As a contractor, one of the most important decisions you will make is how you structure your business.
Opting for a Personal Service Company (PSC) can provide you with numerous benefits, such as reduced tax liability, increased control, and a more professional image.
Setting up a limited company can be a complex process, however here at Cogent Accountants, we take the burden away from you, leaving you free to concentrate on what you do best. Below, we take a look at the necessary steps required to successfully establish your own PSC.
Choose a Company Name
If timing is important we can arrange an ‘off-the-shelf’ company for you. However, if timing is not an issue, you may want to choose a unique company name. If you decide to choose your company name, make sure to consider it’s relevance to your line of work. Once you have chosen the name, it will be necessary for us to check that it is not in use and significantly different to any other name that already exists.
Register with Companies House
Next, we will need to register your PSC with Companies House. As part of this process, we will be required to supply them with the following information:
- Company name
- Registered office address
- Director’s details (name, date of birth, nationality, occupation, and address)
- Additional director / shareholder’s details (if applicable)
- Details of the company’s shares and share capital
Create a Memorandum and Articles of Association
A Memorandum and Articles of Association are required to establish the rules and regulations for running your PSC.
The Memorandum is a brief document stating that the initial shareholders agree to form a company, while the Articles of Association outline how the company will be governed.
You can rely on us to ensure the Memorandum and Articles of Association are appropriate for your new company.
Set Up a Business Bank Account
It is essential to separate your personal and business finances by setting up a dedicated business bank account. This will help you manage your finances more efficiently and ensure you retain sufficient funds for your tax liabilities. We have tie-ins with a couple of bank institutions you may wish to choose from in order to fast-track the application process.
Register for Corporation Tax
As a PSC, you will be liable for Corporation Tax on your company’s profits. We will register your company for Corporation Tax as part of our set-up process.
Register for VAT
If your PSC’s annual turnover exceeds the current VAT threshold (£85,000), you must register for VAT. This involves charging VAT on your services and claiming it back on your business expenses. We will register your company for VAT and file your quarterly returns.
Establish Payroll and National Insurance
As a director of your PSC, you will be both an employee and an employer. This means you must use a payroll system to process your salary and National Insurance contributions. We will register your company with HMRC and submit the monthly RTI on your behalf.
Obtain Business Insurances
Having the right insurances in place is crucial to protect your PSC against potential risks. At a minimum, you should have professional indemnity insurance, public liability insurance, employer’s liability insurance and legal expenses insurance. We can help arrange this for you.
Maintain Accurate Records
To ensure your PSC remains compliant with HMRC regulations, it is vital to maintain accurate financial records. This includes keeping track of income, expenses, invoices, and receipts. This is our strength and you can relax in the knowledge that everything is being taken care of.
Setting up a Personal Service Company can be a valuable move for contractors looking to maximise their income and gain greater control over their business. With Cogent Accountants by your side, you can establish your PSC with confidence and enjoy the benefits it offers.