Implications of starting a limited company for service provided
As stated I have been asked to move from payroll to invoice my time from a ltd company as he wants to reduce PAYE payments!
What should I consider before doing this can I pay myself 6K per year and take my salary as dividends, as my tax code is BR so no PA for the new year. Would I include both on my tax credit application?
Can I add my car and mileage as company expenses against my hours?
Sorry to ask so much I just feel a little out of my depth and worried about making the wrong choice.
Thanks allot
Can't think of any upsides from your viewpoint
It sounds as if you would be in IR35, so there appears to be no incentive in taking your money out the intermediary company by any means other than PAYE. You just end up with the PAYE costs being incurred by your company rather than the current employer. Leaving aside the admin costs and hassle, you would only end up in a tax neutral position if your invoiced charges reflected your current gross salary plus the current employer's NIC thereon. That being the case, your current employer would be no better off (in tax terms) than had he simply paid you direct under PAYE. He would of course be better off (at your expense) in the qualitative sense that he will have shed himself of any currently existing responsibilities under employment law.
With kind regards
Clint Westwood
Think carefully first...
Speaking as one who is in the position you are being asked to adopt..... I agree with all the comments above plus
don't forget you would have to register your own company for money laundering with HMRC. That would cost you £120 per year.
Insurance would be Professional Indemnity cover (at least £155 per year) and Employer's Liability Insurance.
In my experience, it is not easy to get the client to sign your contract (Ltr of Engagement). If you have an awkward client, like I had, you will find it difficult to get the terms that you want. Your previous employer will probably want to continue treating you like an employee whilst dodging out of the responsibilities.
All in all, for now, I would insist on staying on the payroll. By all means set up your own company ready for the future but don't be bamboozled into doing something you do not want or are not ready for yet.
I'm sure others can add to my list now.
I have just walked away from my awkward client!
Best wishes, Star
.
You don't have to accept his proposal as it prejudices your employment rights. Assuming that that your job may be at risk if you dont succumb to this, you need to seek advice from a HR adviser or ACAS in the first instance.
The previous poster has already commented on the work involved in running a Limited Company.
Your company may fall within the IR35 legislation, and you will be responsible for your own PAYE & NIC. In essence, your employer would have shifted the PAYE burden to you, you could have a lower take-home pay, more overheads, more administration work, and a voluntary loss of your ERA rights.
Regards
Gareth Hughes
Accountants Solihull | The Hughes Partnership
Think very carefully about this
What is in this for you?
You will lose all employment protection rights.
You will have the hassle and cost of running a limited company - company house fees and formalities, preparation of accounts, costs of doing CT returns. Have you seen an accountant yet to find out how much this is all going to cost? Is your employer going to pay you anything more to compensate you for the hassle?
You will have to prepare SA returns (as a company director) if you do not do so already.
You will have to run a payroll - more potential income for your accountant or a payroll agency if you do not want the fun of doing it yourself.
There may also be other issues depending on exactly what you are doing eg re insurance.
You may also want to think about using a solicitor to make sure that any contract you have with your current employer is legally watertight & protects you against all eventualities. More cost of course.
I am sure there are some upsides though!