Employment Status

Are you a contractor? If you work for someone else, it is important to know whether you are working for that person in an employed capacity or in a self-employed capacity as an independent contractor.

Your employment status will determine the charge to tax on income from your employment or self-employment. It will also determine the class of NICs, which are to be paid.

Umbrella Companies employ you for tax purposes and complete central returns for all their contractors. It's less hassle and more flexible for you but take home pay is typically less than that the limited company option.

The best option for you depends on your plans, 'one off' contract or 'contractor for life'? [Read More...]

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Reclaiming VAT Through your Limited Company

Reclaiming VAT Through your Contractor Limited Company

As a contractor working through your own limited company you can reclaim VAT on any goods and services you have bought. however there are HMRC rules that you must follow. It's important that you double check these points:

  1. The purchase must be wholly for business reasons
  2. It is an expense in an HMRC allowable category
  3. You have on file a valid and correctly constructed VAT invoice

HMRC say a VAT invoice has to include the following details:

  • The name, address and VAT registration number of the supplier
  • The supplier's unique invoice number
  • The name and address of your limited company business
  • Date and also when the goods were supplied
  • A description of the goods/services that were bought, like:
    • The unit price
    • The amount payable excluding VAT
    • How much VAT is levied

Not all the documentation you may get from the company is classified as a proper VAT invoice, and therefor not allowed by HMRC. These documents are not valid for the purpose of reclaing VAT:

  • A statement
  • A delivery note
  • A request for payment
  • A pro-forma invoice

If you are in doubt, or have any questions, about what VAT your contractor limited company can reclaim the make sure you ask your contractor limited company accountant.

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HMRC Compliance

It's the basics... Compliance with Tax, VAT, PAYE and fiscal arrangements is mandatory for contractors regardless of whether you use an umbrella company or your own limited company.

Incredible then that there are still rogue umbrella companies and limited company accountants who expose their contractors to fraud. Umbrella Compare provides THE solution, we thoroughly vet all umbrella companies and limited company accountants that we list [Read more...].

Umbrella Compare provides a holistic overview of contracting with the aim of helping new and old contractors find the right payroll solutions. Contracting should be about focusing on the contract, not payroll, accounting, HMRC and bureaucracy.