How responsible are you?

How responsible are you?

In a previous article, we briefly touched upon the topic of limited company directors’ responsibilities.

We thought it would be a good time to go back to this and discuss limited company directors’ responsibilities and duties in further detail.

As we have previously mentioned, there are various ways you can operate as a contractor. It is common for contractors to choose to operate via their own limited company. When you incorporate your company with Companies House you must name somebody as a director, and this is often you.

What is the role of a limited company director?

Looking at it in its simplest form, the director is responsible for the day to day running of the company, and making sure that it is run in accordance with UK Company Law.

Who can be a limited company director?

Generally speaking, anybody can be a limited company director, but there are some exceptions:

  • Company directors’ must be aged 16 or over. There is currently no maximum age limit.
  • If you are an undischarged bankrupt or have been disqualified from being a director of another company, you are not allowed to be named as a director of a new company.
  • At least one director must be ‘natural’ i.e. a human being not another company.

Responsibilities of a limited company director

As a director of a limited company you are obliged to act honestly and lawfully and make decisions for the benefit of the company and its shareholders. Specific responsibilities are outlined on the .Gov website and these are listed below:

  • try to make the company a success, using your skills, experience and judgment
  • follow the company’s rules, shown in its articles of association
  • make decisions for the benefit of the company, not yourself
  • tell other shareholders if you might personally benefit from a transaction the company makes
  • keep company records and report changes to Companies House and HM Revenue and Customs (HMRC)
  • make sure the company’s accounts are a ‘true and fair view’ of the business’ finances
  • file your accounts with Companies House and your Company Tax Return with HMRC
  • pay Corporation Tax
  • register for Self Assessment and send a personal Self Assessment tax return every year – unless it’s a non-profit organisation (eg a charity) and you didn’t get any pay or benefits, like a company car

Company Records

It is important to note that the company records must be kept at the companies registered office, if they are not, you must inform Companies House of their whereabouts.
Information that must be kept as part of the company records, include:

  • details of the directors, shareholders and company secretary (if applicable)
  • share purchase transactions
  • details of any loans or mortgages that have been made against the company assets
  • the results of shareholder votes and resolutions

You must keep your records for a period of at least 6 years from the end of the last company financial year. You may be required to keep them longer, if:

  • they show a transaction that covers more than one of the company’s accounting periods
  • the company has bought something that it expects to last more than 6 years, like equipment or machinery
  • you sent your Company Tax Return late
  • HMRC has started a compliance check into your Company Tax Return

Marketing your limited company

Most contractors work on site, but if you do have an office you are legally required to a display a sign with the company’s name, at all times. If you produce any promotional materials such as brochures, newsletters, pens etc. These must have on them the company name (including the words Limited or Ltd), registered number and registered address, as well as where the company was registered i.e. England, Scotland or Wales.

Taking the ‘w’ out of work

Reading through this list, it may seem that this is a lot of work. However, you don’t have to manage this on your own. Hiring the services of a specialist contractor accountant, can save you a lot of time and in the long run, money as well. A contractor accountant will: tell you what forms need filling and when they need submitting by, and keep you updated on the ever changing tax rules.

Further details are available in our Directors’ Responsibilities guide, download it here. Our team at Cogent Accountants we have been supporting contractors and freelancers for over 20 years. If you are looking for expert and uncomplicated advice, give us a call today on 020 8952 2234.

 

Contractors guide to PAYE

Taking a salary and PAYE 

Working as a contractor you have a few options: such as working through an umbrella company or setting up and working through your own Limited Company.

If you decide to work through an umbrella company you sign a contract with them and the umbrella company will invoice the end client for work you have done. The client will pay the umbrella company, and they will pay you minus Income Tax and NI.

Some contractors decide to set up and work through their own Limited Company. Depending on the individuals circumstance this may make more financial sense, as it is normally the most tax efficient manner in which to operate (assuming you are not caught by IR35 legislation) . The Limited Company then invoices the end client for the work that has been done. The end client pays the limited company and you get paid from the limited company through a combination of salary and dividend payments.

Taking a salary through a Limited Company

When you register your Limited Company you will be required to name someone as a director and this is usually you. In doing this, you become an employer and an employee of the Limited Company. And, become responsible for recording and collecting taxes (Income Tax and National Insurance) owed from the salary you take.

These taxes are calculated through the monthly payroll (you can choose to do this yourself, or as we advise get your accountant to do this for you) and are set aside and paid to HMRC via PAYE.

When taxes have to be paid

The amount of tax that is collected depends on your tax code. Further information about the rates and thresholds is available on the .Gov website.
Taxes owed must be paid monthly if the combined Income Tax and NI of all employees averages £1,500 or more per month. As most contractors choose to take a minimal salary and the remainder via dividends, this is usually less than £1,500 and can, therefore, be paid quarterly instead.

These payments must reach HMRC within 14 days of the end of the tax month. This usually falls on 5th of each month. Therefore, by the 19th of each month (or 22nd if making an electronic payment) HMRC must receive the money.

Penalties for late payment

It is your responsibility to make these payments on time. However, there may be a time for some reason when a payment is late or not paid in full. If this happens, HMRC can (and mostly likely will) issue you with a penalty.

How much this is outlined in the table below:

table

Source: .Gov.uk

N.B: The first failure to pay on time does not count as a default.

A 5% additional penalty of the amount due will be issued if you pay less than what is due and the payment is not made in full after 6 months. This is known as an ‘additional penalty’. A further 5% will be charged if it is not made after 12 months. This is explained in further detail on .Gov website.

Can I appeal?

If you are issued with a penalty charge you are able to make an appeal in writing or online using HMRC’s Online Service. Some of the reasons you can appeal on are:

  • data on the returns was incorrect
  • ill health
  • theft
  • death / bereavement

An extensive list of some of the grounds for appeal is available on the .Gov website.

If you are looking for advice and assistance on setting up a Limited Company, give us a call on 020 8952 2234 or Request a Call Back and a member of our team will be in touch at a time convenient for you. 

Freelancers: tips for handling late payers

We recently attended a networking event organised for freelancers, and the most asked about topic was ‘how to handle late paying clients’.

I didn’t realise how much of a problem this is for freelancers. Well, after some research, I found out it is a massive problem. I couldn’t find any exact figures relating to freelancers, but according to SME Insider, SME’S are now owed more than £255 billion in late payments.

If an SME is paid late, their cash-flow is messed up, meaning they end up paying their suppliers late. It’s a vicious circle.

So, how do you handle late paying clients?

Burying your head in the sand and hoping it will solve itself, will not work. Follow these steps to help you stave off late payers:

Carry out pre-relationship checks  

For any new client, you are thinking of taking on, try to find out as much about them as possible. If they are a limited company

So, how do you handle late paying clients?

y, their details will be registered with Companies House. Information available on the company includes: their registered business address, accounts and annual returns. All important information, in deciding if they will be able to pay you for the work you have done.

If they are not registered with Companies House, take to the internet to see what you find on them on review sites and freelance forums.

Get your own house in order

Set out your T&C’s at the start of your working relationship. These should clearly state your invoice and payment terms. Normally, payment is due 30 days from when the invoice is issued.

Track every step of the payment process: the date the invoice is issued, when payment is due, the date you issued a reminder for payment and the extended payment deadline. What system you choose to use for this, is up to you. You may find a simple spreadsheet is sufficient, or you could invest in using an online accountancy portal that automatically issues invoices and reminders for late payments.

Don’t be shy about speaking up

If a client is late in paying, don’t feel awkward about reminding them that payment is overdue. It could just be an oversight on their behalf.

When you contact them, initially do it by phone (make sure you know who to contact about payments) and follow this call up by an email. Ask them to reply by email as well. It is important to document all communication in writing, in case any disputes do arise.

Be prepared for the break-up

If all attempts at getting paid fail, be prepared to tell them that all future work will be put on hold until they clear the overdue payment. This action could see the end of your working relationship. But, if it comes to this, do you want to work with them anyway?

This shouldn’t be the end of it, as they still owe you money. Depending on how much they owe, it may be worth claiming it through the small claims court. The .gov website explains in detail how to go about it and the fees involved.

In summary, always air on the side of caution when dealing with clients. The majority of them will pay you on time (hopefully), but you will occasionally come across one or two who are frogs. In that case, be prepared to make them ‘croak up with the cash’. 

Advantages of a contractor accountant

Why a contractor accountant is a valuable addition to your company 

Deciding to become a contractor is a life choice. Most contractors say they love the freedom it gives them and they enjoy being able to offer their specialist skills to different projects.

If you intend to make contracting a life-long career choice you have to decide on a set-up that is the most financially beneficial. Most contractors find that working via their own Limited Company is the most tax efficient way to work as a contractor.

When you incorporate your Limited Company, you will more than likely register yourself as a director of the company. With this directorship comes a number of responsibilities. Managing the financial affairs of the Limited Company is one of these.

There are a number of sophisticated online / cloud accountancy software packages available on the market that allow you manage the company accounts yourself. Deciding to ‘do it yourself’ may seem like an easy task and a money saving option.

However, the savings you think you may be making through not paying for the services of an accountant could actually be costing you money. The time you spend on; learning how to use the software, understanding tax rules and making yourself familiar with relevant regulation and legislation. Is time taken away from doing paid work.

A specialist contractor accountant will:

  • save you time – the time you spend on doing paperwork and working on your accounts could be time spent on working and earning money
  • give you advice on what forms need filling and what information needs to go on the forms
  • keep you updated on the ever changing tax rules
  • help you operate in the most tax efficient manner
  • advise you on what taxes need paying and when. Therefore reducing your risk of receiving a penalty notice for incorrect or late payment.

We recommend reading our article ‘Looking for a match made in heaven: Tips for choosing the right accountant’ which looks at how to find the accountant that is right for your business.

Alternatively, give us a call on 020 8952 2234 and we would be delighted to discuss your requirements in further detail.

Contractor and Freelancer Insurance

Are you protected? It may be a contract stipulation, so read on….

It’s becoming more common for contractors to acquire liability insurance policies. Contracts, more often than not, state that contractors must have professional indemnity insurance and/or public liability insurance.

Where contracts don’t make reference to insurance specifics it’s still the case that the prudent contractor considers relevant policies to give peace of mind.

Increasingly, litigation in many sectors means that contractors can be in the firing line if things go wrong. This has become one of the main reasons why Professional Indemnity Insurance has become a “must have“ policy opposed to an option.

What is Professional Indemnity Insurance

As we mentioned above it is not always compulsory to have Professional Indemnity Insurance, but if you provide expertise, skills or advice to clients, or have access to clients’ confidential information, or produce materials that could cause offence or infringe intellectual property rights and provide a professional service and could be challenged on your work, then we strongly recommend that you purchase Professional Indemnity Insurance.

Do I need insurance?

Our philosophy is that it is better to be prepared than be caught out. Your work may be top rate and you have never had a problem in the past. However, if the time comes and a client does think you have made a mistake that has financially cost them, your Professional Indemnity Insurance will cover you. Without it, it could be catastrophic for your business.
Professional Indemnity Insurance will cover you for the legal costs involved of defending yourself in a professional negligence case, including any compensation pay-out at the end.

Public Liability Insurance

Public Liability Insurance offers protection to your business if you deal with the public, if you have clients visiting your offices or if you or a colleague need to make visits to client’s premises. For example, if a client visits your office and they drip over a chair and injure their leg, then Public Liability Insurance will cover you for this.
You may feel that this is type of insurance is not applicable to you, but some clients now insist that you have some level of cover, generally a minimum of £1M.

What does Public Liability Insurance cover?

Public Liability Insurance will cover you for legal costs and damages if someone brings a claim against you and you are found liable.

Is it an expense my business can afford?

Professional Indemnity Insurance and Public Liability Insurance premiums are dependent on the type of work you do, the level of cover you require and the number of employees you have. They can start from a low level and increase accordingly.

To put it into a perspective, if a court case is brought against you, it could cost your business thousands. You need to ask yourself, can my business afford this if I don’t have insurance?

This article was provided to us by Caunce O’Hara, a commercial insurance broker, offering a full range of insurance products to contractors and freelancers. Visit their website: https://www.caunceohara.co.uk/

Contractors: find your way through the tax maze

Taxes that you need to pay as a contractor

Working as a contractor has a great number of benefits, but the one downside (maybe) is taking responsibility for what taxes have to be paid.

Most contractors choose to operate via a Limited Company as it is the most tax efficient route. However, as a director of the Limited Company, you will be responsible for making sure the correct taxes and the right amount of taxes are paid on time.

Engaging the services of a specialist contractor accountant will lessen the burden of working out what taxes are due and when. However, ultimate responsibility still lies with you.

Making your way through the muddy maze of tax

We are not suggesting you become an expert in taxation (that is what we are here for) but it is important to have some knowledge of the taxes you will be required to pay.

To understand what tax is due and when, it is simpler to break it down into the tax your Limited Company has to pay and the tax you have to pay, also known as Personal Tax.

Limited Company

Corporation Tax

Corporation Tax is a tax on company profits. Current rate is set at 20% and will fall to 19% for the year beginning April 2017, and to 17% for the year beginning 1 April 2020.

If you have taxable profits of up to £1.5 million, Corporation Tax must be paid 9 months and 1 day after the end of your accounting period.

If taxable profits are more than £1.5 million corporation tax must be paid in instalments.

VAT

VAT is an extremely complicated area of tax. A lot of first-time contractors are unsure if they are required to be VAT registered. Our article ‘To VAT or no to VAT that is the question’ looks at who is required to be VAT registered.

For contractors who are required or want to be VAT registered, choosing the Flat Rate Scheme (FRS) is the easiest option. Our article ‘Choosing the right VAT route’ explains the Flat Rate Scheme in further detail.

What happens if I get VAT wrong?

If you make a late VAT payment to HMRC, it could be recorded as a ‘default’. Following this, you enter into a ‘surcharge period’ which usually lasts 12 months. If during this period you ‘default’ again, you may have to pay an extra amount on top of the VAT you owe. Further information on VAT surcharges and penalties can be found on the .Gov website.

Supplying incorrect information that could lead you to “underestimate the tax due” or “mispresent the tax liability” could see you being hit with a penalty charge. Each tax has its own specific rules when it comes to charging penalties. In general, the size of the penalty charge depends on how the mistake was made, for instance, if:

  • the mistake was made through a lack of reasonable care (e.g. not keeping accurate records) the penalty will be between 0%-30% of the extra tax due
  • the mistake was deliberate, the penalty will be between 20%-70% of the extra tax due
  • if the mistake was deliberate and it was concealed, the penalty will be between 30%-100% of the extra tax due

Personal Tax

Self- assessment

As a director of your Limited Company, you need to register for self – assessment and complete a personal tax return, the tax year is 6 April 5 – 5 April the following year.

You need to register if you haven’t previously filed a tax return. The deadline for registering is 5th October following the end of the tax year in which your income first arose.

Once registered, you can either submit your return by completing a paper tax return or by filing online.

Filing Dates – avoid unnecessary penalties by missing the deadline:

  • A paper tax return must be received by HMRC by 31st October following the end of the tax year.
  • Online tax return must be received by HRMC by 31st January following the end of the tax year.
  • The deadline for paying the tax you owe is 31 January.

You will get a £100 penalty if your tax return is up to 3 months late.

Income Tax

If you take a salary from the Limited Company (most contractors take a small salary and the remainder via Dividends), this is taxed via Income Tax. The amount of tax payable depends on the amount of income that is over the Personal Allowance and how much of this falls within each tax band. For 2016/17 the Income Tax rates and bands are:

Income up to £11,000 = 0% (assuming you have the standard personal allowance of £11,000)

Basic rate: £11,001 – £43,000 =20%

Higher rate: £43,001 – £150,000 =40%

Additional rate: over £150,000 =45%

Note: Your Personal allowances may be more if you claim marriage allowance or less if your income is over £100,000.

Dividend Tax

Please note that under the new dividend tax regime you will be liable for additional dividend tax on any dividend income over £5,000 that is not covered by your personal dividend allowance.

The tax bands will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

If you are subject to any additional tax liability, it is paid through the personal self-assessment tax return system.

Tips to reduce the risk of getting it wrong

Our simple advice is, when it comes to tax, check everything carefully and seek expert advice. We have included some tips to help you from making mistakes:

  • Be honest, never try to hide anything
  • Read all paperwork thoroughly and seek help if you are unsure of anything
  • Fill in all relevant sections
  • Return paperwork within the time stated
  • Pay your taxes on time
  • Keep organised records (rushing around to find invoices / receipts etc, will lead to you making mistakes)
  • Review your accounts regularly
  • Employ the services of a specialist proactive accountant (such as ourselves) who will advise you on the amounts to pay, when to pay and who to pay it too.

If you think you have supplied your accountant or HMRC will incorrect information, contact them immediately. It is better to admit your mistake and deal with the consequences.We will be covering PAYE and the penalties for late payment in another separate article.

We will be following this article up with a in-depth article discussing PAYE and the penalties for late payments.

If you need advice or guidance on any of the areas discussed in this article, please give us a call on 020 8952 2234, or Request a Call Back.

Work it!

Tips for contractors and freelancers on finding projects through their network.

We came across a question posted on a contractor forum asking “what is the best way to find your next project?” The majority of the replies stated, “Through their connections and network”.

The majority of us hate networking (I sure do), so we thought we would give you some tips on how to build up your connections through face to face and online networking. As the saying goes, ‘making small talk can mean big business’.

Face to face networking

Networking feels like the most unnatural thing in the world, but what is it really? It’s a group of people talking. So what is there to hate about it? Some people would say “lots”. Walking into a room full of people would do not know and having to start a conversation, is not easy.

The key to successful networking is to not have an objective. If you go into it thinking you are going to get contact details of everybody you talk to, it will be a failure.

The most successful networkers make it look like they are not networking at all. They are relaxed and are there to chat with people. If you meet somebody who you feel you want to keep in touch with, suggest swapping contact details to carry on the conversation at a later date by phone, skype or email.

Online networking

Online networking is a relatively new phrase, born out of the rise of social networks, such as Facebook and LinkedIn. It may seem logical, but in order to network online, you need to be present online, particularly LinkedIn. If you don’t have a profile on LinkedIn already, it is time to create one. It will take you less than 30 minutes. (Read last week’s article, for tips on how to create a ‘knockout’ LinkedIn profile). Being active online is also vital and joining groups is a great way to connect with people in your industry.

Love them or loathe them, having recruiters in your network is important. They have direct access to clients and jobs. Recruiters love LinkedIn and use it as a board to post their jobs. Choose recruiters who specialise in your chosen field and who come through a recommendation.

Are the details of all your contacts held in your email address book? It would be an arduous task to search for them individually online. An easier solution is to export your contacts into a CSV file and upload them (both LinkedIn and Facebook offer this), the system then does the searching and sends out an email inviting them to connect to you.

Working your network does take time but hopefully, it will pay off for you and help you to find your next project.

Do contractors need a LinkedIn profile?

Love it or loathe it, LinkedIn is the leading online networking site. And, it is only getting bigger.

If you don’t know much about it, here are some interesting facts about LinkedIn:

  • 21 million in the UK have a LinkedIn profile (that’s a 1/3 of the UK population)
  • LinkedIn is the largest social network site in the world
  • LinkedIn has 450 million users, globally
  • 2 new users register on LinkedIn every second
  • It has a presence in 200 countries
  • the most sought after skill on LinkedIn is ‘Data Mining’

LinkedIn is a bit like Marmite, you either love it or hate it. It is well known that recruiters love LinkedIn, for them, it is a free source of potential candidates. On, the other hand, contractors and freelancers have mixed feelings about it. More often than not, they set up a profile years ago (because everyone was doing it), entered a few details and then left it to languish in LinkedIn middle-earth.

To answer the question that we proposed in the title ‘Do contractors need a LinkedIn profile?’. Our answer is ‘Yes’. LinkedIn is all about creating connections and increasing your network of referrers. A well written and professional looking profile could help you find your next contracting role.

So, the time has come for you to resurrect your LinkedIn profile and breathe some life into it. Our 8 tips can help you do this:

Show them who you are

Your profile image is your window to the world and you want it to look good. Research has shown that a profile with a professional profile image is 4 times more likely to get viewed than one without. Take heed, though, don’t rush off and upload your latest holiday snap. LinkedIn is a professional network and you only get one chance at making a first impression. So, preferably use a head shot that looks both smart and friendly. You want to encourage people to connect with you and not scare them off!

Inform not bore

The summary section that is situated at the top of your profile is the most important element of your profile. Unbelievably, a lot of people leave it blank!

People have short attention spans and they want to be able to find out as much information in the shortest time possible. If you think that you can leave the summary section blank, because people can read what you do in the job section. Well, they won’t. If they can’t find what they are looking for, they will click away.

Make it interesting and enticing and insert some personality into it. The aim is to get people to read on not put them to sleep.

Use words that count

As a contractor or freelancer, you have likely worked on lots of projects for different clients. Whilst, it is important to detail all these roles, it is more important to get your main responsibilities and achievements across to people quickly. This may sound tricky, but we have found an easier way to do this. Instead of putting it in words, use numbers instead. Information stands out better in numerical form. What looks better: “Through my stringent budgetary controls and precise time management I saved the client a substantial amount of money, or I saved the client £1,000,000?

Show you are superstar

You may, or, may not feel comfortable about blowing your own trumpet. If you do, go ahead, but remember rambling on about how great you are can sound condescending. To avoid this, and to add credibility to your profile, ask colleagues, clients, or friends to endorse your skills and to leave feedback about you. If you are shy about asking, don’t be. Say if they endorse you, in return, you will endorse them back.

Change it up

Does experience count more than education? Do want to highlight a certain project you have worked on? Did you know that you can change the order in your LinkedIn profile? No, not many people do. It is very simple to do, go to Profile, Edit Profile and click on the double ended arrow to drag and drop the section to the position you want it in.

Be found not find

If you have thought about setting up your blog, but don’t know where to start or if you don’t have the time to start one from scratch, LinkedIn Publisher is the perfect solution for you. It’s an incredibly simple platform to use, but one that many users overlook. By publishing your own thought pieces, articles and solutions to queries that are commonly asked in your line of work, you are showcasing your knowledge and expertise to your connections and public beyond this. Add attractive imagery or videos to make it really stand out.

Interactive

We live in an interactive world, so it makes sense to make your profile so as well. To help your profile stand from the others, try adding images, videos, presentations and brochures. This more engaging than plain text and will encourage people to click, open and share.

Short and Snappy

As we mentioned earlier, people have a short attention span (have you forgotten that already?). Reading long paragraphs of text, particularly on an electronic device is very difficult. To stop people from getting bored and moving on, ditch the long paragraphs and instead use short snappy sentences. Include key phrases but leave out the word ‘motivated’, it is the most commonly used word on LinkedIn and the most irritating (apparently).

If you are a contractor that is starting out or one that this well experienced and you are looking for a proactive firm of accountants, give us a call today 020 8952 2234, or request a callback, and we will get in touch at a time that is convenient for you.

Do you know who you are?

Decoding a Personal Service Company 

IT contractors who operate via a Limited Company, might have heard the term ‘Personal Service Company’ (PSC) been used to describe them.

For those who are new to contracting, this could be a little confusing, and could leave you asking yourself “what personal service is my company providing?”

To make things a little clearer we look at what a Personal Service Company is and how it relates to you, as a IT contractor.

What is a Personal Service Company

Describing someone as a ‘Personal Service Company’ could conjure up thoughts of somebody working as a butler, or a personal assistant. But, that would be incorrect. The term ‘Personal Service Company’ is often used in HMRC guidelines, and it refers to contractors who operate through their own Limited Company.

It is no surprise that HMRC, do not give an exact definition of what a Personal Service Company is, many speculate that they have deliberately left it open to interpretation.

Should you operate via a Personal Service Company ( Limited Company)

So, in order to offer clarification, a Personal Service Company is comparable to a Limited Company.

As a  IT contractor, there are different options available to you. You could decide to work via an agency, through an umbrella company, or through your own Limited Company.

If you think that you will earn more than £25,000 a year (rates for IT contractors start at £380 per day, going up to £600+ depending on experience) then working via your own Limited Company is the better option. Reasons for this are:

  • your take home pay is greater than if you worked through an umbrella company (it can be as much as 75% of the contract value)
  • you can claim for a wider range of expenses, and have access to the Flat Rate Scheme (FRS)
  • could give you access to a greater choice of contracts (clients and recruitment agencies are increasingly asking their contractors to operate via a Limited Company, as it reduces the risk to themselves)
  • operating via a Limited Company reduces your own personal liability
  • it can help create a professional image for your company (in turn could help you attract more contracts)

There are a number of things to be aware of if you decide to set up your own Limited Company. Initially, you will have to spend some time filling in paperwork, opening a business bank account, registering the company name with Companies House (see our article on ‘Choosing a name for your limited company’) and registering for VAT. However, if you don’t fancy doing all this yourself, then an experienced firm of contractor accountants (such as ourselves) can do it for you.

Does my Personal Service Company (Limited Company) have to use an accountant?

In short, no! But we strongly advise that you do. The UK tax system is extremely complicated and if you want to operate in the most tax efficient manner, only a qualified and experienced accountant can advise you how to do this. Additionally, trying to navigate the maze that is IR35 can be very tricky. It is much easier with the guidance of a knowledgeable accountant.

Our article ‘Choosing a contractor accountant’ gives you advice on how to find an accountant that is right for you.

Personal Service Company  (Limited Company) and IR35

The term ‘Personal Service Company’ came to fruition in 1999, when the then Chancellor (Gordon Brown) introduced the complex and controversial IR35 legislation.

IR35 is a type of tax avoidance legislation that was introduced in 2000. It is extremely complex, but we recommend that all contractors have at least a baseline understating of it. Basically, it was introduced to stop employees leaving their job and returning a few days later to the same role but as a contractor, operating via a personal service company (or limited company).

So if you are considering working  via a Personal Service Company (Limited Company) check your IR35 status with an experienced contractor accountant, first.

Our team is on hand to help you through this process. Give us a call on 020 8952 2234, or Request a Call Back.

What’s in a name?

Contractors and Freelancers: Choosing the right name for your Limited Company

Forming your own limited company is the start of something wonderful, you are stepping out and building your own business. Creating an identity for that business is important for its success.

Just as your own name is integral to your own identity, the name you chose for your limited company is integral to letting people know what it is and what service(s) it offers.

This week’s article looks at what you need to consider when choosing a name for your limited company.

Motorway or A road?

There are 2 routes you can take when registering your limited company with Companies House. You can decide to go the quicker route and purchase an ‘Off the Shelf, Ready Made’ limited company that is available for immediate use. Or, as most contractors and freelancers choose to do, you can set up your own limited company with a name chosen by yourself. This is option involves filling in more paperwork, but in the long run, it will be a company that represents who you are.

Not as simple as A,B,C

Picking your limited company name is not as easy as it sounds. There are certain rules that you need to follow. These are set out by Companies House and include:

  • the name has to be unique, it can not be the same or similar as another registered company
  • the name can not contain a ‘sensitive’ word
  • the name can not suggest a connection to the Government or a Local Authority
  • the name must not be offensive

More information is available in the document ‘Incorporation and names’ from Companies House.
We recommend reading through this document before you start the process of choosing your limited company name, so you are familiar with the legal requirements.

Crazy, Concise or Common Sense?

As we mentioned at the beginning of the article, a name is integral to creating a strong identity i.e. creating a strong brand. At the centre of any brand, is the brand name. It’s a calling card to the world!

There are different options you can take when choosing how to name your limited company, these include:

  • keeping it simple and incorporate your own name into the limited company name e.g. Frank Jones Limited
  • basing it on the services that the company offers e.g. F Jones IT Consultant Limited
  • or, you could choose to use something that is unrelated to what you and what the service the company offers. A well-known example here is Apple. What has an apple got to do with technology?

Whichever, option you decide to take, it is important to also consider:

  • is the name professional
  • is the name easy to remember (if it’s too wordy, people will have problems recalling it)
  • is the name easy to spell (complex spelling will lead it to been misspelt)
  • will the name still be relevant in years to come (your service offering may change over time, will the company name to be able to reflect this)
  • is the name marketable

Marketing should not be an after-thought for any business. Asking yourself “Will it be simple to market my company?” should be one of the questions you ask yourself during the naming process.

Before, registering your company name with Companies House, check out how web-friendly the name is. Look at sites such as 123.Reg or GoDaddy to see if it is available as a domain name. This is important if you choose to launch a website to support your Limited Company.

If you are thinking of launching your own Limited Company and require assistance with it, contact us today on 020 8952 2234 and we would be delighted to talk you through the process.

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