From Self-employed to Limited during tax Year

[gcastelo]

Hi everyone,

Just like many of you I'm an IT contractor who recently opened it's own limited company and (perhaps unlike many of you) is founding the whole tax rules and business literature quite interesting.. I might be more of an accountant than an developer who knows Too bad the HMRC has so many theory and little practical examples.

But to the point, I've start my freelance in mid April this year with an Umbrella / trust management company that, making a long story short, paid me 1/3 of my salary as taxable and the rest from a trust fund as loans repayable in 50 years time.. or not. So they say.. After finishing the contract I had at the time, I stopped working with that Umbrella and opened my Ltd in mid-may. To make matters worse this umbrella / trust fund didn't do any NIC or PAYE payments

Basically

mid-april - mid-may - Trust company
mid-may (2 days) - now - Ltd

Now, my question is how do I handle this in terms of taxes and should plan the my wage as director?
Because I have a service contract I know I have to pay my self the minimum wage but having work with that umbrella before should my salary = NMW - (money from trust company) to keep a balance of making the tax man happy and getting the most out of the money?

Also, because I only work for a couple of days in May should I just ignore that and increase my salary in June with those to extra days?

I know this is more complex than it seems and should talk to my accountant but I'm still shopping around and haven't found one that conviced me yet. So I'm just looking for some guidance from the people who know better.

Finally and thank your patiente, I'm still waiting for the CT41G to setup the payroll and everything else dependent on that. That's one month now. Is this normal? I tried to contact the HMRC but given up hope after 2 times getting nowhere in they're automated answering machine..

Cheers,
Gustavo

[Sockpuppet]

Ok I'll save Northern Lad the hassle. Basically your loans deal is illegal. No ifs no buts.

And the rest of it.....really I have no idea what you're trying to achieve. None of that makes sense. I could explain it all to you but it would just take too long - you have so many basic concepts wrong I just don't know where to start.

Go and see an accountant.

[Sally@InTouch]

Hi there

You need to separate your income from the EBT to that of your limited company. The company is a legal entity in it's own right.

The CT41G will not get you a PAYE scheme. It's simply a form that let's HMRC know the date that your company started trading for corporation tax purposes.
You can apply for a PAYE scheme from the Government Gateway, likewise for VAT. You may want to consider the VAT flat rate scheme also.

Usually, you pay a small salary (NMW is fine but not a legal requirement) and take the rest as dividends.
Have you considered whether your contract falls inside or outside of the IR35 legislation, as this can change the way in which you take your income.

An accountant should be able to explain everything to you and assist in setting up the registrations too.

Good luck!

[gcastelo]

@Sockpuppet yes I can imagine is not too legal, that's why I left, but the reason I join that umbrella was because a friend has been using it and recommended and I needed something fast. They payed him a referring fee which we split, so that's a nice bonus.
That's past, onto to the LTd..

@Sally I wasn't clear in my text, I know the CT41G doesn't have anything to do with PAYE but does have the UTR right? Without it I can't register to any service in the HMRC portal..

As for the NMW not being necessary, I'm confused since in the HMRC website cleary says that the NMW:

...

does not apply to:
the self-employed, office holders, directors (unless they also have a worker's or employment contract)

Source: HM Revenue & Customs: The national minimum wage

This contract does fall outside the IR35 I explicity asked for it and the terms in which it's written would pass HMRC recently announced IR35 test scenarios. (I also had to take the public liabily and profissional idemnity insurances, work with my own machine, only on one project, no overtime, etc..)

So what happens at the end of the year? WIll I have to file two self assessement forms, for the period of self-employed and the other as a director?

Thank you

[Sockpuppet]

@Sockpuppet yes I can imagine is not too legal, that's why I left, but the reason I join that umbrella was because a friend has been using it and recommended and I needed something fast. They payed him a referring fee which we split, so that's a nice bonus.
That's past, onto to the LTd..

@Sally I wasn't clear in my text, I know the CT41G doesn't have anything to do with PAYE but does have the UTR right? Without it I can't register to any service in the HMRC portal..

As for the NMW not being necessary, I'm confused since in the HMRC website cleary says that the NMW:

...

Source: HM Revenue & Customs: The national minimum wage

This contract does fall outside the IR35 I explicity asked for it and the terms in which it's written would pass HMRC recently announced IR35 test scenarios. (I also had to take the public liabily and profissional idemnity insurances, work with my own machine, only on one project, no overtime, etc..)

So what happens at the end of the year? WIll I have to file two self assessement forms, for the period of self-employed and the other as a director?

Just because they've told you its outside IR35 doesn't mean it is Get it checked by B&C or QDOS. The IR35 scenario tests focus on what HAS happened not what could happen based on your contract so you can't pass it as you've not traded yet.

Have you given yourself a contract from your LTD to yourself for working their as a director? No so you don't need to pay NMW. Your contract is from your customer to your company.

[SarahL2012]

WIll I have to file two self assessement forms, for the period of self-employed and the other as a director?

Thank you

You only ever file one self assessment form. It has different sections for your different employments - no idea how the umbrella situation gets dealt with though.