Q: Getting my Ltd company to pay for my services
Discussion
Part of my business is paintings - originals and ltd edition reprints. Is it possible/legal for my business to buy these off me. For example. My company sells a painting for £5k. I (the artist) initially sell the painting to my business for £3k...rather than renumerate myself through the traditional income methods of the business. Is this A) legal! B) sensible. I am just throwing this idea around at the moment as I want to keep company profits smallish for the time being. Any thoughts?
Eric Mc said:
What is the current arrangement?
..At the moment I am drawing no salary from my business (other means available) and what I was thinking of doing was to in effect get the company to pay me for producing the work (no different to any other goods) ..so for example the company supplies and pays for the canvas and materials and I then bill the company for the cost of my artwork. A picture selling for £2k costs the business £1.5k to purchase from me.. WRT printing ltd edition prints then the company will have to pay me a fee for the printing of each one...so Ltd print @ £500 costs the business £200 in artists fees . Does that sound reasonable?Cheers
drivin_me_nuts said:
Eric Mc said:
What is the current arrangement?
..At the moment I am drawing no salary from my business (other means available) and what I was thinking of doing was to in effect get the company to pay me for producing the work (no different to any other goods) ..so for example the company supplies and pays for the canvas and materials and I then bill the company for the cost of my artwork. A picture selling for £2k costs the business £1.5k to purchase from me.. WRT printing ltd edition prints then the company will have to pay me a fee for the printing of each one...so Ltd print @ £500 costs the business £200 in artists fees . Does that sound reasonable?Cheers
Anyway - I would have thought it would be a goer only if you had a history of selling at those numbers, i.e. the company is buying at a true market value.
Edited by Olf on Monday 4th February 15:39
Sorry I didn't come back with any further comments. I was working out of the office today.
Unfortunately, you cannot quite treat yourself in the same way as you would an independent third party supplier. You have a special relationship with your company in that you are no doubt both a shareholder and a director of your own company.
If you perform work on behalf of the company and then remunerate yourself from the company, the Revenue would strongly argue that you are receiving director's salary/remuneration for services rendered and that the company should deduct PAYE and NI on the amounts it pays you.
Companies cannot hire their own directors as "self employed suppliers".
Unfortunately, you cannot quite treat yourself in the same way as you would an independent third party supplier. You have a special relationship with your company in that you are no doubt both a shareholder and a director of your own company.
If you perform work on behalf of the company and then remunerate yourself from the company, the Revenue would strongly argue that you are receiving director's salary/remuneration for services rendered and that the company should deduct PAYE and NI on the amounts it pays you.
Companies cannot hire their own directors as "self employed suppliers".
Edited by Eric Mc on Monday 4th February 16:38
Olf said:
drivin_me_nuts said:
Eric Mc said:
What is the current arrangement?
..At the moment I am drawing no salary from my business (other means available) and what I was thinking of doing was to in effect get the company to pay me for producing the work (no different to any other goods) ..so for example the company supplies and pays for the canvas and materials and I then bill the company for the cost of my artwork. A picture selling for £2k costs the business £1.5k to purchase from me.. WRT printing ltd edition prints then the company will have to pay me a fee for the printing of each one...so Ltd print @ £500 costs the business £200 in artists fees . Does that sound reasonable?Cheers
Anyway - I would have thought it would be a goer only if you had a history of selling at those numbers, i.e. the company is buying at a true market value.
Edited by Olf on Monday 4th February 15:39
It seems like a complicated way to possibly make you liable in an investigation. Remember, even when you get paid for the paintings you will still have to pay tax through self-assessment at the going rate.
Also, if the company was buying them from you, what money would it be using in the meantime to give you the money before that painting is sold? What if the painting is sold at a loss - it would only mean that there would not be enough money to pay you for another painting?
I am pretty sure that should the Ltd Co or your own taxes be investigated it would sound like you have created this system in order to directly avoid tax. However, I dont even think it would benefit you that much in the long run!
For example, you could pay yourself up to the tax allowance, tax free of course and receive the rest of your renumeration as a dividend - effectively what the proposed system is doing, but in an easier and more effective way.
If for whatever reason your Ltd company had to be liquidated I am pretty sure that the practice of the company buying things from you would be seen as malpractice in hindsight, even if you had the best intentions at the time.
I also dont think it would save you any more tax, and in fact you would probably be worse off!
Eric Mc said:
Sorry I didn't come back with any further comments. I was working out of the office today.
Unfortunately, you cannot quite treat yourself in the same way as you would an independent third party supplier. You have a special relationship with your company in that you are no doubt both a shareholder and a director of your own company.
If you perform work on behalf of the company and then remunerate yourself from the company, the Revenue would strongly argue that you are receiving director's salary/remuneration for services rendered and that the company should deduct PAYE and NI on the amounts it pays you.
Companies cannot hire their own directors as "self employed suppliers".
...thanks for the reply Eric. Can I differentiate between the pictures I sell as an individual and those I sell through my Company?Unfortunately, you cannot quite treat yourself in the same way as you would an independent third party supplier. You have a special relationship with your company in that you are no doubt both a shareholder and a director of your own company.
If you perform work on behalf of the company and then remunerate yourself from the company, the Revenue would strongly argue that you are receiving director's salary/remuneration for services rendered and that the company should deduct PAYE and NI on the amounts it pays you.
Companies cannot hire their own directors as "self employed suppliers".
Edited by Eric Mc on Monday 4th February 16:38
Of course - although you would now be operating two separate trading activities - one as a limited company and another as a sole trader.
This would make life more complicated than if you traded entirely through the company or entirely through a sole-tradership.
As ever, I always wonder what your accountant thinks about all these ideas - have you even asked him/her?
This would make life more complicated than if you traded entirely through the company or entirely through a sole-tradership.
As ever, I always wonder what your accountant thinks about all these ideas - have you even asked him/her?
Eric Mc said:
Of course - although you would now be operating two separate trading activities - one as a limited company and another as a sole trader.
This would make life more complicated than if you traded entirely through the company or entirely through a sole-tradership.
As ever, I always wonder what your accountant thinks about all these ideas - have you even asked him/her?
.. to be entirely honest I have not asked my accountant yet as in essence in a very tactile sense I am just 'feeling my way' around what I want to do next. I am trying to balance several things at once really This would make life more complicated than if you traded entirely through the company or entirely through a sole-tradership.
As ever, I always wonder what your accountant thinks about all these ideas - have you even asked him/her?
a) the need to keep my tax bill as small as possible (obvious one really!)
b) the need to keep the pictures part of my business personal and individual and not from a 'business/company' but from me..
Thanks for your help.
I don't think that operating your picture sales through a limited company will make it look any less personal than if it was through a sole trader.
You can still ensure that your personal "stamp" is all over your stationery and business graphics.
One of my favourite painters, Michael Turner, runs his business through a company called Studio 88 Ltd but you are never in doubt that you are dealing with Michael Turner.
Trying to segragate two (or more) aspects of your business can cause all sorts of admin and clerical problems and need not necessarilly result in you saving any tax at all.
You can still ensure that your personal "stamp" is all over your stationery and business graphics.
One of my favourite painters, Michael Turner, runs his business through a company called Studio 88 Ltd but you are never in doubt that you are dealing with Michael Turner.
Trying to segragate two (or more) aspects of your business can cause all sorts of admin and clerical problems and need not necessarilly result in you saving any tax at all.
Eric Mc said:
I don't think that operating your picture sales through a limited company will make it look any less personal than if it was through a sole trader.
You can still ensure that your personal "stamp" is all over your stationery and business graphics.
One of my favourite painters, Michael Turner, runs his business through a company called Studio 88 Ltd but you are never in doubt that you are dealing with Michael Turner.
Trying to segragate two (or more) aspects of your business can cause all sorts of admin and clerical problems and need not necessarilly result in you saving any tax at all.
...deep down somewhere in my subconscious thoughts I knew that was the answer. Thanks for confirming it You can still ensure that your personal "stamp" is all over your stationery and business graphics.
One of my favourite painters, Michael Turner, runs his business through a company called Studio 88 Ltd but you are never in doubt that you are dealing with Michael Turner.
Trying to segragate two (or more) aspects of your business can cause all sorts of admin and clerical problems and need not necessarilly result in you saving any tax at all.
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