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Our limited company accountancy services are designed to give you what you need at a price that makes sense for your business and we want to make sure you use the service that's right for you. We’ve answered some of your most frequently asked questions below.
There are certain criteria that a contractor has to meet in order to work in this way, the most important being that they shouldn't fall inside IR35. There are also other considerations such as length of contract and pay rate. Our new business consultants will discuss your circumstances in detail and where required carry out an IR35 review of your contract and working practices to make sure they comply with the legislation.
To find out more, see our IR35 guide.
As you become the director of a limited company you do have certain responsibilities such as deciding how you're going to be paid, whether to register your company for VAT and preparing and filing your statutory documents. If all this seems a little daunting, don't panic - at PayStream you'll have a dedicated accounts team who'll help with all of the above, including preparing draft accounts for you to sign and filing them at Companies House on your behalf.
This will depend upon who is engaged as an accountant and what you ask them to do. A good accountant will act as your business advisor as well as helping your company meet all its legal obligations. He/she can assist the company in preparing its financial statements or accounts and help with the filing of VAT, PAYE and Corporation Tax Returns.
The most common form of business structure, the limited company is characterised by limited liability for shareholders (i.e. a shareholder’s liability is usually limited to the amount of their investment in the company). It is a separate entity for income tax and legal purposes from its shareholder(s) and director(s). Click here for more information.
Up until April 2008 every company needed to have two registered officers, the director and the company secretary. From that date, you have the option whether or not to appoint a company secretary.
As the director of a limited company you can set your salary (Director’s Fee) at any level because directors are not subject to the National Minimum Wage or National Living Wage. We advise our clients to take a salary of at least £165 per week or £715 per month as this is a tax efficient salary level and ensures you retain your entitlement to state benefits. As a shareholder you can also take profits from the company in the form of a dividend.
You will be employed by your limited company as a director - you will not be self-employed.
As soon as your company bank account is open and your agency/client is given the details you are ready to be paid. You must also have completed the online joining portal and returned a completed starter pack with additional forms that are required.
It is an industry wide requirement to have Employers’ Liability, Public Liability and Professional Indemnity cover and you are free to approach any roker for a competitive quote. At PayStream we have negotiated a low premium with three different levels of cover, Bronze, Silver and Gold. If you’re already using one of our limited company services, please contact your dedicated accounts team if you have any further questions. If not and you’d like some more information, give us a call on 0161 929 6000 (option 1).
Business expenses such as stationary costs, travel expenses and subsistence are reimbursed to you by your company from the company bank account. To be tax deductible for the company, they must be incurred wholly, exclusively and necessarily in the performance of the duties of employment. If you’re already using our limited company services please refer to our expenses policy which is on the download section of the portal. If not and you’d like some more information, call us on 0161 929 6000 (option 1).
To claim mileage you should log details of your daily business travel via our online portal. The best way is to record the postcodes of where you travelled from and to. Petrol receipts should be retained by yourself, if you wish to reclaim VAT. If you are staying away from home on business for the night, you may claim a Personal Incidental Expenses (PIEs) allowance of £5 per night for which receipts are not required. All other expenses should be supported by an original receipt. To allow us to work out your company and Personal Tax Liabilities, you should submit your expenses via our online portal and keep the original receipts.
When you submit your timesheet to PayStream you should clearly state the expenses that need to be included on the invoice. Your agency or client may require the original receipts along with a claim form. You should include the expenses in your online claim.
Your PSC Insight portal will update daily to advise you of your current available to draw and taxes to retain figure. PayStream can also produce and send you an income statement which shows the amount of money available to withdraw each week or month having calculated your tax liabilities. Ultimately it is up to you how much you take out of your company bank. However if you’re not already using our limited company services and you’d like some more information, call us on 0161 929 6000 (option 1).
PayStream will advise you when payments are due for taxes and National Insurance; we will detail how much is due, when and how to make the payment. We will always email you the details so you can make the payment. However if you’re not already using our limited company services and you’d like some more information, call us on 0161 929 6000 (option 1).
If the company makes profits liable to Corporation Tax for the first year (accounting period) in which it trades, those profits will be charged at 19% (currently). The tax will be payable 9 months and a day after the accounting period end.
For example, company profits for first year ended 31 March 2021 - £20,000 x 19% = tax £3,800 payable on or before 1 January 2022.
All directors have to submit a Self Assessment tax return. You will be sent a P60, P11D and dividend summary to enable you to submit the form by the statutory deadline, if you require PayStream can provide the service for you. If interested please contact your dedicated accounts team. If you’re not already using our limited company services and you’d like some more information, call us on 0161 929 6000 (option 1) or you can complete a form here.
Depending on the level of income you receive you may have some tax to pay on dividends. All individuals are entitled to receive £2,000 of dividends tax free, dividends within the basic rate tax band are taxed at 7.5% and within the higher rate tax band are taxed at 32.5%. Within the PayStream portal you will have access to a personal tax calculator which gives you an estimate of your personal tax liability. However if you’re not already using our limited company services and you’d like some more information, call us on 0161 929 6000 (option 1).
VAT registration is compulsory if your company turnover exceeds £85,000 (2018/19) in a rolling 12 month period however you can register prior to exceeding this threshold on a voluntary basis if you want to.
Once registered for VAT you would be required to charge an additional 20% in VAT to your agency in addition to your daily rate. This amount is then payable to HMRC on a quarterly basis after deducting any VAT spent on expenses. This is known as accounting for VAT on the standard rate scheme. Click here for more information about purchasing a vehicle through your limited company.
The Flat Rate scheme is an alternative method to account for VAT where a company does not reclaim VAT on expenses but instead pays VAT to HMRC at a lower flat rate percentage, accounting for VAT in this way usually means a lesser admin burden for the company.
The rate at which companies pay VAT under the flat rate scheme is less than 20% and depends on the type of business the company carries out.
Most contractors fall into the “Limited Cost Business” category therefore the flat rate percentage to pay VAT at is 16.5%, a 1% discount is received on this in the first year.
The amount of VAT due is simply the total of GROSS sales (that is including the 20% VAT charge) multiplied by the Flat Rate level for the business.
VAT collected: £200.00
Total gross: £1,200.00
Say Flat Rate = 15.5%
VAT due = £1,200 x 15.5% = £186
VAT collected = £200.00