Reply to: Plan B - new company?

[Lewis]

Just one thing to consider re VAT. If you're VAT registered for contracting, then running Plan B through the same Ltd will of course mean Plan B is also liable for VAT. ie. you have to charge your customers VAT (or pay it for them).

If customers are mainly VAT registered businesses then that won't be such an issue for them, in fact it could even work in your favor by making you not look like a small (perhaps risky) outfit. However if selling to the public that is a very good point!

[JRCT]

Just one thing to consider re VAT. If you're VAT registered for contracting, then running Plan B through the same Ltd will of course mean Plan B is also liable for VAT. ie. you have to charge your customers VAT (or pay it for them).

[Gaz_M]

From what you describe, I'd have thought the SJD spreadsheet works well enough.

I've done it both ways. If your Plan B operation is small it should be pretty simple: no reason to pay a salary, might not need to register for VAT, just pay yourself dividends if and when you want to and put that on your SA.

It is probably easier to do it all through one company. But of course that means one side of the business is liable for the other's debts, so if your Plan B ended up failing owing thousands you'd be covering it out of your contracting income.

You're correct, I won't be paying myself any additional salary so the SJD spreadsheet is fine for that.
It's the buying and selling part of a second business that is difficult to fit into the spreadsheet. I can put all my website expenditure through 'computer related costs' but there is no provision for buying and selling of stock.
I've contacted SJD before when I had my original idea and they said I may have to join their sister company 'Easy Accountancy' to make this work under one company but I'd sooner try to keep it where it is until I know if/when it will take off.

[VectraMan]

However, I use SJD and their book keeping software is not geared up to anything other than contracting. My problem is that I'm very happy with SJD and if my Plan B doesn't take off I have no reason to leave them but how/where do I keep accounts until such time?

From what you describe, I'd have thought the SJD spreadsheet works well enough.

I've done it both ways. If your Plan B operation is small it should be pretty simple: no reason to pay a salary, might not need to register for VAT, just pay yourself dividends if and when you want to and put that on your SA.

It is probably easier to do it all through one company. But of course that means one side of the business is liable for the other's debts, so if your Plan B ended up failing owing thousands you'd be covering it out of your contracting income.

[ContrataxLtd]

This is what I thought, both ideas are related to an IT business. If PLan B takes off then I always intended to seperate the two and hopefully eventually close down the conultancy side of things.

However, I use SJD and their book keeping software is not geared up to anything other than contracting. My problem is that I'm very happy with SJD and if my Plan B doesn't take off I have no reason to leave them but how/where do I keep accounts until such time?

Hi Gaz

A couple of options open to you I'd think:

1. Speak to SJD and see if they can help. It's more than likely they've come across this before so should be able to advise.
2. Move to a different accountant that can accommodate both Plan A & Plan B via the same Co.
3. Use a newCo now for Plan B and have a different accountant look after that in isolation (probably not ideal).
4. Maintain the records yourself using online software, excel or sage (or similar products) then get SJD/another accountant to do accounts at year end (assuming it's a separate co from start).

You probably need a good review of Plan B to ensure you structure things in the best way, optimist your VAT position etc.

HTH

Martin
Contratax Ltd

[Lewis]

However, I use SJD and their book keeping software is not geared up to anything other than contracting. My problem is that I'm very happy with SJD and if my Plan B doesn't take off I have no reason to leave them but how/where do I keep accounts until such time?

I use Nixon Williams and they have been fantastic - I told them I was starting a "Plan B" through the company and it was no problem for them at all. They process an order of magnitude more invoices a month for me, and they are mostly subscriptions that span a year (so they have to allocate amounts into each month, spanning multiple accounting years). They don't charge me any more, despite there clearly being more work than a standard contractor and they have never raised the workload as an issue. They have been exceptionally understanding (with all my Plan B questions) and I've always felt they know exactly what to do even when the business started moving outside of the normal contractor model. I don't use any book keeping software with them btw. I would discuss with SJD, see if they are open to such an approach, and if not to be honest I would move to Nixon Williams.

[Gaz_M]

I have some personal experience of this. My thoughts are:

It is perfectly valid to use the same company for both contacting and (IT related) Plan B; both to save on accounting costs and because the two sit nicely together, e.g. both are based around software development. Chose the name wisely though, so as it has meaning to both businesses; or the one that needs an appropriate name more, e.g. a contracting company can be anything really, the agencies won't care, so it maybe better to use a name more closely linked to your Plan B. If you already have a ltd company but want a more appropriate name for Plan B side you can have a trading name, e.g. "XYZ trading as ABC".

I think this is a good option if you are not sure how successful Plan B will be and you don't want to over complicate things.
However as your Plan B's income grows you may want to consider opening a new company for future contracts (or Plan B) for a few reasons: (a) You might want to sell Plan B (or shares in it), (b) Plan B might be sued, or some other similar issue might rear its ugly head (IR35?), having two companies offers some extra protection for the income from different streams, finally (c) at some point you may want to close Plan B and take entrepreneurs relief on profits - separate companies allow you to continue contracting with no fear of being accused of Phoenix-ing. Separate companies also makes it easier for you (and others) to see the true value of each business.

IR35 is an interesting one for contractors, people always say that contracts are looked at in isolation, but if the company as a whole is much more like a software house (multiple concurrent contracts, licensed products, multiple staff etc.) even though the bulk of the income comes from contracting (likely in the early days of Plan B), I've always thought that it looks much better from an IR35 perspective. But perhaps it makes no difference, I don't know on this point.

This is what I thought, both ideas are related to an IT business. If PLan B takes off then I always intended to seperate the two and hopefully eventually close down the conultancy side of things.

However, I use SJD and their book keeping software is not geared up to anything other than contracting. My problem is that I'm very happy with SJD and if my Plan B doesn't take off I have no reason to leave them but how/where do I keep accounts until such time?

[Lewis]

I have some personal experience of this. My thoughts are:

It is perfectly valid to use the same company for both contacting and (IT related) Plan B; both to save on accounting costs and because the two sit nicely together, e.g. both are based around software development. Chose the name wisely though, so as it has meaning to both businesses; or the one that needs an appropriate name more, e.g. a contracting company can be anything really, the agencies won't care, so it maybe better to use a name more closely linked to your Plan B. If you already have a ltd company but want a more appropriate name for Plan B side you can have a trading name, e.g. "XYZ trading as ABC".

I think this is a good option if you are not sure how successful Plan B will be and you don't want to over complicate things.

However as your Plan B's income grows you may want to consider opening a new company for future contracts (or Plan B) for a few reasons: (a) You might want to sell Plan B (or shares in it), (b) Plan B might be sued, or some other similar issue might rear its ugly head (IR35?), having two companies offers some extra protection for the income from different streams, finally (c) at some point you may want to close Plan B and take entrepreneurs relief on profits - separate companies allow you to continue contracting with no fear of being accused of Phoenix-ing. Separate companies also makes it easier for you (and others) to see the true value of each business.

IR35 is an interesting one for contractors, people always say that contracts are looked at in isolation, but if the company as a whole is much more like a software house (multiple concurrent contracts, licensed products, multiple staff etc.) even though the bulk of the income comes from contracting (likely in the early days of Plan B), I've always thought that it looks much better from an IR35 perspective. But perhaps it makes no difference, I don't know on this point.

[Alan @ BroomeAffinity]

Self-funded.

Dormant Company - https://www.gov.uk/corporation-tax-t...nd-non-trading

Dormant for HMRC and Dormant for CH are, unfortunately and confusingly, different. Dormant for CH (and therefore OK to file DCA) means that it has had no significant accounting transactions. If your company was, as you say, self-funded, this would suggest that there have been transactions requiring funding - in fact the funding itself would qualify - and therefore the company is not dormant.

[oliverson]

Excuse my ignorance, but what's a DCA?

Also, if you don't mind answering, have you self-funded your sepearte Ltd company or have you loaned from your consultancy business to set things up?

Self-funded.

Dormant Company - https://www.gov.uk/corporation-tax-t...nd-non-trading

[Alan @ BroomeAffinity]

DCA = Dormant Company Accounts

[Gaz_M]

I have a separate Limited company set up for my plan B. Some accountants only do 'fixed price' accounting on contracting companies, like my account does. I also really wanted to keep the two companies separately as I don't plan on contracting forever and would like to fold that company at some point in time when, hopefully, the other company becomes my plan A. As for accounts, I'm not making money just yet (it's not gone live) so I submitted a DCA to Companies House.

Excuse my ignorance, but what's a DCA?

Also, if you don't mind answering, have you self-funded your sepearte Ltd company or have you loaned from your consultancy business to set things up?

[Alan @ BroomeAffinity]

As for accounts, I'm not making money just yet (it's not gone live) so I submitted a DCA to Companies House.

Just as a small aside, not making money is different from dormant. To be dormant the company needs never to have had any transactions. So if the company has incurred costs, it's not dormant. If I have inferred wrongly, sorry in advance.

[oliverson]

There's no problem having two different income streams into the one company. I did it for a number of years so dont believe anyone who says it will cause problems. with VAT and the like.

However, only you know whether you want to pay for 2 sets of accounts and different companies.

I have a separate Limited company set up for my plan B. Some accountants only do 'fixed price' accounting on contracting companies, like my account does. I also really wanted to keep the two companies separately as I don't plan on contracting forever and would like to fold that company at some point in time when, hopefully, the other company becomes my plan A. As for accounts, I'm not making money just yet (it's not gone live) so I submitted a DCA to Companies House.

[BolshieBastard]

There's no problem having two different income streams into the one company. I did it for a number of years so dont believe anyone who says it will cause problems. with VAT and the like.

However, only you know whether you want to pay for 2 sets of accounts and different companies.