Thinking about incorporation? It can be simple or complex depending on the set up and management of the company.
Many people don’t understand how companies work and what they need to do for financial administration, and this is where we can be of greatest help.
We advise people to get advice before incorporating, so that the best combination for shareholders and officers can be determined. We also give lots of information regarding the duties and responsibilities of the officers and shareholders.
Advice may also be needed regarding IR35, which is a bit of tax legislation that says if you behave like an employee and have a contract like an employee then you should be taxed like an employee. If caught by this legislation, you will pay more tax and NI than a normal employee or self-employed sole trader.
All limited companies must comply with the following:
- Corporation tax return for HMRC
- Statutory accounts for HMRC
- Abbreviated accounts for Companies House
- Annual return for Companies House
- Bookkeeping (records of the income/expenditure)
- VAT records and returns (if applicable)
- Payroll (officers are usually employees of the company)
- Self-assessment tax returns for Directors
Some clients are happy to do as much as possible themselves, and therefore pay reduced accountancy fees. Others prefer us to manage everything on their behalf. We can register your company for you in a matter of hours.
There are two main advantages of a limited company. The first is the limited liability, which will safeguard your personal assets. The second is reduced tax/NI as you are able to manage the withdrawal of profits to avoid higher rate tax, and you can receive a credit for National Insurance contributions, without actually paying any NI.
Goodwill (please disregard – the rules changed on 03/12/2014 in the Autumn Statement)
If you incorporate an established business, you may get a one off bonus of Goodwill. This is generated by ‘selling’ your established business to the limited company. There will be a payment of Capital Gains Tax (10% less your annual CGT allowance of £11,000 in 2014/15), but the whole amount will eventually give tax relief at 20% (2014/15). The extra bonus is the large capital sum that can be withdrawn from the company with no additional tax liability.
If you are a higher rate taxpayer, and have an established business that isn’t caught by IR35, why not give us a call and we can send you a guide listing the advantages and disadvantages of incorporation.
Call us on 01977 667789