This article was written by David Colom of Platinum Umbrella the executive management
and payroll umbrella service for premium contractors.
Introduction
Having chosen an accountant and set
up your limited company you will now need to
consider the on going requirements and obligations to run your company.
Whilst you will have chosen a specialised accountant to assist and guide you
through the various matters that arise you will need to consider the following:
1. IR35 Matters
IR35 is a fundamental issue which you will need to consider at the very start of
your contracting career and every time you accept a contract.
You will need to familiarise yourself with the requirements of IR35 and decide
whether or not you will choose to work within it.
IR35 is a fundamental issue which you will need to consider at the very
start of your contracting career and every time you accept a contract
David
Colom - Platinum Umbrella
You may need to seek specialist legal advice for the various contracts you
undertake in order to ensure that your decision is valid and will stand up to
scrutiny on an IR35 inspection.
2. Invoicing Your Agent
You will need to invoice your agent each week or month together with an approved
timesheet. You will need to ensure it is forwarded to them within their
prescribed deadline to avoid delays in payment.
3. Recording Transactions
You will need a system in place to record all the the company transactions:
Payments, Invoices, Expenses. A simple spreadsheet will suffice although
the method used will usually be determined by the accountant you select.
Some accountants have a recommended software package, while others will
recommend a simple spreadsheet which you will keep yourself and forward to them
once a year, when they prepare your accounts.
4. Payroll Matters
As company director you normally take a salary from the company whether or not
you are working under IR35. You will need to arrange for payslips to be
prepared and ensure that the necessary taxes are paid over in due time.
Most accountants include a full payroll service as part of their package to
contractors, which will avoid the need for you to be involved in the detailed
calculations.
Following the end of the tax year, it will also be necessary to file an
employers annual return (form P35), together with forms P14, P60 and P11D if
you have taken any expenses or benefits in kind from the company during the
year. Your accountant would normally deal with these so that your involvement
is simply approving the documents before they are submitted to HMRC.
5. Dividend Planning
If you are working outside the scope of IR35 then the bulk of your income from
the company will be taken by way of dividends. It is vital that the necessary
documents (board minutes and dividend counterfoils) are prepared at the time
you take each dividend.
Profound problems can arise if the necessary procedures are not adhered to in
this area. In addition you will need to ensure that your dividend drawings are
not in excess of the company’s profits after corporation tax. Your accountant
will be able to advise on a sensible amount to withdraw.
6. Accounts
The company will need to submit accounts to the Inspector of Taxes and
Companies House once per year. Penalties arise for late filing and it is
important that you ensure that the documents are prepared in due time. Your
accountant will normally prepare these for you which you then approve for
forwarding.
7. Company Secretarial Matters
Companies House will issue a company annual return once every year which you
will need to complete and forward to Companies House, together with their
annual fee of £15. Various other forms will have to be submitted to Companies
House if the circumstances of the directors or company change, e.g. you move
home, change company secretary, etc.
8. Personal Tax Return
As a company director it will usually be necessary for you to file a personal
tax return under self-assessment. Your accountant can prepare this for you,
although bear in mind that this can be a hidden cost depending on which account
you choose.
9. VAT Return
If your company revenue is more than VAT registration threshold (£58,000
in 2004) then you will be required to register your company for VAT. You then
add an extra 17.5% to you invoices. You can also claim the VAT back against
purchases you make that incur VAT. Every three months you must complete a VAT
return and send a cheque to HMRC for the balance of VAT left
over after purchases.
Published: Monday, February 06, 2006
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