I have been day rating in the Oil Industry for around 6 months or so now, and I've finally decided to go LTD Company. The trouble is I don't really know much about the how to manage my LTD Company properly. I've spent a while trying to find information online, but there is a surprisingly small amount of information available from what I can see. I have gone through an accountancy firm local to me and they went through the basics with me but it was hard to take it all in. Does anyone with a decent knowledge/experience of ltd companies have any tips for me? The accountant stressed the importance of making sure to expense everything I can to the business account, but she almost made it sound like I should be buying things business related just for the sake of it to lower the companies overall profits (to lower my corporation tax), but at the same time I can't help but feel like I am just wasting money for the sake of not paying it in tax. I don't particularly want to end up with a load of stationary and printer ink filling my drawers around the house which is what I envisage happening following her advice. Any advice in layman's terms welcomed.
LTD Company Advice/Help
- Thread starter Lankoss
- Start date
Caporegime
- Joined
- 30 Jul 2013
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Anything you need and can justify for work can be used to lower your corporation tax bill, but buying a bit of stationary for no reason is utterly pointless
Caporegime
Make sure you are fully aware of IR35 and your contract is proof against it.
Soldato
This. Contracting is no longer as beneficial/easy as it used to be IMO and the only real benefit is charging more. You need to cover your own holidays, sick pay, employment gaps and pension contributions/perks.
Plus, I don't really see the value of limited company versus self-employed. You can still claim tax back as necessary if just a sole trader, then there's less paperwork.
Soldato
Make sure you are Ad Hoc and work through more than one agency. Also be careful of what your accountant wants to allocate through your wife's tax allowance (if you're married).
I've been PAYE offshore for 15 years and would only consider LTD if it was my only option. I've heard a few horror stories. One person I'm working with at the moment is currently trying to cope with a £26k tax bill that came from a HMRC investigation; his accountant doesn't want to know anything about it.
I've been PAYE offshore for 15 years and would only consider LTD if it was my only option. I've heard a few horror stories. One person I'm working with at the moment is currently trying to cope with a £26k tax bill that came from a HMRC investigation; his accountant doesn't want to know anything about it.
Soldato
People who set up LTD companies to avoid tax are probably the first people to shout benefit scroungers.
Soldato
Having a limited company ring fences your personal assets from business debts. As a Sole Trader, if you are held liable for a work mishap, they can claim against your house, savings, etc. In offshore oil I imagine there are lots of potential accidents...
You'll need to nominate a company secretary, which is a redundant role in a one-person setup but in bigger companies negotiates between shareholders and directors.
You'll need to nominate a company secretary, which is a redundant role in a one-person setup but in bigger companies negotiates between shareholders and directors.
Right now I have it set up as me as the director and only Share Holder. I went LTD as there are other associated costs with PAYE which reduce the take home pay (Not just the higher TAX). One thing I need to look into is the Payroll for the £1041 I pay myself every month out of the business account (this equates to £12,500 a year which is TAX free), the accountancy can do it for me, but they charge £300 for it (£25/month), which seems a lot. I am going to contact HMRC tomorrow and try find out the procedure for it. My understanding of it is anything over the £12500 I pay myself out if the business account, I pay 7.5% on up to £45,000, above that it's 37.5%. There is also a £116 charge for something called a "Confirmation Statement" which I need to look into, plus £100+Vat for another charge that I didn't make a note of. I am going back in on Tuesday, I will ask some more questions there and find out if I really need to pay these fees or if it's something I can do myself. If I pay everything they ask, no questions asked it will cost me £1400 a year for the accountancy, to me that seems high, hence why I want to look into exactly what I am paying for.
A Ltd company has various tax advantages - being able to expense legitimate business expenses is one of those. You can also draw down funds only as needed, which means you do not pay income tax on money you do not need in the current tax year (you still pay corporation tax). Also, drawing down funds using majority dividends, rather than salary, allows you to legitimately reduce your income tax bill, with no national insurance payable.
As others have said, though, you need to be sure you are outside of IR35, otherwise all of these benefits are negated and you'd be better off being a permie, unless you are on an insanely high day rate.
As others have said, though, you need to be sure you are outside of IR35, otherwise all of these benefits are negated and you'd be better off being a permie, unless you are on an insanely high day rate.
Don
It’s worth noting that IR35 rules are changing next March to place the liability of unpaid NI/income tax on the client, rather than the contractor, if you are found to be a disguised employee after an HMRC investigation.
Associate
Are you married? Can give you some general advice related to investing but nonetheless useful from a tax perspective.
Add your wife as a shareholder so she can take dividends too.
It is actually cheaper to pay corporation tax and dividend tax and then invest in a Life Time ISA than it would be to put it in a SIPP - you'll end up with MORE MONEY. So - do that first i.e. fill LISA with £4k each for you and your Mrs.
Then and only then start moving company revenues into a company SIPP. Anything you contribute to the SIPP (up to £40k per director IIRC) won't be liable for corporation tax so its an instant 19% saving. Remember a SIPP is a pension so when it comes time to withdraw, you will end up paying income tax on any amount above the personal allowance - but, you can plan an minimise this by using a mixture of savings, LISA, etc.
Add your wife as a shareholder so she can take dividends too.
It is actually cheaper to pay corporation tax and dividend tax and then invest in a Life Time ISA than it would be to put it in a SIPP - you'll end up with MORE MONEY. So - do that first i.e. fill LISA with £4k each for you and your Mrs.
Then and only then start moving company revenues into a company SIPP. Anything you contribute to the SIPP (up to £40k per director IIRC) won't be liable for corporation tax so its an instant 19% saving. Remember a SIPP is a pension so when it comes time to withdraw, you will end up paying income tax on any amount above the personal allowance - but, you can plan an minimise this by using a mixture of savings, LISA, etc.
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Hang on a minute. dividends are payable to shareholders not directors.
i'd like to see the maths on that. you can pay an employee approximately 8000 without incurring employee national insurance contributions in respect of that employment, the company won't pay corporation tax on that 8000 and the employee can get all of that ~8000 into a SIPP without income tax touching it. I'm not sure of the status employer national insurance contributions in such situation
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either the employer can make a direct gross contribution to the SIPP (definitely no employer national insurance contributions) or the employee can receive it as salary and make a net contribution to the SIPP with the taxed component added back within the SIPP
On the buying stationery issue, I can only see that as practical if registered to the VAT flat rate scheme, where buying a lot of goods might push a business over the low cost business threshold and cause it to pay a smaller percentage of VAT over to HMRC in a given VAT period.
as fezster says, being a director does not disqualify a person from receiving dividends, but they must be a shareholder to receive a dividend.
adding someone as a director will not create entitlement to dividends.
the classes of shares is a good piece of advice as well, but take professional advice on setting this up.
I just googled IR35, from this quote "If you are a genuine contractor, freelancer, interim or consultant who is in business on your own account, you should have nothing to fear from IR35." I assume I am indeed outside of the IR35 as I am a genuine contractor but I'll explain what it is exactly I do then you can maybe tell me. To sum up what I do, 3 separate contracting businesses have my contact information, they are in turn contacted by vendors looking for personnel with specific skill sets to go offshore to complete work, If i meet those requirements they contact me and ask if I am interested in the work, if I agree to it I give them my day rate, and they contact the vendor with said Day rate then I go offshore and complete the work. As an example of this, around 5 weeks ago Halliburton contacted one of the companies I am signed up with called NES. Halliburton were looking for a Cementer to go offshore for 3 weeks, I agreed and gave NES my day rate to which NES add their fee ontop (typically around £50-£60 per day ontop of my day rate) then quote back to Halliburton. Halliburton agreed and I went offshore for 3 weeks, sending NES a timesheet each week to bill for my services, which they in turn bill Halliburon plus their daily fee then pay me. Up until now I have been PAYE, I assume that is why I have been filling in a timesheet, I am not sure if this trip I am doing this week coming (my first trip as LTD Company) whether or not I will simply send them an invoice rather than a timesheet.