Reply to: Diversifying Ltd. to Non-IT as well as IT

[BlasterBates]

See separate reply, plus - its amusing that the immediate assumption is that I am trying to pass off personal gadget consumption as a business expense - there are obviously some right chancers in IT freelancing!
On a more serious note - surely having to set up a separate company is discrimination against the small guys - for instance, I suspect BP would laugh at HMRC if they tried to tell them to set up a separate co. because a new venture was not energy related.

It's not a matter of what we think, but HMRC will look at it. If you're running something like this at a loss, they'll take a dim view of you offsetting the losses against your income, ie. they would see this as your personal hobby and you should have no business getting them to finance you. That's the way they'll see it. Let us say you were to buy a yacht for half a million, and then charge 10,000 for rides, do you honestly think HMRC would let you simply pay no tax ie. take off the depreciation? Don't you think everyone would do this, if they could?

If you want to run this as a business create a separate Ltd, then if it makes a profit in the future, you can offset losses in previous years.

Anyway check with your accountant and he'll tell you the exact same thing.

[jonathanOnshore2010]

If you are running a bonafide sideline business then there's no problem as far as I can see, I don't understand why you would need to setup a separate company with all the admin hassle and expense (eg accountancy) that goes with it.

I agree. Just go for it. Remember, as long as it's legal there is huge scope to run a business, try new things and hopefully make money. All new startups take time and investment, so it's not unrealistic to have not much income in the first two years. Since you're in IT, get a template website and some business cards. Putting the finances through the company will keep track of things, and remember, businesses fail sometimes so there is no reason to fear HMRC if your genuine endeavour doesn't make a profit after giving it a good shot.

I don't see the point really of the hassle of a ltd co if the extent of running it is a small salary to the higher tax rate, and then divs drawn out. you might as well get a senior VP perm role at a bank and just do away with the hassle. Otherwise, use the flexibility of being in your own business and try some creative endeavors. Your accountant will figure out the details (if he's any good, note my previous experience with SJD) I wish you all the best in the photography.

Oh, and BTW. There was a comment about having to charge VAT on your photos once the company is VAT rego'd. I had that same dilemma with the therapy. But I figured since it was not the primary income source, I was happy to charge it to the clients but all I did was effectively absorb it into the hourly rate anyway and took a haircut (I dont bother the clients with VAT discussions as it's not important to them).

Also, seriously consider just a trading name for your other business. You can have "Ltd Co trading as XYZ Photography" for brand reasons.

[Wanderer]

See separate reply, plus - its amusing that the immediate assumption is that I am trying to pass off personal gadget consumption as a business expense - there are obviously some right chancers in IT freelancing!

Not just in IT. Not suggesting you are doing it but I'm sure loads of freelancers would love to indulge a hobby and reclaim the tax/VAT by putting it through the company books and HMRC are going to be well wise to this one.

If you are running a bonafide sideline business then there's no problem as far as I can see, I don't understand why you would need to setup a separate company with all the admin hassle and expense (eg accountancy) that goes with it. Just put it though your IT company. But if you are spending thousands on semi-pro kit and you do maybe 1 or 2 photo shoots with it then it's going to look a bit suspicious. Once you've done a few jobs and can show off a portfolio of work and a series of contract engagements I don't think you won't have a problem justifying it.

Good luck!

[SueEllen]

Then you'd keep it away form your contract ltd and all the money that holds.

Maybe, maybe not.

Depends on the other business you are running.

[xux42]

Doing 3 or 4 weddings a year really isn't going to stop them judging a contract as being inside IR35 if they had solid pointers to the opposite.

How about I talk to HMRC rather than trying to second guess them?
I will talk to my insurer too.
To reiterate, I already have a decent, personally owned DSLR outfit.
Low light capability is needed because brides like prep shots by available light and the couple also want shots of the ceremony, formal dinner and disco. Some of these will be available light only, some will be flash assisted but must show the ambient light for atmosphere.
Often flash is forbidden anyway.
Digital cameras and wireless tech have revolutionary capabilities and people, particularly young women, see the wedding pictures of friends and want the same or better.
The expectation now for around £500 is a set of shots that would have cost thousands of pounds and involved a team of specialists in the days of film.
Some shots e.g. long tele without flash would simply have been impossible.

[Sockpuppet]

IR35 is no longer a consideration due to a diversity of income.

Doing 3 or 4 weddings a year really isn't going to stop them judging a contract as being inside IR35 if they had solid pointers to the opposite.

[Sockpuppet]

Limited liability?

Then you'd keep it away form your contract ltd and all the money that holds.

[jonathanOnshore2010]

Maybe my experience will help...

I have a Ltd co which I run IT contracting as well as a therapy/services business through.

The therapy turnover is less than 20% of total, and my interest in having it through the co was liability, and having some form of audited accounts to prove turnover which I could then use later to justify a sale of the therapy business if I wished.

SJD initially told me it would be considered unlawful to have the two enterprises through the same book. They recommended their separate self-assessment accountancy arm for further monthly fees. Another accountancy said that wasn't so if the therapy remained a viable, but smaller concern than the IT contracting (I think under 20%, any larger a separate co would have to be created).

Since the therapy has a regular income, and as a ltd co I can claim all startup training costs (not applicable to self-employment), office equipment to depreciate and real advertising costs and a website etc (unlike some phony IT contractors websites that make them out to be much larger than a one man band); IR35 is no longer a consideration due to a diversity of income. I'm even starting to run meditation classes on meetup to booster the income and diversity further. The accountants are happy with things so far.

Maybe dont take advice from those who haven't done what you are doing. And with a reputable accountant and good receipts, why should you be scared of an audit. Good luck with the photography pursuits.

[SueEllen]

The bigger issue is why the **** would you bother?

The only reason we use Ltd companies is to shield the client from us the worker in case of employment dispute etc. If your doing work like this I'd do it self employed. Can offset the costs from what you earn and you can be a bit more cash in hand about it.

Infact the ONLY reason I can think off for the OP to want to use the IT contractor company is to rip off the VAT and/or tax man, there is literally no other reason to do it this way.

Limited liability?

If he screws up a couples wedding snaps they can only come after the company.

If he climbs up a tree to take a group scene at the wedding, falls on top of a guest and injuries them then their only come back is against the company.

Wedding couples can be a nightmare if they are paying for their photos.

Though as I mentioned he needs to make sure he has the correct insurance cover in place.

Personally with the extra cost of insurance for services like that I wouldn't bother doing it either as freelance or through a company.

BTW I've done other work though my limited as well but my expenses where minimal.

[TestMangler]

The bigger issue is why the **** would you bother?

The only reason we use Ltd companies is to shield the client from us the worker in case of employment dispute etc. If your doing work like this I'd do it self employed. Can offset the costs from what you earn and you can be a bit more cash in hand about it.

Infact the ONLY reason I can think off for the OP to want to use the IT contractor company is to rip off the VAT and/or tax man, there is literally no other reason to do it this way.

[Sockpuppet]

The bigger issue is why the **** would you bother?

The only reason we use Ltd companies is to shield the client from us the worker in case of employment dispute etc. If your doing work like this I'd do it self employed. Can offset the costs from what you earn and you can be a bit more cash in hand about it.

Infact the ONLY reason I can think off for the OP to want to use the IT contractor company is to rip off the VAT and/or tax man, there is literally no other reason to do it this way.

[TestMangler]

I don't know for a fact, but I'm going to have a guess that the majority of people who suggest you don't do it, don't ferking know !! Here's a story from the mangler archive:

Back in 2000, I got a small gig to do an ecommerce website for a dude who wanted to sell dildos etc online. Bear in mind, that this wasn't commonplace online back then. Anyways, built the website with cart on sql, ssl offline card clearing etc. The cost was going to be six grand. I paid a grand to an IT bod I knew with a higher boredom threshold than me to add the products (about 900) complete with descriptions, pics etc. The site was tested and ready to go. Problem then arose and the client paid a grand, which I paid to the product monkey, then came up with another grand, which I took and he couldn't come up with the rest. I refused to hand over the website until he paid, which he couldn't. Upshot was, I had a dildo website all ready to go. So, instead of shelving it, I advertised it, bought some stock and got on with running it in conjunction with a normal contract.

The fun part was when I got a VAT inspection about six months later. We were working through stuff (just the usual random quarter out of each of the last four years) when we come to a quarter with dildo purchase invoices in it

Mr VAT says that he can see some entries for invoices from a company called 'SINtillation'. Can I tell him what they sell and can he see an invoice picked at random from the list in the accounts. I explain the story as above, which raises a smile. He then asks if I'm holding any purchased stock and can I prove these purchases, as they are 'out of character' for an IT service company. I produce several large boxes of dildos, vibrating latex c**ts and various other bits and pieces. By this time, Mr VAT doesn't know where to look. I then asked him if that was an acceptable approach to take and he said there was no issue with it, despite the goods being 'out of classification' with my VAT registration information. Job done, no issue, not a problem.

To counter some of the above arguements, I could technically have purchased some of these goods and used them personally and claimed they were for resale. That didn't 'come up' !

If the O/P is buying something that he's using to generate profit for his company, I can't see an issue. The wholly and exclusively arguement might wash for a wide screen TV or an iPad but if he purchases the equipment via his company and generates income for his company, there is no issue.

[SueEllen]

People do talk a lot a cr*p on here. If it is legitimate business expense and used only for business you can do what you like. Just because something can be used personally doen't mean it is. Also, business things can get lost / broken and so written off. Enjoy your new camera.

The reason people are being cautious - or what you call crap - is because HMRC inspectors aren't nice and friendly when they start digging into your affairs.

Also another thing xux42 needs to think of is insurance. I'm sure Public Liability Insurance and the car insurance add-on for a photographer is more than for most people in IT.

[Jeebo72]

My Ltd was set up for IT Services and this remains it principal activity.
Just recently I have started to do a little photographic work, 1 wedding (as assistant), some private discos and a small rock/pop gig.
I have quality gear and have captured a few nice shots, but the exposure/focus success rate pitiful. Its clear that even from this small number of events that low light is difficult and also demands faster glass, better high ISO performance and better low light AF accuracy.
Is it OK for my Ltd. to buy non-IT equipment such as cameras and lenses and subsequently invoice for the images?
I will check with my accountant later, but I don't have her contact details with me onsite.
Aside from the tax and legal question, it does feel like a good idea to hone a commercial non-IT skill that I could perhaps ramp up when IT work is scarce.

People do talk a lot a cr*p on here. If it is legitimate business expense and used only for business you can do what you like. Just because something can be used personally doen't mean it is. Also, business things can get lost / broken and so written off. Enjoy your new camera.

[tractor]

..

See separate reply, plus - its amusing that the immediate assumption is that I am trying to pass off personal gadget consumption as a business expense - there are obviously some right chancers in IT freelancing!
On a more serious note - surely having to set up a separate company is discrimination against the small guys - for instance, I suspect BP would laugh at HMRC if they tried to tell them to set up a separate co. because a new venture was not energy related.

No, they wouldn't. In fact they will often set up a company especially for a specific project, then once the project is over, mothball the co until the next venture. Many construction companies do this also.

Getting back on topic, the equipment you are talking about is arguably not office equipment and would likely need to be treated as assets to be written down - do you really want to be paying tax on the residual value for several years?

I can understand you needing additional equipment for low light work, but for a wedding? Have you been invited to the honeymoon as well or is this for speculative work?