Typically, a contractor will work through their own limited company, employing a limited company set up for contractors. The tax advantages of employing a limited company set up for contractors heavily out weigh any other method. The general rule around IR35 is that if you are situated outside of the rules around IR35, then you will usually be better off setting up a limited company over any other methods. Otherwise, if falling within the IR35 rules, an umbrella company will be the most beneficial.
The most popular overall options available include employing a limited company set up for contractors, PAYE (pay as you earn) through an agency or setting up an umbrella company.
Limited Company Set Up for Contractors: Benefits
The most common option for contractors of all employment sectors is to work through a limited company set up for contractors. Should you wish to implement your own limited company, Euro Accountancy & Finance Services can advise, check name availability and create your company for you within a matter of minutes – your limited company being equipped to commerce within only a few hours.
Running your own limited company set up for contractors is the most efficient in terms of tax, umbrella companies being more expensive to run due to charges in overheads for administration; while not giving the same tax benefits. If choosing to use PAYE (pay as your earn) through an agency then it is worth noting that this is the least efficient manner in which to deal with tax and expenses, as you pay full tax amounts and national insurance (NI) on all of your earnings. Furthermore, using this option will not allow claims over legitimate business expenses to be made, therefore your tax and liabilities over national insurance will not be reduced.
All incorporations for limited company set up for contractors are performed past Companies House. Limited Companies are required to assign the role of at least one director, however due to legislation changes a secretary is no longer required. Should you wish to appoint two directors then the second individual is allowed to be from another company, but it is worth remembering that a director must be an individual. It is possible to assign a director and distribute shares online during the process of your limited company being formed.
Limited Company Set Up for Contractors: Final Points
Some final points to adhere to in regards to a limited company set up for contractors is that the registered address for your limited company set up can be any relevant address (i.e. a ‘physical address’), this can be your trading or your accountants address. Please be aware that the address you choose must be appropriate for receiving your business and official or governmental documents, letters and correspondence with customers or traders.
Also, once your limited company set-up for contractors is finalized and formed, you must then file your annual accounts and an annual return – both required by law. These will inform Companies House of any changes to your limited company set up.
For more information on Company Formations or Limited Company Formations visit the Euro Accountancy & Finance Services website.
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