Ltd company or not

[MrQ]

I'm thinking of changing to run through a Ltd company and looking for some good advice on whether its worth it and the best way of moving over.

I've been in the same contract for over 3 years and currently running through NoLongerLimited as part of the partnership; as I can't claim expenses due to the 24 month rule my return is not good. Cash flow is good though as NLL pay on timesheets so moving over to Ltd company could be tough.

My wife is also a contractor so the Ltd company would be for both of us taking equal dividends I guess...

So is the usual method to pay out minimum PAYE to both then take the rest as divs? how often can divs be taken? When first moving over to work though the company cash flow would probably be bad as I don't currently have reserves is there an easy way of getting money straight out of the company after the first month if I can't do a dividend?, i.e. Director Loan or selling my car to the company?

So is it worth making the switch?

Cheers

[MrRobin]

If you want to take small salary and dividends then you have to ensure your contracts are not caught by IR35. Do you know if this is the case? I would hazzard a guess that if you have been at same client for 3 years then your contract probably (but not definitely) is caught and you won't be able to do the dividend route.

Take a look at the "First Timers" guides on this website. You can access it with the Navigation links on the right.

[Ardesco]

You can take divi's whenever you like as long as there is profit in the company to take them. Some people suggest that small regular divi's attract hector, other say they don't.

You can estimate the profit you expect to make based on your outgoings and incoming as take a divi based on this estimate as well.

[NotAllThere]

...I would hazard a guess that if you have been at same client for 3 years then your contract probably (but not definitely) is caught...

Length of contract has no bearing. What matters most is the contract, followed by working practices.

Moving across to a ltd co will save you the employers NI if you are outside IR35. Even if you're inside, you may still be better off because, 1) 95% of your income is subject to IR35 2) you can negotiate a better contract at some stage.

You still fall foul of the 24-month rule, and still will be unable to claim travel and subsistence for your current client.

[Archangel]

I would hazzard a guess that if you have been at same client for 3 years then your contract probably (but not definitely) is caught and you won't be able to do the dividend route.

I was at the same client for over 6 years when I was investigated and found to be outside IR35 (contract had a good unfettered substitution clause, and a good "no MOO", and a good D&C clause (I helped write the contract) so 3 "silver bullets"). Length of contract is irrelevant, do you think the company who get the 8 year contract to build a new nuclear reactor will be an "employee"?

[MrRobin]

Fair points Archangel & NotAllThere. It does indeed depend on the contract and working practices, not just the length of time worked.

What I was really trying to say was that sometimes contracts that do continue for that long a length of time, inherently have a permy feel to them. Many do not ofcourse - your example of the nuclear reactors is a good example of where this is not true.