LTD Company Advice/Help

Lankoss · 4 May 2019 at 23:16

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.

Lankoss · 5 May 2019 at 09:27

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.

Lankoss · 5 May 2019 at 11:01

fezster said:
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.

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.

Lankoss · 5 May 2019 at 14:11

Kemik said:
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)

If you're not happy with the quote, ask friends and look around. You'll find they're all similar but the service you receive might vary. Look for accountants focused on cloud accounting as it will make things more efficient.

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.

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

Lankoss · 5 May 2019 at 22:43

fezster said:
It can all be done yourself, of course - as with pretty much anything depending on your competency. But IMO, the time you would have to invest into it wouldn't be worth it. You'd make more on your day rate doing what you're good at.

A good accountant will also be able to save you (legally!) more than they charge through their advice. For example, I noted you said a salary of £12,500. This is not a tax efficient way of paying yourself. You should pay salary only to the limit at which you are entitled to NI contributions, but dont have to pay any NI. The rest should be as dividends. I'd suggest you get recommendations on accountants before engaging one.

The £12,500 is the figure that was given to me by the accountant for how much she suggests i pay myself out of the company. I will speak to her about it Tuesday and see why she suggested paying at the pre tax limit instead of the pre NI one at £8632. The more i am reading, the more likely it is that one just going to let them do it all as it looks like I would be out of my depth. I'm still glad I asked the question though, if you don't ask you don't get as my mum would say.