Ltd company accounts question
Discussion
I've been invited to join an old work colleague to setup a small IT business, we'd be joint owners 50/50.
This would be my first foray into being self employed and so I'm a little confused about what is required from an accountancy point of view. He already has the ltd company formed from when he used to be a contractor, and already has an accountant in place.
I understand that end of year accounts are necessary for the ltd company, but would I also be required to do a personal tax return? If so, would it make sense to use the same accountant or is there no need?
I'm also considering setting up my own ltd company whilst things get off the ground as I've been offered some infrequent consultancy work that would help to pay the bills when we're quiet.
Any thoughts or advice would be very welcome... As you can tell I've only ever been PAYE.
This would be my first foray into being self employed and so I'm a little confused about what is required from an accountancy point of view. He already has the ltd company formed from when he used to be a contractor, and already has an accountant in place.
I understand that end of year accounts are necessary for the ltd company, but would I also be required to do a personal tax return? If so, would it make sense to use the same accountant or is there no need?
I'm also considering setting up my own ltd company whilst things get off the ground as I've been offered some infrequent consultancy work that would help to pay the bills when we're quiet.
Any thoughts or advice would be very welcome... As you can tell I've only ever been PAYE.
So yes in a nutshell.
Company needs to file return with companies house at the year end for the company (might not be tax year end), and pay any tax due on profits.
There are time limits to it all - but without going into detail the accountant will sort that all for you.
That said I would make sure you are familiar with the cut off times just in case the accountant slips up..
Personal tax wise, yes you will need to do a return to HMRC. This needs to be done at the normal cut off time etc its done online.
Some other things you will need to consider:
VAT
Insurance
Pensions
Dividends
You also need to be aware that if you apply for any larger advances (i.e mortgage / bridging loan etc) then you will now need to supply company accounts or SA203 etc. In other words, you wont get a mortgage for roughly 1.5 years at which point you will be limited to a few lenders as you will only have 1 years accounts. That may or may not be a problem.
You can have directorships of many companies. In fact the rules about how you can manage profits between companies has recently been relaxed IIRC... sure Eric will advise...
HTH!
Company needs to file return with companies house at the year end for the company (might not be tax year end), and pay any tax due on profits.
There are time limits to it all - but without going into detail the accountant will sort that all for you.
That said I would make sure you are familiar with the cut off times just in case the accountant slips up..
Personal tax wise, yes you will need to do a return to HMRC. This needs to be done at the normal cut off time etc its done online.
Some other things you will need to consider:
VAT
Insurance
Pensions
Dividends
You also need to be aware that if you apply for any larger advances (i.e mortgage / bridging loan etc) then you will now need to supply company accounts or SA203 etc. In other words, you wont get a mortgage for roughly 1.5 years at which point you will be limited to a few lenders as you will only have 1 years accounts. That may or may not be a problem.
You can have directorships of many companies. In fact the rules about how you can manage profits between companies has recently been relaxed IIRC... sure Eric will advise...
HTH!
I'd personally avoid getting involved with his limited company. Just too much baggage there. Will he give you 50% shareholding? Does it have retained profits - unknown liabilities - what if his contacting work gets caught by IR35, for example?
A new ltd is easily formed, or you can look at options like partnerships etc.
A new ltd is easily formed, or you can look at options like partnerships etc.
No.
If a person does not have income that needs to be self assessed, they don't have to complete a self assessment tax return.
If a director only received a basic rate salary, no or minimal dividends and had no self assessment income such as sole trader income or rental profits, then they would not have to complete a tax return. In theory, they would be paying the correct tax under the PAYE system and through deduction at source.
If a person does not have income that needs to be self assessed, they don't have to complete a self assessment tax return.
If a director only received a basic rate salary, no or minimal dividends and had no self assessment income such as sole trader income or rental profits, then they would not have to complete a tax return. In theory, they would be paying the correct tax under the PAYE system and through deduction at source.
red_slr said:
That's a good point actually - it would be a good idea to start a new company from the outset just in case you are buying into any debts etc..
essayer said:
I'd personally avoid getting involved with his limited company. Just too much baggage there. Will he give you 50% shareholding? Does it have retained profits - unknown liabilities - what if his contacting work gets caught by IR35, for example?
A new ltd is easily formed, or you can look at options like partnerships etc.
Would it not be easy to check for existing debts and liabilities through checking the accounts? Granted that can't check for retrospective IR35 action, but all the ancillary stuff with setting up a new business can be a real PITA.A new ltd is easily formed, or you can look at options like partnerships etc.
Thanks for the replies, chaps - much appreciated - all makes sense.
I will check the accounts of the existing business as I definitely don't want to absorb any debts, but I can't imagine that it's going to be a problem in regard to IR35 as it's been at least 6 years since he last did any contracting - he's been PAYE since then.
In terms of doing some contract work to tide me over does it make more sense to go LTD straight away? Is that more tax efficient than being a sole trader?
Thanks for your time again, gents.
I will check the accounts of the existing business as I definitely don't want to absorb any debts, but I can't imagine that it's going to be a problem in regard to IR35 as it's been at least 6 years since he last did any contracting - he's been PAYE since then.
In terms of doing some contract work to tide me over does it make more sense to go LTD straight away? Is that more tax efficient than being a sole trader?
Thanks for your time again, gents.
Mr Kitten said:
I've been invited to join an old work colleague to setup a small IT business, we'd be joint owners 50/50.
This would be my first foray into being self employed... He already has the ltd company formed from when he used to be a contractor, and already has an accountant in place.
You won't be self-employed, you'll be PAYE again - as a company director you're an employee of the Company. It's just that you the individual owns some of it.This would be my first foray into being self employed... He already has the ltd company formed from when he used to be a contractor, and already has an accountant in place.
As I understand it to be a 50:50 shareholder in his company you'll need to pay him 50% of what it's worth. Many newbies seem to be dazzled by Limited Companies - but they are only one form of trading and it may not be the best for you.
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