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Going contracting - Starting a Ltd company

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MyNameIsUrl
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Re: Going contracting - Starting a Ltd company

#95936

Postby MyNameIsUrl » November 15th, 2017, 2:11 pm

Redmires wrote:VAT - I wouldn't hit the threshold but the company I would be contracting for are asking for a VAT certificate. Would I need to register ?

Don't worry too much if you feel you need to register. If you use the VAT Flat Rate Scheme (https://www.gov.uk/vat-flat-rate-scheme) the quarterly returns are trivially simple - just a flat % of your turnover.

I don't think you've said what your business is but you'd need to check if Flat Rate is valid - it won't be appropriate for buying and selling goods for example, but by 'going contracting' I'm taking this to mean you will be working for a daily rate (or similar) and won't have significant purchases. Business types here: https://www.gov.uk/vat-flat-rate-scheme ... ch-you-pay

StepOne
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Re: Going contracting - Starting a Ltd company

#96167

Postby StepOne » November 16th, 2017, 12:05 pm

Hi,

In terms of registering a company, you don't need to use a one-stop shop, just do it directly on the companies house website. Only costs £12.

https://www.gov.uk/limited-company-form ... ur-company

Then you just need an accountant and a bank account.

StepOne

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Re: Going contracting - Starting a Ltd company

#96170

Postby FredBloggs » November 16th, 2017, 12:10 pm

StepOne wrote:Hi,

In terms of registering a company, you don't need to use a one-stop shop, just do it directly on the companies house website. Only costs £12.

https://www.gov.uk/limited-company-form ... ur-company

Then you just need an accountant and a bank account.

StepOne

All the accountants that I know will do it for you for free if you engage them to look after the accounts.

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Re: Going contracting - Starting a Ltd company

#100159

Postby melonfool » November 30th, 2017, 11:32 am

I registered my own company, I do all my own payroll (even if you don't pay yourself you need to do the HMRC RTI stuff, I just click 'non pay periods' every few months), my VAT (flat rate scheme, piece of [VAT-free] cake) and keep detailed records. I have a spreadsheet that tells me how much corp tax I'll need to pay, I deduct any business expenses, then pay myself the rest as dividends.
I send the records to the accountant at the end of the company tax year and she charges me £250 to do a short statement for Companies House plus my own Self-Assessment.

I use HSBC bank for my business account (yes, you *must* have one as your payment from clients must go to an account in the same name as the contracting party and the company that issues the invoice).

If you are a Ltd co there are also a lot of rules around what you put on your invoices and headed paper etc. For example, you must put your Co Reg number and your VAT Reg No on all invoices, and the co Reg no on all correspondence - even emails (so, design yourself a footer and use it). It should also be on your website and business cards if you use them. And, in theory, your registered offices but I've never bothered to be honest, since it's my house. I do have the 'company file' in my office, with all the reg documents and the share information. It is a different colour to all my other folders and clearly marked.

Oh, and every time you pay yourself a dividend you must do a 'company resolution'. I do this, print it, sign it, stick it in the company file and keep a soft copy on the PC.

I would say though, if you have only one 'customer' and they have given you an 18m contract why isn't that just employment? It would be very hard to justify that as a service contract. Usually I tell companies to only give 6m contracts and then 'extend' them. Also, do you plan your own holidays, control your own working days, can you work wherever you like, do you provide your own equipment including using your own/your company email address? If the answer to those is 'no' then you are at very high risk of being found to be employed and the 'contractor' status a sham if HMRC does an inspection.

For me, I have an employed job 3 days a week and three separate clients. For the clients I do most of my work from home, if I go to their site I take my own laptop, I don't use their email addresses, I do most of the work ad hoc (i.e. no set days, no set duration except with one they give me 6 day call-off contracts at a time, I may or may not use the 6 days), I tell them which days I am available (next week I am having new carpets fitted, I don't need to tell my client this, I just say "my next day I'm coming in is Friday").

Mel

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Re: Going contracting - Starting a Ltd company

#103006

Postby Redmires » December 9th, 2017, 5:40 pm

Thanks to all for your replies and help. I've just finished my first week as a contractor and what seemed daunting at first (setting up a company etc) was actually quite a doddle. The only delay was setting up a business bank account (with Santander) but that only took a couple of weeks.

I'm well aware of the IR35 situation and will take advice on it. If found to be inside then I'll consider upping pension contributions to counteract the increased tax and NI. One question that I can't find an answer for though is: If found to be inside IR35 and "employed" by a company, then surely that company has to offer a pension etc (be it at a minimum of 1% of salary).

Either way, it will work out for me as I will still earn considerably more than my last role even if inside IR35.

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Re: Going contracting - Starting a Ltd company

#103016

Postby FredBloggs » December 9th, 2017, 6:43 pm

Redmires wrote:Thanks to all for your replies and help. I've just finished my first week as a contractor and what seemed daunting at first (setting up a company etc) was actually quite a doddle. The only delay was setting up a business bank account (with Santander) but that only took a couple of weeks.

I'm well aware of the IR35 situation and will take advice on it. If found to be inside then I'll consider upping pension contributions to counteract the increased tax and NI. One question that I can't find an answer for though is: If found to be inside IR35 and "employed" by a company, then surely that company has to offer a pension etc (be it at a minimum of 1% of salary).

Either way, it will work out for me as I will still earn considerably more than my last role even if inside IR35.

Well, the bad news, don't try to conflate tax law and employment law. They are not consistent. If IR35 caught you can still work via your own Ltd Co or you can use an umbrella company. You will be a "deemed employee" if IR35 caught, not an actual employee. This is an important difference, it is tax law, not employment law. There is no 1% "free money" to be had for your pension. The only money is your hourly/daily rate. Employers and employees NICs come out of this pot of money when you are IR35 caught, as well as income tax and the fees the brolly co charges you. I'm afraid the golden days of contracting in the UK are long gone, the only real benefits now are being able to manage your income stream better than an employee can and indeed to pay GBP 40k a year into your pension as a company contribution. If you are IR35 caught, it is a real bad deal, in my opinion. But soon, it seems HMG and HMRC are going to ensure almost everyone will be caught, something they have been trying for since IR35 was first brought in back in 2000. It has been difficult to enforce but they are learning and I think by maybe April 2019 being out of IR35 will be largely a thing of the past.

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Re: Going contracting - Starting a Ltd company

#103068

Postby melonfool » December 10th, 2017, 12:50 am

I agree with Fred, employment law and tax law do not align.
In fact, there is another category, 'worker', which may or may not be an employee and may or may not be a contractor and has some rights and liabilities and not others.

I think if you do work for multiple clients, as I do (four currently, plus my three day a week employed role) then you'll still be OK, but those ten year contracting posts won't exist soon.

Mel

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Re: Going contracting - Starting a Ltd company

#104335

Postby Jopo1 » December 15th, 2017, 11:43 am

Your contract should include a clause that you can substitute someone else to carry out the work. This helps avoid IR35 issues. But of course it helps to have someone available to do this! my husband has a couple of people he can call on to subcontract to.

Also, it helps if you have more than 1 client to invoice over the course of the year, then you are clearly not just working for 1 company, but a true contractor offering services to various clients.

You should have an accountant to do your accounts. We pay approx £800 pa for the company accounts, 2 self assessments of 2 directors, and the company return with companies house. I deal with the salary and VAT which is minimal work. If you want an accountant to do this then it will cost of course. I gather up all the info needed once a year and send it off in spreadsheets and receipts in date order.

You will be legally required to keep an invoice record and VAT record (if registered), I combine onto a single, simple spreadsheet.

If you decide to go down the VAT route, you can opt for the flat rate scheme.

For insurance, we use Markel which I have found to be much cheaper than anyone else.

HTH

Jo

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Re: Going contracting - Starting a Ltd company

#104811

Postby moorfield » December 17th, 2017, 8:47 pm

Redmires wrote:Either way, it will work out for me as I will still earn considerably more than my last role even if inside IR35.


... while you are working. Don't forget you are no longer a permanent employee, assume billing voids may occur, and manage your cashflow accordingly.

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Re: Going contracting - Starting a Ltd company

#104910

Postby StepOne » December 18th, 2017, 12:32 pm

I thought that the number of contracts was completely irrelevant. HMRC will assess each contract individually, and you could in theory be caught by IR 35 in some but not others. The key decision is about whether the hiring company will accept someone else in your place.

StepOne

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Re: Going contracting - Starting a Ltd company

#104929

Postby UncleEbenezer » December 18th, 2017, 1:17 pm

moorfield wrote:... while you are working. Don't forget you are no longer a permanent employee, assume billing voids may occur, and manage your cashflow accordingly.

Same applies in a notionally permie job, some more than others. Especially if you're not in a "protected" group (i.e. if you're white, male, and able-bodied).

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Re: Going contracting - Starting a Ltd company

#104947

Postby didds » December 18th, 2017, 2:46 pm

StepOne wrote:I thought that the number of contracts was completely irrelevant. HMRC will assess each contract individually, and you could in theory be caught by IR 35 in some but not others. The key decision is about whether the hiring company will accept someone else in your place.

StepOne



I haven't contracted since 2009 so it could be there has been new case law or similar since, but back then the right of substitution was a strong indicator of not being caught but as I understood it would NOT on its own mean the contract was not caught. Ditto lack of mutual obligation. Again, as I understood it having several clients in a short period of time eg a year, would not in itself mean all contacts were not IR35 caught... but the overall pattern may be an indicator. Best scenario - back then etc - AIUI was if you could several clients running concurrently that was a very very strong indicator. Though again, would not necessarily mean HMRC would not have deemed any one of those not caught.

I appreciate as said above possibly more recent case law or findings etc have altered this understanding. :)
didds

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Re: Going contracting - Starting a Ltd company

#105032

Postby StepOne » December 18th, 2017, 9:26 pm

I just ran through the IR 35 status checker https://www.tax.service.gov.uk/check-em ... x/cluster/

There were more questions than last time I did it - questions about substitution, the kinds of duties involved and who decides where and when the work is done, but there are no questions like 'is this the only client of the worker'.

I answered them honestly about my current contract and it said I do not come under IR35. For the substitution question I said the situation had not arisen (which is true) and for the other questions I said that I can choose my own work location (which is true, although 95% of the time I am in the client office) and I choose my own work schedule (also true, although pretty much I am there Monday to Friday 9-5).

StepOne

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Re: Going contracting - Starting a Ltd company

#105035

Postby melonfool » December 18th, 2017, 9:37 pm

StepOne wrote:I just ran through the IR 35 status checker https://www.tax.service.gov.uk/check-em ... x/cluster/

There were more questions than last time I did it - questions about substitution, the kinds of duties involved and who decides where and when the work is done, but there are no questions like 'is this the only client of the worker'.

I answered them honestly about my current contract and it said I do not come under IR35. For the substitution question I said the situation had not arisen (which is true) and for the other questions I said that I can choose my own work location (which is true, although 95% of the time I am in the client office) and I choose my own work schedule (also true, although pretty much I am there Monday to Friday 9-5).

StepOne


Yes. As said above - IR35 is a different matter to employment status. Having more than one client helps to avoid a risk that the assignment could be seen as employment.

I have a substitution clause but have never enacted it. Most clients would be fine if you just took a day off sick. My work can just wait a day, it's not critical, I'm not a heart surgeon!

Mel

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Re: Going contracting - Starting a Ltd company

#105063

Postby FredBloggs » December 19th, 2017, 1:51 am

To be quite clear, as stated above, each and every job is judged on its own merits regarding IR35 compliance. It is perfectly possible to have three clients and any one of them can be either outside or inside entirely independently of each other. Case law even says that a job that starts out as outside IR35 can eventually become inside over time. It's a mess.

The "holy trinity" of being outside of IR35 has been for quite a number of years -

1 No mutuality of obligation
2 Unfettered substitution
3 Lack of direction and control

Any one of those three means you are outside IR35 but it is getting ever harder to have the authorities accept this. The IR35 legislation has not changed but the way in which it is being applied is changing rapidly, first of all with public sector contracts.


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