Don
You have nothing to worry about.
LTD Company Advice/Help
- Thread starter Lankoss
- Start date
HMRC won't help you. You're asking some extremely basic questions. For example, you are over the NI threshold and will pay NI on some of that monthly salary at a £12.5k annual salary. Are you aware of that? Pay for an accountant for a year and if you feel confident, try to do it yourself the next year or get an accountant to only do your accounts and returns. Contractor accounting at £120 per month is about market rates. You obviously have no idea how much work is involved for the accountant. To give you an overview:
- Setting you up as a client - drafting an engagement letter, doing money laundering checks, asking HMRC to confirm them as an agent, etc.
- Giving you annual and ongoing guidance around the recommended salary, deductible expenses, what to pay to HMRC and when, how the tax rules are changing, do you know you need dividend vouchers when you issue dividends? What should they look like? When can you issue dividends? What do you do with VAT? Which VAT scheme is most appropriate for you, if any? etc.
- Drafting your monthly payroll, reviewing and submitting (fairly easy via cloud software but then there is the associated tasks like pension compliance, setting up the payroll with HMRC, etc).
- Reviewing your accounts (which will be shocking), amending, querying with you, preparing the annual accounts, submitting.
- Preparing your company tax return.
- Preparing your personal tax return.
- Potentially doing your quarterly VAT return.
- Doing your confirmation statement (previously known as an annual return)
Don't do it yourself. You will screw it up (see example here). You might get penalties. Only being honest. Some people do a lot of research and get by for themselves. Some people are lucky that they've never been caught screwing things up.
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IR35 is a very confused legislation. Hmrc's view is that every PSC should be inside IR35. Indeed, with the off payroll rules introduced in the public sector, and coming soon to the private sector, they cite their flawed CEST tool (Google this if you don't know what it is) to determine IR35 status. It has been proven to be wrong for many engagements and seems to be biased towards hmrc's view of IR35.
The reality of IR35 depends on your working arrangements. Have a look at substitution and mutuality of obligation. It should be noted that hmrc have categorically lost every IR35 case they have brought (bar one perhaps? And if you read the details of that case you'll see why).
With the off payroll rules, the agency will be liable for determining IR35 status. In the public sector, this meant many people were unfairly put inside IR35, pushing many to say there was no point in being a contractor, as you lose the financial benefit whilst not having any of the advantages of being a permie. In the private sector, it looks like some agencies are trying to get contractors to indemnify them against any tax which hmrc may say is due. Its an evolving landscape, though, so we'll see what happens later this year.
Also, do not discount any future retro laws to tackle IR35. There's a big debate in the HoL and HoC over the past couple of months over the retrospective 2019 Loan Charge (which goes back 20 years) and many commentators and tax experts have discussed that if it is allowed to be implemented unchallenged, retro IR35 may well be next.
The reality of IR35 depends on your working arrangements. Have a look at substitution and mutuality of obligation. It should be noted that hmrc have categorically lost every IR35 case they have brought (bar one perhaps? And if you read the details of that case you'll see why).
With the off payroll rules, the agency will be liable for determining IR35 status. In the public sector, this meant many people were unfairly put inside IR35, pushing many to say there was no point in being a contractor, as you lose the financial benefit whilst not having any of the advantages of being a permie. In the private sector, it looks like some agencies are trying to get contractors to indemnify them against any tax which hmrc may say is due. Its an evolving landscape, though, so we'll see what happens later this year.
Also, do not discount any future retro laws to tackle IR35. There's a big debate in the HoL and HoC over the past couple of months over the retrospective 2019 Loan Charge (which goes back 20 years) and many commentators and tax experts have discussed that if it is allowed to be implemented unchallenged, retro IR35 may well be next.
since the tax credit was abolished does this remain the case?
cheers. the page looks familiar, so i've probably answered this question for myself before and forgotten.
Associate
For me miles is the big one as I do a lot of miles when freelancing. Do you? If so keep a tally as 40p a mile adds up.
Sorry I meant shareholder. Director's can be paid a pension though.
Associate
I'm he'll live on that first £8,000 so don't really look at the first £8k. Just use a spreadsheet and you'll see how LISA trumps SIPP all day long when you factor income tax on withdrawal.
And yes, sorry I meant shareholder. I have corrected my post.
Soldato
A confirmation statement costs about £13.
Don
I don’t see the loan charge as retrospective, people were clearly abusing loaning themselves money with no intention of ever paying it back, it was pretty much tax evasion in my opinion and it’s no wonder that now HMRC have won court cases over it that they are now going after anyone and everyone they know were engaged in those types of schemes with the expectation they will be paying the tax fully. You’re only quibble is how much and over how long you get to pay it back.
I know people, very intelligent people no doubt, that convinced themselves that not having to pay tax was perfectly acceptable with HMRC. As always, if it’s too good to be true!
Though it is sad to hear people getting tax bills for £100k’s with a due date last month or whenever it was, I don’t really have much sympathy for them.
very fair point, i was looking at it purely academically from the mathematical standpoint without taking into account the living consideration, however first 8k becomes first 16k if he pays director's remuneration to a partner.
a lisa is 4k max a year with a 1k top up, correct? 20%
isn't this essentially the same as a SIPP except for cash flow and potential differences in tax regime or marginal rate in a given year. you pay any tax due on income before putting it into an ISA wrapper, whereas with a SIPP you pay no tax until you take money from it.
a benefit of the LISA being that you can choose to take the money out at any time subject to sacrifice of the top up, with interest.
cool
I'm tring to do it in my head, not the best idea, i think i see where i've got it wrong. the top up is identical and the tax paid at the outset is identical, the only difference being no tax on withdrawal with the LISA.
the subtleties of GROSS employer contributions foxed me as you don't get a top up on gross contributions.
edit: no there's definitely something I'm missing... pension contributions increase
edit2: basic rate limit, not personal allowance.
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At the risk of this thread going off topic...
Having operated as a Ltd company for over 15 years, I have no vested interest in these Loan arrangements, other than to say that I've always dreaded a potential IR35 investigation, despite taking all of the relevant precautions. Mainly because the IR35 legislation is so flawed and vague that potentially any PSC could be caught by it. Having been part of the freelance community online for many years, I've seen the way in which HMRC has slowly but surely gained more and more powers to attack those who they see as "disguised employees" - first we had BN66, then we had APNs (a dreadful piece of legislation which means that HMRC decide if and when you owe money, and get you to pay it upfront until such time a court decides otherwise - forcing many into insolvency as a result, despite no court ever having found they had done anything wrong).
Now we have Loan arrangements which have been used for over 2 decades. Some were forced into these arrangements by their employers and/or agencies. Others declared these arrangements on their self assessment returns. HMRC stayed silent - in some cases, they sent letters saying they could find no fault with these arrangements, and some were even given tax refunds (!). HMRC litigated against the schemes for years, but the courts always found them to be legal.
No court has ever found them to be tax evasion. Not to be conflated with tax avoidance - which let's be honest, anyone who has operated as a Ltd company engages in. Minimising your tax bill is something which is encouraged. Otherwise, why have ISAs or Pension contributions?
The case you refer to is the Rangers case. And this is where it gets interesting. HMRC did win this case eventually - but it was a pyrrhic victory. It was not the outcome they were actually looking for:
https://wttconsulting.co.uk/summary-of-the-rangers-case-to-date/
The court found that the employer is liable for the tax due and because HMRC sat on their hands for 20+ years, they found many of these employers had either disappeared or were unable to pay the tax demands.
Then we come onto the 2019 Loan Charge - an almost genius piece of legislation which allows HMRC to "retro-actively" tax individuals (not employers - as the court found) in cases where their normal time limits would have prevented them from doing so. The legislation passed largely unscrutinised in 2017, yet the effect of it can go back as far as 1999 (how anyone can argue this is not retrospective is beyond me).
The outrage in Parliament is unanimous:
https://www.simplybusiness.co.uk/kn...ective-2019-loan-charge-unacceptable-say-mps/
https://www.contractoruk.com/news/0013900lords_condemn_hmrc_over_devastating_2019_loan_charge.html
https://www.ft.com/content/f9d46388-5613-11e9-91f9-b6515a54c5b1
And in my opinion, so it should be. If HMRC are allowed to get away with retrospective legislation for one group of people, they won't hesitate to do so again. I can see the writing on the wall now that I've become aware of it - and yes, I'm taking a selfish approach to it, because retrospective IR35 would affect me as well as thousands of others who have used a Ltd company in the past 20 years.
The similarities are uncanny. HMRC lose case after case in the courts (as they have done with IR35) and eventually introduce a retrospective law to capture everyone they deemed to have owed tax.
Just in the last month you can see the action they are taking is not just against those who used loan schemes:
https://www.lexology.com/library/detail.aspx?g=8d00486f-5791-49f9-993b-30c3e6a1c20e
Managed Service Companies are on their hitlist. As well as Personal Service Companies. As freelancers, we should be standing united, rather than taking an "Im alright jack ..." approach - which HMRC rely upon to ensure there is no concerted effort to stop them gaining ever greater powers.
Right - that was a longer post than I intended, but this is a subject I've gotten quite passionate about of late. Once you see the attack on the freelancing community, it's very hard to not get angry. If government had their way, all contractors would be on PAYE (without the benefit of sick pay, holiday pay, pension contributions) - and the big consultancies would clean up and take their massive cut in the process.
Don
It’s worth noting that in the Rangers case, Rangers were the employer, if your a LTD company case you are the employer.
I would also say that it’s people using these sorts of schemes that give all the other contractors a bad name, so I would rather see the back of them.
I would also say that it’s people using these sorts of schemes that give all the other contractors a bad name, so I would rather see the back of them.
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Absolutely - and the courts found the employer to be liable, so they should adhere to the court ruling and do so.
Except they haven't - they're going after the individuals. Which is despicable - but from their point of view, going after big employers with vast resources is too difficult and costly, so easier to hit the easy targets who dont have the resources to defend themselves.
Except they haven't - they're going after the individuals. Which is despicable - but from their point of view, going after big employers with vast resources is too difficult and costly, so easier to hit the easy targets who dont have the resources to defend themselves.
Soldato
I'm not talking about doing it all myself, I literally wouldn't know where to start, and I never said I was unhappy with the quote, if that's what it costs, then that is what it costs. With that being said, I don't make a habit of spending money needlessly, if I can save money by doing things myself then I will do (I don't apply this logic to accounting alone, I do this with EVERYTHING, as should everyone else. Blindly paying fee's without knowing what I am paying for is a good way of getting ripped off). The problem with that is I have no idea which parts are or are not easily achievable on my own without paying an accountant, which is the basis of why I started this thread. If something is straight forward then it doesn't make sense to pay someone to do it for me, one it costs me more money and two, I am always reliant on someone else doing it for me, if its straight forward I would rather learn how to do it and be self reliant.
As it stands, I am set to pay £300 for Payroll to pay myself the £12,500, and also £116 for the Confirmation statement. You are obviously experienced and know what you are talking about so my question is, for someone with no prior knowledge of accounting, are either of these things simple to do on my own, or should I pay for them to be done for me?? I have no issue at all paying the accountant to do them, but only if it's advisable, if either of them are straight forward to do then why not just do them myself and save £400. I have also written down there is a £120 charge for something else that I didn't make a note of, I will have to find out what that is on Tuesday.
Thanks
Mags, your posts are like a siren's call to me.
I know you were probably addressing someone else who had posted something incorrect, but this post is amusing with its misleading nature
That's not really what APNs are, and if used correctly they are a good tool to counter abusive arrangements. However, HMRC do need to reign themselves in as they are far too aggressive with their use.
Well, no, they really didn't find them legal. HMRC won a lot, with the Ramsay series of cases being the modern standard setting for the principal that tax legislation is interpreted on a purposive rather than strict literal interpretation. A lot of these were loan/EBTs of various formats.
Pedantically it's not retrospective as it applied to a single future date. Scant compensation to those affected though I agree.
Christa Ackroyd would certainly have preferred it if HMRC could have lost.
It's difficult. The accountant you are speaking to seems to be willing to give a breakdown of their costs. I would personally avoid clients that do this as they are bound to challenge every pound of fee that comes their way. Most accountants these days are moving to a fixed monthly fee arrangement whereby everything is included. Yes, the confirmation statement is very straight forward if you know the company and their circumstances. Part of their fee will be to ask those questions. As to if it is worth saving the money and doing it yourself, you would need to factor in if you are happy to learn what the deadlines are for it (some websites will remind you) and if you can learn the answers to the questions asked (e.g. what is a person with significant control defined as?). There are guides out there to help. You could potentially run the monthly payroll for yourself if you use cloud software. You'll want someone to hold your hand on the annual admin though, but they're going to get annoyed and start billing you if you ring them up with tons of questions as to how to manage the payroll if you agree to strip out that bit from the fees. Separating out tasks like this really makes responsibilities unclear and that's why I don't like it.
The reason why I say it is difficult is that you are almost cherry picking very small tasks as part of the compliance cycle to try and drive down the fees. I personally wouldn't advise doing VAT yourself but some will learn the different VAT treatments and would argue you can do it yourself. It's a cost v time debate.
Unless you are willing to learn the changes to the tax law each year, you're always going to be bound to an accountant, but a good accountant can save you a lot of effort, time and money in the long run.