Contractor Limited Companies

First timers Contents:

^ TopDo you need a Ltd Company?

Limited company or umbrella – deciding on a payment structure
First time contractors have two options for setting up a payment structure: Limited company, or umbrella company. This article discusses the differences between the two and gives practical advice on which option to choose.

What is a ‘personal service company’?
Many contractors who work for clients through their own limited companies frequently find their business referred to as a ‘personal service company’.

^ TopSetting up your company

Contracting via a limited company. An overview of the start-up process
Contracting via a limited company is straightforward, as long as contractors get the basics right from the outset, says InTouch’s Clare Rickman.

Contracting via a limited company: Preparing to trade
Contracting via a limited company requires a bank account and registration with HMRC before trading can start, explains InTouch’s Clare Rickman.

Setting up a limited company for contracting
Contractors have several options in setting up a limited company: breakdown of shareholding and purpose are important. You can do it all yourself, or a company formation specialist or an accountant can do it for you.

How to set up and incorporate a contractor limited company online
Contractors choosing a limited company as their trading option can quickly and cost effectively incorporate online, using a range of options.

Choosing a company name
Choose something catchy and original but avoid using something too specific.

Contractor limited company formation versus set up and preparing for trade
Contractors wishing to use a limited company can choose between a basic formation service or an existing entity that’s registered and ready to trade.

Contractor guide to new model articles of association
As part of the changes introduced by the Companies Act 2006, limited company contractors should consider updating their articles of association.

Contractor guide to completing a statement of capital
What is a statement of capital and how should they be completed by limited company contactors?

Transferring shares within a contractor limited company
Splitting shares in a contractor limited company can mitigate tax liabilities, but there can be pitfalls, as Phil Richards of Blevins Franks explains.

Opening a company bank account
Advice and guidance for choosing and opening a company account.

Business bank account savings protection under FSCS
Contractors qualify as small businesses under Financial Services Compensation Scheme rules so business bank account cash up to £85,000 is protected.

Contractors may find limited liability partnerships useful
A Limited Liability Partnership may have value for contractors. But a limited company is probably more useful.

Tax efficient death-in-service benefits via a contractor limited company
Contractor death-in-service insurance premiums can be paid by a contractor’s limited company, as Tony Harris of ContractorFinancials explains.

Contractors and the Data Protection Act (DPA) – what they need to know
The Data Protection Act (DPA) potentially impacts every UK business, including contractor limited companies.

Declaring dividends before invoices have been issued or paid
Contractors can declare a dividend before invoices are paid, or before sending the invoice, but there are pitfalls, says Abbott Moore’s James Abbott.

^ TopChoosing a contractor accountant

Contractor accounting: limited company contracting and when to call your accountant
How can contractors manage their accounting for a contracting limited company and at what point should they call in the services of their accountant?

Choosing an accountant for your limited company
Having decided to contract via the limited company route you will need to get yourself an accountant. This article explains the issues you should consider when choosing one.

Why you need an accountant and not just accounting software
The value your accountant can provide to your contracting and freelance business goes far beyond what an accounting software package can offer.

10 tips for choosing a contractor accountant
Once you've decided to trade using your own limited company, then choosing a contractor accountant is the next step.

Choosing an accountant - checklist download
Download a checklist to help the decision of which accountant to choose.

Top ten contractor questions to ask a specialist contractor accountant
Contractors should ask these ten questions to check whether an accountant is a contracting expert before signing up, says Abbott Moore’s James Abbott.

Contractors get qualified accountants from PCG
The Professional Contractors Group accredits accountants who are specially trained to help contractors. It is a precious resource.

Counting the true cost of a contractor accountant
Derek Kelly of ClearSky Accounting explains how contractors can use a checklist to spot the hidden costs in advertised contractor accountant fees.

Contractor accountants: count the true cost with the ContractorCalculator checklist
Many contractor accountants advertise a monthly fee but don’t say what your money buys. Find out for sure with the ContractorCalculator checklist.

Contracting limited companies: top questions contractors ask their accountants
Answers to the most common questions contractors ask their accountants are explored by Derek Kelly of contractor accountant ClearSky.

Choosing an online contractor accountant or accountancy software – checklist download
Contractors can choose the online contractor accountant or accountancy software that suits the needs of their contracting business using this free che

Contractors and the rise of the online contractor accountant
Online contractor accountants are driving a paradigm shift in the way that contractors can record and manage their bookkeeping, accounts and tax.

^ TopSalaries

How much salary should a contractor pay themselves as director?
Contractors often find the low salary-high dividends model to be the most tax efficient way to take remuneration, says Abbott Moore’s James Abbott.

Should contractors with limited companies take salaries?
Contractors are wise to take some salary in the interest of avoiding the attentions of the Revenue.

Can I pay my spouse or partner a salary?
Contractors who run their own company can pay their spouse or partner a salary for work done for the business, explains Abbott Moore’s James Abbott.

Processing your company payroll when contracting via a limited company
Maintaining a company payroll seems a mundane task but Phil Richards of Blevins Franks explains it is a vital statutory requirement for contractors.

Contractor guide to HMRC’s Real Time Information (RTI) operation of PAYE
Salaried contractors must submit PAYE data to HMRC from April 2013 as part of HMRC’s Real Time Information system. James Abbott explains the process.

Contractor guide to HMRC’s Real Time Information (RTI) annual scheme
Limited company contractors can now choose to submit their RTI payment submission for salary to HMRC annually, explains Abbott Moore’s James Abbott.

Contracting and the national minimum wage (NMW)
Limited company contractor directors are not affected by the national minimum wage, but umbrella contractors employed by their service provider are.

^ TopRunning your company

How contractors should run limited companies
There are a number of issues that contractors should be aware of in running their own limited companies.

Contractor limited company directors’ roles and responsibilities
Company directors have clear roles and responsibilities in their management of limited companies and failure to comply can result in severe penalties.

Timesheets, invoices and payments
When you are contracting you need to complete timesheets and raise invoices. This article explains the process.

How to prepare an invoice - examples and templates
How to prepare an invoice. Examples and templates.

Penalties incurred for late filing of forms
If you use a limited company for contracting you will need to file certain forms each year. If you don’t then you could be liable to substantial penalties.

Accounting for assets and depreciation in your accounts
Explains how assets and depreciation are accounted for in your Limited Company.

Dealing with multiple contracts being inside and outside IR35
Accounting requirements when you have contracts both inside and outside IR35.

Limited company contractors with contracts inside and outside IR35
Having contracts both inside and outside IR35 need not be complicated for limited company contractors to deal with, says Phil Richards of BFCA.

How to change your accountant
Want to change your accountant? Find out what you need to do to move to someone else.

When contractors need to change accountants
An accountant is a trusted business partner, but when you feel you need to change accountants, the process can be handled without excessive strife.

Contractors can run multiple businesses from one company
Contractors have every right to run as many businesses as they choose from their limited companies. They can also own other companies. But there are a few issues they should be aware of.

Checking annual accounts of your limited company when contracting
Contractors who work through their own limited company are required to prepare, check and submit annual accounts to Companies House for the business.

Contractors, directors’ loan accounts and borrowing company money
Contractors usually have no need for a director’s loan, but for those that do, there are strict rules and pitfalls, says Abbott Moore’s James Abbott.

Keeping the cash flowing through a contractor limited company
Cash is still very much king and the contractor without money in the bank can come unstuck. The key is keep the cash flowing in the right direction.

Financial year-end checklist for contractor limited companies
The financial year end provides limited company contractors with useful opportunities, but timing is crucial and deadlines cannot be ignored.

Contractor limited company checklist for moving company address
Moving business address can be stressful for contractors, but an organised approach will make the legal side of it relatively hassle-free.

Contractor guide to the P11D - declaring benefits and expenses
ClearSky’s Derek Kelly explains why some contractors must complete a P11D for HMRC each year and the penalties for filing incorrectly or late.

P35 Employer Annual Return service company question and IR35 - contractor guide
Contractors working through their own contractor limited company must complete a P35, including the service company question, and submit it by 19 May.

What hardcopy paperwork must I keep for my limited company?
Contractors can keep most business records electronically, but there are documents that must be kept as hardcopies, says inniAccounts’ Matt Poyser.

^ TopExpenses

Claiming contractor limited company start-up expenses
Contractors can claim all their limited company start-up expenses, but it is essential to keep accurate records to prove the expenses are legitimate.

Can I claim for pre-incorporation personal expenses?
When first starting out, contractors often find that the paperwork takes time to catch up. Barry Roback, of JSA Group, explains what personal expenses contractors can claim if starting work before incorporating their company.

Can I claim for training as a pre-incorporation expense?
Contractors have limited scope to claim for training expenses incurred before incorporation, explains Steve Crouch of Crunch.co.uk.

Valid expenses as a contractor - what you can claim
We describe in detail what expenses are allowed to be claimed when you are contracting.

Does taking a break get around the 24 month contractor expenses rule?
Answers a contractor's question about the 24 month expenes rule and explains the rules in detail.

Can expenses be claimed for entertainment?
Answers a question from a reader about the rules for claiming entertainment expenses.

Claiming contractor expenses for use of home as office
Discusses if claims should be made for use of home, what the rules are, and what can be claimed.

Buying gifts for employees and clients - what you can claim
The tax man is not particularly generous when it comes to treating your staff as this article explains!

Buying a company car - is it worth it?
Should you buy your own car and charge it to the company, or purchase it as a company car through the company?

Can I give my spouse a company car with no ‘benefit in kind’ due?
Contractors using P11D exemptions for low-paid staff to avoid BIK tax on a spouse’s company car will get caught, says Aboott Moore’s James Abbott.

Making personal and company charitable donations and sponsorships
Contractors may qualify for tax relief on charitable donations, although the rules on sponsorship can be complex, says Abbott Moore’s James Abbott.

How to charge contracting expenses and disbursements back to your client
Contractors incurring expenses & disbursements on behalf of clients must treat them correctly when charging them back, says Clare Rickman of InTouch.

How contractors should process contracting expenses
Contractors who run their own limited company can use really simple systems to ensure they keep accurate, up-to-date expenses records for their tax and VAT accounting, as well as ensure they get to claim everything they can.

Contracting guide to home office expenses for limited company contractors
Contractors trading via a limited company are technically employees, so home office rules require a rental licence, says James Abbott of Abbott Moore.

Contractor expenses: combining business trips with holidays
Contractors can legitimately combine a genuine business trip with a holiday and still claim contracting expenses, says Abbott Moore’s James Abbott.

Contractor guide to company healthcare and gym membership benefits
Contractors can pay for healthcare costs and gym expenses using their limited company, but these benefits are taxed, says Abbott Moore’s James Abbott.

^ TopExpanding

Taking on your first employee - financial and legal issues
Consideration when deciding to expand your contracting business by taking on an employee.

Contracting and subcontractors: tax, VAT and employment issues
Contractors subcontracting client work to other contractors should be aware of the tax, VAT and employment issues, says James Abbott of Baker Watkin.

Hiring a temporary resource – option and issues to consider
Options and issues to consider when deciding to hire a temporary resource.

Processing fees for fellow contractors should be avoided
Tempting though it might seem to help a friend in need, contractors should resist invoicing on behalf of fellow contractors, as it could backfire.

Working with foreign and offshore companies
Financial aspects to consider when dealing with companies outside of the UK.

Contracting businesses: growth and exit strategies for contractors
Contractors seeking to grow and exit their contracting business need to plan and implement a strategy.

^ TopSalary and Dividends

Dividends and contracting: calculation, payment and taxation
You may take dividends from your limited company whenever you are certain that there are after-tax profits to be divided up. Here's how you calculate them.

Contractor guide to calculating taxes payable on dividends
Explains how to calculate any further tax payable on dividends you receive from your limited company

Contractor dividend timing and dividend waivers
Calculating the dividend and managing the frequency of when to raise and pay dividends is not so simple, as Phil Richards of Blevins Franks explains.

Contractor dividend strategies and administration for limited company contractors
HMRC can deem a dividend as salary and tax it accordingly if the correct paperwork is allowed to lapse, warns James Abbott of Abbott Moore.

Declaring dividends: the paperwork - dividend counterfoils and company board minutes
There is little paperwork or reporting associated with dividend payments.

Contractor guide to splitting dividends
Splitting dividends with a spouse to maximise contracting income used to be the norm, but the Arctic Systems case changed the rules, says David Colom.

How can I account for overpaying my dividend?
Phil Richards of Blevins Franks accountants explains to contractors how to account for an overpaid dividend.

Can I claim Statutory Maternity Pay from a contractor ltd company?
Contractors can pay themselves Statutory Maternity Pay from their contracting limited company and reclaim costs from HMRC, says BFCA’s Phil Richards.

I’ve just married – can I share contracting income with my spouse?
David Colom of D J Colom highlights the pitfalls of sharing contracting income with a new spouse and suggests the best tax strategies to employ.

Illegal dividends explained – what are they?
Abbott Moore’s James Abbott explains why contractors must ensure they record profit calculations & the correct paperwork to avoid illegal dividends.

Salary versus dividends – limited companies advice
Contractors can tax efficiently extract earnings from their contractor limited companies by paying themselves a low salary and the rest as dividends.

Contractor guide to dividends and dividend tax credits
Contractors pay themselves via a combination of low salary and dividends, but calculating how much income tax to pay on dividends can be complicated.

^ TopTaxation and VAT

Contractor tax: limited company and personal taxes explained
Depending on how you structure your finances and your IR35 status will depend on the type and level of taxes you need to pay.

Contractors’ guide to VAT
VAT is a contractor’s best friend if treated right, or worst enemy unless care is taken to keep to the rules. Here’s how to keep the VAT-man happy.

Contractors’ guide to the flat rate VAT scheme
Contractors can benefit from the flat rate VAT scheme by cutting admin & potentially enjoying a cash surplus, explains Abbott Moore’s James Abbott.

Contractor guide to charging VAT to overseas, non-UK clients
For most contractors whether or not they should charge VAT for overseas non-UK business clients is straightforward, explains Steve Crouch from Crunch.

HMRC VAT inspection - preparation and process
How to prepare and what to expect when HMRC conduct a VAT inspection

HMRC PAYE/NI tax inspections explained
A guide to Inland Revenue tax inspections, explaining the preparation and process of the HMRC PAYE/NI tax inspection.

Tax on employer provided assets and computers
Contractors using company assets for private use must obey HMRC’s rules and pay a benefit in kind (BIK) tax charge, says James Abbott of Abbott Moore.

Contractor guide to HMRC’s Real Time Information (RTI) operation of PAYE
Salaried contractors must submit PAYE data to HMRC from April 2013 as part of HMRC’s Real Time Information system. James Abbott explains the process.

Contractors who take long breaks between contracts should be aware of likely pitfalls
For many limited company contractors, taking long breaks is part of their reason for contracting, but James Abbott warns there can be pitfalls.

Contractor guide to how online accountants manage tax and company year-ends
Contractors need no longer complete numerous forms, as online accountants largely automate end of tax and company year processes, says Carl Danvers.

Can I give children shares in my contracting company to save tax?
Contractors tempted to transfer company shares to their children to reduce their tax bills will still have to pay tax on any dividend income.

Contractor guide to the tax treatment of child benefit and the January 2013 changes
Contractors earning over £50k with children can take action to avoid losing child benefit & a marginal rate of 54%, says James Abbott of Abbott Moore.

Contractors publishing their owns books – tax and accounting issues
Contractors self-publishing promotional books shouldn’t publish through their company unless profits will be large, says Abbott Moore’s James Abbott.

Tax issues of acquiring quality and antique assets
Contractors considering buying high quality or antique assets for their limited companies may discover its more tax efficient to buy it personally.

Extracting profits tax efficiently from a limited company
Contractors can choose from a range of strategies to extract profits tax efficiently from their limited company, explains Abbott Moore’s James Abbott.

^ TopHMRC Inspections

Minimising the risk of an HMRC investigation
Contractors can minimise the risk of being investigated by HMRC by taking simple yet effective measures, explains Abbott Moore’s James Abbott.

HMRC self assessment (SA) investigations – how they work
Explains the process of a HMRC Self Assessment investigation.

Can I avoid an HMRC investigation if I close my limited company?
HMRC can still investigate contractors who have closed their contractor limited company, but retroactive IR35 cases tend not to succeed.

Contractor guidance on record keeping for HMRC’s Business Record Checks
Contractors can easily ensure their records are in good order if HMRC undertakes a Business Records Check, says InTouch Accounting’s Paul Gough.

^ TopClosing Down or Making Dormant

Making your contracting limited company dormant
How to make a limited company dormant and the responsibilities whilst it is dormant.

How contractors can close down their limited companies
If a contractor changes career path or decides for another reason that their limited company is no longer needed, they can choose to close it down.

Dormant limited companies: guidance on HMRC and Companies House rules for contractors
Contractors maintaining dormant limited companies must abide by rules set out by HMRC and Companies House, explains David Colom of DJ Colom & Co.

Avoiding the tax issues of transferring assets from limited companies to contractors
Contractors can face unwelcome income tax and employer’s NI charges if they fail to follow the rules when transferring ownership of a company asset.

Contractor guide to Section 1030A distributions (ESC C16) closing a limited company
Contractors can extract cash tax efficiently as capital when closing their limited companies, by using Section1030A distributions (formerly ESC C16).

Tax efficient distribution of contractor funds using members’ voluntary liquidation
Contractors closing a limited company with cash in excess of £50,000 can use a members’ voluntary liquidation (MVL) to extract funds tax efficiently.

^ TopMoving between Ltd Company & Umbrella

Moving from a limited company to an umbrella: reasons and practicalities.
Discusses the many reasons you might have for wishing to move together with practicalities of moving.

Reasons and practicalities of moving from an umbrella to a limited company
Discusses the reasons and steps to take to move from an umbrella arrangement to a limited company.

^ TopPensions & Investments

Contractor pensions - pension options and pensions advice for contractors
Explains away the jargon and points out the opportunities available to contractors who are looking to channel their hard earned income away from the tax man and into their own pocket.

Can company money be used to offset a mortgage?
Discusses the issues surrounding the concept of using company money to offset your mortgage.

Can I use my limited company money to offset my mortgage?
Contractors may face a hefty tax bill, and even prosecution, by using company money to offset personal mortgages, warns James Abbott of Abbott Moore.

Considering property investments via your contracting limited company
Considering using company profit to invest in property? This article explains reasons why that is not a good idea.

Spending contractor limited company profits tax efficiently
According to Duncan Strike of Quay Accounting, contractors should be looking closer to home when deciding how to spend the cash in their business.

What contractors need to know about investing through their contractor ltd company
Contractors can build up large sums in their limited company, but James Abbott of Abbott Moore warns that investing this cash can mean higher taxes.

Tax issues for contractors who save large sums of money in their limited companies
Abbott Moore’s James Abbott explains why building up a large cash balance in a contractor limited company can end up costing contractors more tax.

Can Entrepreneur’s Relief help extract cash from my ltd company?
James Abbott of Abbott Moore explains that for most contractors ER won’t make it worth accumulating a large cash surplus in their limited company.

Contracting company profits - tax issues when investing cash surpluses
Contractors with cash in their businesses may be considering company investments. Expert financial advice is vital, says Abbott Moore’s James Abbott.

Investing your company money in gold
Gold could offer contractors seeking investments for their limited company’s surplus cash a greater return than other investments.

Contractor guide to the tax treatment of financial advice, including company pensions
Contractors can only claim limited costs for financial advice, including advice on company pension schemes, explains Abbott Moore’s James Abbott.


  
  

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