Contractors Guide. Free Initial Consultation is available for new contractors- Contact us on or call us on

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1 Contractors Guide Free Initial Consultation is available for new contractors- Contact us on or call us on

2 Contents About Asmat & Co...1 FOR INFORMATION ONLY Limited Company...2 Accounting...2 TAX Insurance Setting up a Limited Company...4 TAX- VAT, Corporation tax...5 -Income tax, Salary & Dividends...6 IR Important Dates to Remember...7 Contact details...8

3 About Asmat & Co Asmat & Co are one of Berkshires leading independent firms of Accountants servicing a growing and satisfied clientele. At Asmat & Co expert advice is available from senior qualified Chartered Management Accountants (ACMA) and Chartered Certified Accountants (ACCA), at very attractive packages tailored to suit varied individual and business requirements. The professional team at Asmat & Co. possesses extensive experience in providing accounting, tax, finance transformation and business advisory services to a diverse customer base. Wrapped around our core service are a range of business advisory services delivered by highly regarded tax planning, corporate finance, risk management and other professionals. All of our Team members undertake Continuous Professional Development and regular training to keep up-todate in their particular field and we invest heavily in information technology to continue to enable us to deliver the quality services expected by today s clients. Asmat & Co are committed to helping ambitious businesses achieve strategic goals and growth expectations, and we now serve some of the region s best known owner managed businesses. We are also interwoven with the local business community and aim to continue to aid its growth. Page 1

4 Limited Company (FOR INFORMATION ONLY) Private Company which provides limited liability to its owners and is separate legal entity. Certification of Incorporation Certificate Issued by the Companies House once the company is incorporated displaying company number and name. Companies House Where companies are registered in England, Wales, Scotland and Northern Ireland. Company Director Person who is responsible to run the Limited Company. Memorandums & Articles of Association Documents issued by the Companies House showing term and condition and Responsibilities of director e.t.c Shareholders Owners of the Limited Company. Accounting (FOR INFORMATION ONLY) Bookkeeping Recording Company transactions e.g Invoice, expenses, salary e.t.c Dividends Money paid by the company to its shareholder out of its profits. Expenses All the expenses which are made wholly, exclusively and necessarily for the business purposes can be claimed. Accounts Preparing company accounts and filing it to Companies House and HMRC. Page 2

5 TAX (FOR INFORMATION ONLY) Corporation Tax Tax on Limited Company Profits. IR35 Tax Legislation designed to disguised employment at a rate similar to employment. VAT (Value Added Tax) Tax charged by VAT registered businesses in UK on goods and services. NIC (National Insurance Contribution) Contribution which make you entitle to state benefits. PAYE (Pay as you Earn) Tax deducted from Salary. RTI (Real Time Information) System for PAYE reporting to HMRC. Insurance (FOR INFORMATION ONLY) Professional Indemnity Insurance Insurance to cover Businesses from Professional Negligence. Client to source and acquire insurance according to business requirements Public Liability Insurance Insurance covers the cost of compensation for: personal injuries. loss of or damage to Public. Client to source and acquire insurance according to business requirements Page 3

6 Setting up a Limited Company (FOR INFORMATION ONLY) By law you need to register your Limited Company with Companies House. Asmat & Co your accountants will register your company and ensure that you are complying with the laws & regulations. When we have formed your new Limited Company, you will receive following documents. - Incorporation Certificate confirming that your company is formed. - Articles of Association and Memorandum of Association documents showing terms and conditions and Responsibilities of director. - Share Certificate showing the shareholder details. Directors Directors are responsible for managing and running the company in accordance with terms and condition laid out in Articles of Association. Share Holders Shareholders are the owners of the company. You can be sole director and shareholder of your own company. Business Bank Account Once your Limited Company has been set up, you would be required to set up a business bank account. A Limited company bank account should be separated from your personal transactions. The types of activities that should go through account are: Income received from your clients Director/employee salary HMRC taxes this includes VAT, PAYE and Corporation Tax Business expenses Dividends payments to yourself or other shareholders Page 4

7 TAX Limited company has a number of taxes to pay that you may not be familiar with, see below a brief outline as below Value Added Tax (VAT) This is an additional sum added which is added to the price of most goods, services and invoices. The current threshold for registering yourself for VAT is 82,000. If your net incomes cross the threshold we will be obliged to register. This means that for every invoice you generate you need to incorporate 20% for the VAT. Failure of not registering at the appropriate time would likely to incur penalties from HMRC. Asmat & Co can help to register you for VAT and manage your VAT returns therefore it would less of a stress for you. VAT - Flat Rate Scheme Small companies with a turnover of less or equal to 150,000 was introduced for companies to pay HMRC a flat rate percentage of your sales depending on your industry and still allows you to charge customers at 20%. No VAT on expenses are allowed to be claimed if registered for Flat rate. VAT- Standard Rate For all companies registered for standard will charge at 20% and will offset all purchase vat paid against the vat amount received. Corporation tax Every company needs to register for corporation tax. In simple your company needs to pay tax on any profit made on its trading. Every 12 months from the date formation accounts are filed with HMRC and Companies house and taxes must be paid within 9 months and 1 day of your company s year end. Page 5

8 Income Tax-Personal Apart from company tax, you are liable to pay tax on any income you receive, usually in the form of dividends and salary from your company. Salary & Dividends You may pay salary to yourself from your company at either the level below the NIC & Tax free thresholds or in accordance with the national minimum wage. We will assess and advise you in light of the tax year, based on the NIC and Income tax bands which change every year to adjust for inflation. Dividend is the money you may withdraw from the company s post-tax profits as a shareholder. It is for you to make sure the company has the profits available to withdraw dividends as otherwise money paid will be recorded as director s loan. Dividends are subject to corporation tax, though additionally until your income exceeds the higher rate tax threshold dividends are taxed at a lower rate. However, the tax man has decided that it would be unfair to tax this money twice so you can claim a tax credit on this amount. Page 6

9 IR35 Legislation Tax legislation (known as IR35) is the tax and National Insurance contributions legislation that may apply if you re working for a client through a Limited Company. If IR35 applies, all payments to the Limited Company are treated as your employment income and the Limited Company must pay any tax and National Insurance contributions due. It ensures that you pay roughly the same amount of tax and National Insurance contributions as if you d been directly employed by the client. The Limited Company is always responsible for ensuring compliance with the IR35 legislation when it applies. As a director of your limited company or a member of your partnership, you must ensure compliance with all relevant legislation, and take responsibility for determining whether IR35 applies for each of your engagements or not. Important Dates to Remember. Self-Assessment Directors of the limited company are legally required to file their selfassessment of their personal finances every year. Tax year is from 06 to 05 of April. The deadline for filing the Self-Assessment online is 31 st Jan. Annual Return Annual Return is information about directors, shareholder and registered office which need to file once a year to Companies House. This not to be confused with Limited Company s Annual Accounts. Abbreviated Accounts Abbreviated Accounts are filed to Companies House every year. These accounts contained information about company s assets and liabilities. Abbreviated Accounts must be filed to Company s house within nine months after your company accounting period ends. Company s Tax Return/CT600 CT600 is a company s tax return which needs to be filed to HMRC. Deadline for filing CT600 is 12 months after your company accounting period ends. Page 7

10 Business Advice Straight to you. You can visit our website blogs section for further information. Website: Phone: Free Initial Consultation is available for new contractors- Please inquire by contacting as per details below Page 8