New company formation - a couple of questions

[Blitzer]

I'm about to set up a new company. I've read around this forum and decided that InTouch looks like the best bet to provide accountancy services. A couple of questions follow - the best answer gets my referral if you'd like it (which will probably be on Wednesday 8th April).

I'll be a contractor but not in IT. I have one contracting job (for the next month or two) - after that I may go back to permanent work or may carry on contracting.

1. I intend to make my wife a shareholder (49% seems sensible so I always have control) and an employee as she'll be on a lower tax rate than me. It this sensible?

2. I may use some (most?) of the revenue to pay into my wife's pension because I'm at the end of my career and close to the lifetime allowance. I've read that HMRC require 'commercial justification' for paying a substantial salary to a spouse. Any thoughts about this?

3. Any negative thoughts on InTouch? (I've read lots of positive ones.)

4. What's the typical time for InTouch to respond to a phone call or email? Do you always get the same person? What if you don't like the person they give you - can you change?

5. Registering a new company on the Companies House website looks pretty easy. Is there merit in doing this now, or should I wait and let the accountant do it?

6. I'll have a few initial costs before I get any revenue (eg the accountants). Can I just pay these out of my own pocket and claim them back later or should I loan some cash into the company at the beginning and repay the loan once the company has some cash?

7. If I go back to permanent work, I guess I can just leave the company ticking over until I need it again (is this what 'dormant' means?). Are there any ongoing costs of doing this (assume there is no revenue after 2015).


Thank you for your help

[Alan @ BroomeAffinity]

For a couple of months forming a limited company may not be worthwhile. Normally £30k pa is the minimum to make the tax savings outweigh costs (accounting etc) and hassle.

You need "commercial justification" for any salary - not just substantial. This also applies to the pension. The whole amount is taken in the round.

Can't comment on InTouch as I've no experience of them. They do seem very good however. So are many others.

[Alan @ BroomeAffinity]

For q's 5,6 snd 7:

5) either. Prob best the accountant does it.
6) either.
7) yes.

[jamesbrown]

InTouch are very good, they always respond within a day (quite often, even at weekends ).

However, I fear it's moot, as there's very little reason to set-up a Ltd company, with all the filing requirements nowadays, unless it's going to operate for some time. You'd be much better off with an umbrella company for this short period.

[northernladuk]

If you are only doing a couple of months just go brolly. It's not worth setting a company up for so little.

If you do IMO you need to realign your thinking. If you want to run a business do it properly. Don't use it and your wife as nothing more than a tax mule. It's your career/income. Don't play silly buggers with it. Yes you do need commercial justification so do it properly and leave your wife out of it. Some people do it but that's their problem. IMO don't.

[Louisa@InTouch]

Hi Blitzer,

As the other posts mention, if you are only going to be contracting for a couple of months, Umbrella is likely to be the best option. However it would be a good idea to chat this through and look at your circumstances.

In regards to your questions:

1 - Adding your spouse as a shareholder and an employee, this will depend on the sources of income that she has, along with the role that she may be completing for the company. However this is a tax efficient way of extracting the profits from the company.

2 - This would need discussion but we there is the option of a 'director's remuneration package' that we can look at, in order contribution into a pension.

3 - I can't comment in regards to this question, without it being biased...

4 - When you signed up with InTouch, you do have one main point of contact. However if for any reason you don't establish a good rapport, you can switch to another Manager. We always aim to reply to your email as soon as possible, at least same day response. As for phone calls, call anytime and if we are not available, we will call you back at the first opportunity.

5 - You can do this on our website or directly with us over email. A company can then be set up within 24 hours. Or you can do this yourself relatively easily with Companies House yourself. However with a free incorporation, you can't go wrong.

6 - Either, both have the same tax implications.

7 - Yes, the company can be kept dormant if you are going to be using this again in the future. The costs will depend on the level of work required and will be agreed with you in advance.

Be great to talk to you when the office opens again on Tuesday. Feel free to give us a call.