mad4x4
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| posted on 10/7/09 at 12:01 PM |
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Going self employed
Ok, I work as a PLC controls engineer, and I am thinking about setting up a limited company and going self employed
Doing a web search I keep getting IR35 info.
What laymans terms what is IR35 ?
And as a one man band would I fall into it?
Looked at some websites and they say make sure you are outside ir35 but how do you tell?
How many IT contract on here and are Hit By IR35 rules things.
Scot's do it better in Kilts.
MK INDY's Don't Self Centre Regardless of MK Setting !
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Guinness
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| posted on 10/7/09 at 12:12 PM |
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Briefly, as I understand it, IR35 applies in the following situation:-
You are self employed / work for your own limited company.
But you only have 1 client (i.e. the company you are contracting for).
HMRC will then carry out a number of tests to see if you are an employee or not:-
That company tell you what to do,
when to do it,
start times,
finish times,
and control when you take holidays,
then they are really employing you and HMRC will take a dim view of it.
I have my own limited company, but have several clients, none of whom can dictate to me my working hours / when I can take holidays etc, so I'm
not subject to the IR35 rules.
As I said, as far as I know.
HTH
Mike
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hughpinder
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| posted on 10/7/09 at 12:18 PM |
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I work as a self employed automation engineer. I was 'caught' by IR35 because I was lucky enough to find a long time contract.
Basically, people used to pay a small salary and a large annual bonus, and since the bonus does not attract employers NI you could save 12.8% NI on
your income. You still pay normal employees tax/NI in either case. However, when IR35 came in, the government decided that if you work in one place
for more than 3 months for one company you are an employee, and therefore they will assume all income is salary, for corperate NI purposes and claim
the 12.8% employers NI. If you work at many different places, you will still be able to avoid this. Its probably best to talk to an accountant- you
will need one anyway I guess.
Regards
Hugh
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SteveWalker
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| posted on 10/7/09 at 12:27 PM |
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As above, but you can still fall outside IR35 even on longer term projects for a single client, if you can show that you are treated differently from
a company's employees. So if you can decide when to take holidays, are not included in company Christmas parties and other social events, work
different hours/days, it's all ammunition to stay outside IR35. There are a number of companies that specialise in guiding you (Brookson is
one).
I was until recently a C&I Engineer working this way. I have now ceased trading though - simply because I was out of work for a while, my wife was
ill, so I wasn't ready to return and my mortgage and credit card insurances wouldn't pay out while the company was still trading.
[Edited on 10/7/09 by SteveWalker]
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MikeR
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| posted on 10/7/09 at 01:04 PM |
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I've 'run' IT contractors for a number of years. We've had a couple for 4+ years (long story).
Basically we agree with them that they'll do x hours over the duration of the contract, broken down into y hour blocks.
(ie 40 hours a week until we run out of cash).
They then take holiday as they want and within reason work the hours they want (usually 4 x 10 hours to get fridays off). They also both take separate
contracts on the friday - fix a mates computer, occasionally they've written software for different parts of the company / sister companies on a
fixed price contract.
One did get investigated for IR35, was most indignant about it and cleared.
(filling in the IR35 tax questionnaire from the companies point of view had me poo'ing my pants)
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v8kid
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| posted on 10/7/09 at 01:49 PM |
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Sorry to highjack this post but I am in a similar position and am wondering if it is worthwhile setting up a limited company.
What are the adverse side effects? Don't I have to submit certified accounts to registrar house every year?
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Guinness
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| posted on 10/7/09 at 02:12 PM |
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It depends on a multitude of factors.
Best advice is to talk to an accountant from the off.
We set up a limited company, to do exactly what it says on the tin (limit our liability). We are in the building trade, so if something goes wrong,
it could be very expensive!
Annual return to companies house is about £20. Not to be confused with your annual accounts.
We've just finished our first year of trading and the accountant is in the middle of preparing the books. Cost will be dependant on time taken
/ turnover. Estimate £250-500.
We went VAT reg from the outset, as we knew (hoped) that we'd exceed the threshold quite quickly (and some customers won't deal with
companies that aren't vat registered).
Mike
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v8kid
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| posted on 10/7/09 at 02:17 PM |
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Ta. I think I will talk to an accountant - not very locost but safe!!
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StevieB
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| posted on 10/7/09 at 04:59 PM |
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I have a ltd company and most of what I do is consultancy based for one client - I do bits on the side when I can and am trying to expand into that a
lot more (my main businss objective is to have a more diverse client base) but being in the construction and engineering industries for what I do,
there's just not an awful lot going on out there.
Another IR35 test is whether you;re taking any risk in conducting your business, so if you're on a fixed price for some given work, then you are
taking a risk because you could potentially lose money. If you;re on a day rate, then it;s a bit more of a grey area.
Im on a day rate, but I choose when, where and how I work for my client. It just so happens that I decided that the best way to deliver services to
my client is to second myself to their offices for the duration of the contract....
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mad4x4
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| posted on 15/7/09 at 06:48 AM |
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Ok thanks for the advice - Next stop find an accountant that can "save me money" and look at Ltd. If I do go ltd it Will include Vat reg
I think
Scot's do it better in Kilts.
MK INDY's Don't Self Centre Regardless of MK Setting !
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iank
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| posted on 15/7/09 at 08:14 AM |
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quote:
Originally posted by hughpinder
I work as a self employed automation engineer. I was 'caught' by IR35 because I was lucky enough to find a long time contract.
Basically, people used to pay a small salary and a large annual bonus, and since the bonus does not attract employers NI you could save 12.8% NI on
your income. You still pay normal employees tax/NI in either case. However, when IR35 came in, the government decided that if you work in one place
for more than 3 months for one company you are an employee, and therefore they will assume all income is salary, for corperate NI purposes and claim
the 12.8% employers NI. If you work at many different places, you will still be able to avoid this. Its probably best to talk to an accountant- you
will need one anyway I guess.
Regards
Hugh
Can you not do the big tax saving anymore?
As a limited company you pay the shareholders (usually you an your wife) a dividend which attracts capital gains tax rather than income tax. So all
the contractors used to pay themselves minimum wage (thus paying the minimum of income tax) and take a huge dividend every few months. Capital gains
being a lot less than 40% means you can save a lot of cash if you're in the higher tax bands.
Definitely need to talk to an accountant if running at the bleeding edge of tax 'planning'.
--
Never argue with an idiot. They drag you down to their level, then beat you with experience.
Anonymous
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Jon Ison
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| posted on 15/7/09 at 08:26 AM |
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quote:
Originally posted by v8kid
Sorry to highjack this post but I am in a similar position and am wondering if it is worthwhile setting up a limited company.
What are the adverse side effects? Don't I have to submit certified accounts to registrar house every year?
I would advise A) you speak to an accountant and B) I think you will find they advise the same as me, go sole trader, LTD as few tax benefits these
days but incurs lost more costs, it can be beneficial but from your description of your intentions I would suggest not.
Most accountants will do an initial interview/meeting for free.
The one we chose was not the cheapest we met but they have saved us far more by knowing what they are talking about than we pay them in
fee's.
As for VAT registration I believe currently it starts at around £67k ? There is a flat rate VAT scheme which for some is a easier and cheaper way to
go, you can go flat rate between £67k and something over £280k ?
We are on flat rate, 5.5% it saves us £9k a year but our buying circumstances dictate it is a better route for us as we don't pay VAT on around
1/2 the stuff we purchase so there is no vat to claim back, we also use Parcel Force who don't charge VAT so we cant claim that back either but
have to charge it on deliveries so we would lose there to.
Confused ? I was.
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