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London
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

Regular EF Member
Messages
141
Location
Midlands
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
 

SWD

Gender neutral
Electrician's Arms
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5,908
Location
London
I remember mentioning to someone that I was on £640 pcm, they said I should claim benefits lol................
 

SWD

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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

Mentor
Electrician's Arms
Messages
22,964
Location
Northampton
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.
 

SWD

Gender neutral
Electrician's Arms
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5,908
Location
London
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..........
 

SWD

Gender neutral
Electrician's Arms
Messages
5,908
Location
London
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)))))
 

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