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If you are thinking about making the move from permanent to contracting and setting up your own limited company, then there will be a small amount of paperwork that needs to be done to inform HM Revenue and Customs (HMRC) of your new trading status.
The usual questions that we are asked here at Nixon Williams are:
This article will help dispel the myths and help you understand what is expected of you and most importantly when by, the last thing you want to be doing is facing a pesky fine, just as you start.
The first thing to do is probably to speak to an accountant and make sure that working through a limited company is the most tax-efficient way of operating for you. Our limited versus umbrella guide might be worth a quick read.
Ideally, you should have your company bank account set up as quickly as possible in order to avoid using your personal bank account for business purchases. Although these expenses can be claimed back it makes it a little easier to purchase business goods through your business bank account.
Whilst there are no real legalities as to how much time you have to set up your limited company after you have begun trading, it is recommended that you should have registered at least six months before the new tax year (April). A company is considered active when it is carrying out the following:
However, if you register your new company and decide you do not wish to trade until a later date, you must inform HMRC within 3 months of any business activity.
Once you have formally set up your limited company or registered as being a sole trader with Companies House you can commence trading. Companies House will then inform HMRC and you can expect to receive documentation to your registered office address informing you of the next steps.
If you have started a business without registering and setting up a limited company, then you are effectively a sole trader whether you intended to be or not. You are then legally required to inform HMRC when you started the business and could face fines for failing to do so earlier.
Though not forming a limited company you are personally liable for any business debts, meaning that if you were to form a limited company, for example, any business debts would be attached to the limited company and not yourself.
Your name can be anything, your street name or something to do with the industry you are in. Once you have your name, now onto the simple part. If you are thinking of becoming a client of Nixon Williams then the formation is free of charge, all you will need to do is fill out a few extra boxes on our limited company application form, these are:
Having an accountant can be very beneficial, especially if you just want to get on with the work and wish to leave all the admin and accounting to someone else. It can be a relief not having to worry about whether you’re paying the right amount of tax or getting the correct amount of dividends from your company’s profits. If you are unsure of what amount of dividends you can take, we would advise you speak to an accountant, who will be able to help you with this. This means that if you are married you might like your spouse to be a part of the company too with a share in retained profits.
The simplest way to register is to go to our limited company formation page. It usually takes 3-6 hours to register your company. If you choose to become a client of Nixon Williams, we will set your company up for free along with registering your new limited company for PAYE, VAT, Corporation Tax and assist with opening a business bank account with Metro Bank.
Nixon Williams is a specialist contractor accountant concentrating mainly in the IT sector, but also have experience in other sectors such as project management and oil and gas engineering.
Appointing an accountant can save you time and pressure when starting up your own limited company. If you would like to speak to someone about any of the above information or any other queries you may have, please contact us on 01253 362062.