New contract role beginning soon - Insurance & Tax question

[Daplayer321]

Hi All,

I've secured my first gig and the end client is requesting I have Professional indemnity insurance, public and employers liability insurance.

Is it normal for a client to ask contractors for these 3 insurance types as I understood contractors only needed professional indemnity insurance?

Also can you recommend the best site to get these insurance type?


I also have a question around what is the best way of being tax efficient?

To add context, I have my own LTD company with a day rate of £560 and I also have accountant, now I understand my accountant will go through different options with me but before I have that conversation I want to be armed with information.

I have heard that contractors pay themselves a small salary and pay their partners (who work for the LTD company) the same to maximise the tax free allowance as well as being on the flat rate scheme.

I heard others take a small salary and then pay various family members dividends (who are also shareholders) and get the money back from them, there are lots different ways.

Can someone please give me the best way to operate ensuring I can take full advantage of tax efficiencies (I work and understand much with examples if possible).

Thank you




Thanks,
Tarik

[Alias]

Hi All,

I've secured my first gig and the end client is requesting I have Professional indemnity insurance, public and employers liability insurance.

Is it normal for a client to ask contractors for these 3 insurance types as I understood contractors only needed professional indemnity insurance?

Also can you recommend the best site to get these insurance type?


I also have a question around what is the best way of being tax efficient?

To add context, I have my own LTD company with a day rate of £560 and I also have accountant, now I understand my accountant will go through different options with me but before I have that conversation I want to be armed with information.

I have heard that contractors pay themselves a small salary and pay their partners (who work for the LTD company) the same to maximise the tax free allowance as well as being on the flat rate scheme.

I heard others take a small salary and then pay various family members dividends (who are also shareholders) and get the money back from them, there are lots different ways.

Can someone please give me the best way to operate ensuring I can take full advantage of tax efficiencies (I work and understand much with examples if possible).

Thank you




Thanks,
Tarik

Welcome...

I think you need to understand how the Ltd co works as you are directly responsible...try reading all the links over here on the right ------------------------->

Start from the top and work your way down...Also...use the search function at the top, a lot of what you have asked has been asked many times before....read the stickies at the top of each section....

Once you have done that and digested it, a lot of the questions you have asked will disappear...it will also make it easier when you ask your accountant.

Good Luck!

[SueEllen]

Hi All,

I've secured my first gig and the end client is requesting I have Professional indemnity insurance, public and employers liability insurance.

Is it normal for a client to ask contractors for these 3 insurance types as I understood contractors only needed professional indemnity insurance?

The answer to this question is "yes" and "it depends".

If you don't employ anyone else and it's just you in the company you don't need employer's liability insurance. However the minute you hire a substitute, sub-contractor or employee you need it.

Public liability insurance is needed if you are working in premises where the public or multiple different companies use communal parts such as toilets. Premises like this normally have a notice somewhere saying clearly that they don't cover you/your employees if they injury someone in such places by accident.

Most insurances bundle public liability and employers liability together anyway. It works out cheaper than getting it separately simply because the public are more likely to claim than employees so the public liability part would be something like 75-90% of the insurance amount.

[Martin at NixonWilliams]

I echo SueEllen's advice regarding the insurance.

In terms of salary and dividends, and assuming you are not caught by IR35, the most common approach is to pay a salary of £10,000 and the remainder as dividends. Note that any earnings you have in the tax year already might mean this is not the best approach for this tax year.

You can only pay your partner a salary if they are actually working through the company, I would recommend no more than a reasonable hourly rate in line with the hours actually worked. In my experience this is not usually worthwhile.

You can however make use of your partners allowances by paying them dividends if you are married and living together. You would need to give shares in the company to be able to pay dividends. Your accountant should be able to advise on the best split.

The suggestion of giving family members shares to pay dividends and then taking the funds back is out of the question. There is legislation in place that prevents arrangements like this, broadly speaking the dividends would be taxed as if they were paid to you.

I hope this helps.

Martin

[LisaContractorUmbrella]

As Martin says you need to consider your IR35 status - if that's not something you've looked up then I would have a read up. If your accountant is a specialist then he should be able to advise you on your status but a professional review is also recommended

[TheFaQQer]

Is it normal for a client to ask contractors for these 3 insurance types as I understood contractors only needed professional indemnity insurance?

You want to forget about normality - if the client asks for them, then you either get them or walk away from the contract. They won't negotiate them out of the contract, so that's your choice.

Also can you recommend the best site to get these insurance type?

PCG membership gives you some discount with Randell Dorling. I got mine through Qdos this year as it seemed a better deal with higher limits.

I heard others take a small salary and then pay various family members dividends (who are also shareholders) and get the money back from them, there are lots different ways.

That's what we generally call tax evasion.

Can someone please give me the best way to operate ensuring I can take full advantage of tax efficiencies (I work and understand much with examples if possible).

Whack 100% of your profits into a pension scheme - hey presto! 0% tax. 0% income as well, but that's your most tax-efficient manner.