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...]
Worth doing and worth doing properly - Stay compliant and maximise your income by reducing your tax bill via legitimate expenses. All companies put maximium expenses possible through to reduce there expenditure on taxes, if you're not doing so then you're missing a bug trick.
Contractors running their own limited company will have various business costs that can be claimed as expenses.
Sometimes as the director of your own limited company you will pay for items out of your personal cash. If you keep proper records you can claim these back through your limited company.
There's no point in devising a complicated expenses system, otherwise you'll get yourself in a mess and transactions are in danger of not being recorded at all.
Keep It Simple, Stupid! This is the best advice you can take. You need to keep accurate accounting records for both tax and VAT reasons. HMRC will take a dim view if you are not a diligent bookkeeper. Plus, a set system means you're more likely to claim everything you're allowed to claim as a business expense.
Always, always, always keep your receipts. It might be a pain but it is worth your time and effort. After a short while it will become second nature. This is correct limited company practice.
If you cannot get a receipt for a given expenditure, like the 'correct change' lane of a toll road, you should still claim the cost as an expense. Make sure you keep a record of exactly what the expense was for, the amount and time and date.
If you are VAT registered and want to reclaim the VAT you will need a receipt, always. No VAT receipt no claiming back VAT - so don't bother even trying!
You can complete your limited company expenses claim form anytime you want. There are no specific time periods you have to adhere to.
You can claim back expenses from your limited company at set frequencies or on an ad-hoc basis. It's probably a good idea to set yourself specific times to claim your expenses, say, once a month. This is a good discipline and will ensure you don't forget, or miss-out, on claiming back what you've paid out of your own pocket.
There isn't a particular way you need to record your expense claims. There isn't a proscribed format required by HMRC. But you do have to declare certain details.
Make sure you record the date, reason, amount and the VAT. Other information may be useful for you to remind yourself of the reason in years to come, but not essential.
Once you have completed your expense claim form, print it out and attach the corresponding receipt(s) to it. This is now a proper formal document that you need to keep securely or send to your contractor accountant.
Now, all you have to do is simply transfer the exact amount that is entered on your expenses. You transfer the money from your limited company bank account to your personal bank account.
Check with your contractor accountant to see if they have any particular methods or systems they'd like your limited company to adhere to. That's all there is to it!
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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.
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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.