When passion turns to profit – 5 reasons to become a Limited Company contractor

When passion turns to profit

Becoming a Limited Company contractor may seem like a big step but, when taken properly, it’s a savvy move that could see a quantum leap in your business (and your bottom line).

 

When you’re pursuing your passion as a contractor, operating under an Umbrella company looks like an attractive option – with its minimal paperwork and administration. Happy days.

 

But if you want to turn your passion into more pounds in your pocket, you may want to consider contracting through your own Limited Company. You’ll not only reduce your tax burden, but your business will become more of a magnet for prospective clients.

 

What are the advantages of contracting via a Limited Company?

There are scores of reasons for “going Limited” and trading through your own Limited Company, especially if you earn £30,000 a year or more and plan on contracting for at least three to six months. We walk you through five of the main incentives.

 

1. Tax and National Insurance Contributions (NICs)

You’ll be hard pushed to find someone – anyone – who doesn’t want to pay less tax.

As a Limited Company director, the bulk of your income is made up of dividends, which are subject to a different tax than a regular salary. Plus, National Insurance Contributions (NICs) aren’t payable on dividends. All of this means more money in your pocket at the end of the month.

Last year’s Summer Budget may have increased dividend taxation after the first £5,000 but this shouldn’t deter would-be contractors opting for the Limited Company option. After all, at the top end, you can still take home significantly more of your contract value compared to when you operate through an Umbrella company.

Why not use our take home pay calculator to see how much you can expect to take through your Limited Company versus an Umbrella?

 

2. Expenses

The more allowable business expenses you claim, the less you’ll owe the taxman.

Given that business expenses are deducted from Limited Company profits (and you only incur tax on profits), if your profits are reduced, your tax bill will be too.

As a Limited Company contractor, the range of expenses you can claim tax relief on is far broader than when you work under an Umbrella company.

 

3. VAT Flat Rate scheme

If your Limited Company taxable turnover is £150,000 or less (excluding VAT), you’re eligible to join the Flat Rate Scheme (FRS), which means you:

  • pay a fixed rate of VAT
  • keep the difference between the amount you charge your clients and pay to HMRC

 

Money-saving benefits aside, the FRS simplifies your record keeping and VAT calculations (never a bad thing). By contrast, if you choose to go down the Umbrella route, you won’t be able to take advantage of the FRS at all.

 

4. Liability

As a director of a Limited Company, you’re protected by having limited liability.

So, even if the worst happens and your business goes down the pan, you’ll only be personally responsible for your company’s debts to the extent of any shares you paid for and unsecured loans made to the company.

This is because your Limited Company has a separate legal personality. In other words, your clients enter into contracts with your Limited Company as an entity, not you as its director.

 

5. Client confidence

Appearances count for a lot in business and having a Limited Company structure can instil confidence in clients and potential clients, some of whom equate ‘Ltd’ with professionalism.

Many businesses won’t even take you on for a contract if you don’t have a registered Limited Company.

 

When is the best time to become a Limited Company contractor?

Conventional wisdom says that, while your earnings are fairly modest, it’s best to stay on the Umbrella pathway because your tax and accounting responsibilities are fairly basic. You can comfortably do a DIY job on your Self Assessment (and save yourself accountancy fees).

In reality, working as a Limited Company contractor isn’t just about saving money. It’s about keeping the financial health of your business and personal lives separate. There’s no better time to do this than now.

 

How do you start working as a Limited Company contractor?

Before cracking on as a Limited Company contractor, you’ll need to register your company with Companies House.

You have three choices:

1. Do it yourself online

2. Ask an accountant to do it on your behalf

3. Use a company formation agent

 

The Companies House website sets out the registration requirements, registration fee, restrictions on company names and so on. Or speak to us and we’ll do it for FREE in 24 hours. You can also read our guide to contracting and our blog on how to set up a Limited Company.

 

If you’re currently working under an Umbrella company and considering making the move to becoming a Limited Company contractor, talk to our experts today about what you need to know and how to get started.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

How to set up your Limited Company

How to set up your Limited Company

If you’re ready for a change in the way you work, today is a good day to get started. Maybe you’ve been in permanent employment all your life and want to get more for your skills; or perhaps you’re already contracting but aren’t getting the most through your current arrangement via an Umbrella or agent. Or are you a student approaching graduation and prefer the idea of being your own boss instead of getting stuck into the 9-5 daily grind?

 

Why bother?

As a contractor you can:

  • keep more of your earnings
  • be your own boss
  • control how, when and where you work
  • decide who you work for and how

 

There are already 4.7 million self-employed workers in the UK right now. Everyone will have different motivations for going into contracting and for those looking on with envy, quite often the only thing stopping them is…themselves.

Do some research into the level of demand for your skills and the day rate you can command and you may find the confidence you need to take the plunge.

 

It’s not what you make, it’s what you take

If you expect to earn at least £30,000 per annum and to be contracting for more than three months, working through your own Limited Company will mean you can enjoy more freedoms and maximise your take home pay. Our Ready, set, go…into contracting guide gives you more insight into what being a contractor entails.

 

The first step to setting up a Limited Company…

Know what you’re getting yourself into and understand the responsibilities you’ll have with your own Limited Company. But don’t be alarmed, just make sure you get to grips with what’s what.

We work with contractors every day, helping them run their Limited Company in the best way depending on their individual circumstances. We know exactly how to set up your Limited Company. We can help you incorporate your company within 24 hours and register you for VAT and PAYE. To fully appreciate your responsibilities as a Director, you can have a chat with our experts. You are ultimately responsible for your company throughout the year but we’ll help guide you through everything that needs doing.

 

Get yourself out there

With the freedom to work where you want, you are the master of your destiny so you need to be active in finding your next contract. Decide on a suitable company name and give yourself a visual identity that you are proud of. Check out our 10 tips to promoting brand: You, including tips for networking, and make sure you harness the power of social media, whether it’s a whole new world or you’re looking to get more out of it.

 

What else?

There’s lots to get your head around when you’re first setting up your company and working with a specialist contractor accountant from day one can help ensure you don’t miss anything. With Intouch, not only will you get help with everything you need to run your company throughout the year, we also have relationships in place so you can sort out your business insurance and banking without any fuss.

Whatever your motivation, there are so many great reasons to set up your Limited Company. Make the right choice for you.

 

Speak to our experts today about how to get started and they can set your Limited Company up for you within 24 hours…for FREE!

The day the UK decided to break away

Brexit becomes reality

June 24th 2016 – an historic day for the United Kingdom as the voting population opted to leave the European Union in favour of national independence. Unsurprisingly, today everyone wants to know what leaving the EU really means and how it will affect them. Well, it seems no one could get hold of a crystal ball to see what’s around the corner so in the immediate term, we simply don’t know what’s to come or when it will come. It is certain that anything that is going to happen will be slow. Our pre-voting day blog considered issues that contractors will be most interested in and for now we can offer no more direction on how this monumental outcome will specifically impact contractors.

 

The process of leaving will be no mean feat. With the UK now facing many years of negotiations, we have to employ a ‘wait and see’ policy while talks are held, old deals are undone and new ones struck. This uncertainty could benefit contractors as companies wishing to employ a cautious approach to boosting their business may favour hiring temporary resources with specialist skills that can be brought in and out more easily than permanent employees. Donald Tusk, EU Council President, has been quick to reassure the UK that during its two year withdrawal period from the EU we won’t lose our rights and must still honour our responsibilities.

 

This morning Bank of England Governor Mark Carney warned us all to expect “some market and economic volatility”. Indeed the exit announcement triggered the biggest one-day fall in the Pound (10%) since 1985 and the Sterling has been bouncing up and down in the past 24 hours and is likely to yo yo more over the next few days. This was always going to be the case with such a fundamental shift in world economics. And the Prime Minister’s resignation was always going to be next on the cards if Brexit became a reality. But Carney has also unveiled the bank’s ‘Plan B’ which involves £250bn to see the economy through this inevitable period of uncertainty. He attempted to reassure the public and media that Britain’s banks are robust and have been subject to rigorous stress tests to deal with huge volatility.  It seems par for the course that we’ll need to see another recession through. We have recently come out of one and are familiar with employing austerity measures to build a stronger economy.

 

Whether you wanted in or out, it’s important that we respect each other’s views and now work together to build a stronger Britain. Yesterday’s vote saw the highest turnout since the 1992 General Election: 72% of those eligible to vote turned out to the polls, with 52% opting for Brexit. So in the immediate term these people at least will be supporting our outgoing and new Prime Ministers to build a more independent nation. Of course, Cameron’s successor will hope that as things become clearer there will be a better feeling about the UK’s life outside of the EU. Given that 48% wanted to remain, their voice will still be heard and negotiations are unlikely to be radical. They will be done by serious people looking for sensible outcomes.

 

European Commission President Jean-Claude Juncker suggested earlier this month that a deserter would not be welcomed with open arms. The UK still holds a strong position and has a significant contribution to make on the world’s stage so the reality is unlikely to be as devastating as first feared. Norway and Switzerland have strong trade agreements in place, despite not being an EU member so there’s no reason why Britain can’t achieve the same. Other economic powers will want stability as much as our own Government so it seems a reasonable bet that they will want to sit round the table and work out ways to keep stability as much as possible…and they’ll want to do it soon. After all, this is a worrying time for those countries remaining in the EU as a key player has left the game. Although he feels he’s “not the right captain to steer the country to its destination” Cameron has vowed to stay on and help steady the ship until his replacement takes over in October.

 

A quick glance at how votes were divided across the nation raises the question of just how united the UK will remain. Scotland and Northern Ireland voted to remain and Nicola Sturgeon has already suggested a new Scottish Referendum is highly likely. But there’s also the strong likelihood of other EU countries now reassessing their membership, so perhaps we should be asking ‘who’s next?’ France? Italy? The Netherlands? That opens up a wider debate about what might happen if the EU as we know it (at least up until 4:00am this morning) breaks up altogether. That’s a discussion for another day…

 

For now, no one knows how long this rollercoaster will last and how many twists and turns it will have. The UK’s contractors need to continue to deliver business as usual and apply their valuable skills to bolster our economy. This is a once in a lifetime opportunity for us all to take control and help shape the future.
As Britain’s Contractor Champion Intouch will be there voicing the concerns and ideas of the UK’s independent workforce. We will continue to advise our customers on the best way to run their Limited Company based on their individual circumstances and will be keeping a keen eye on developments to ensure you receive the contractor-centric interpretation. Make sure you’re with us for now and the future.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Redundancy can pave the way to more money, freedom and choice. How? We’ll tell you…

Redundancy is not the end!

Have you been made redundant or is redundancy on the cards? It’s not a disaster; in fact it could be just the incentive you need to unlock your hidden potential and achieve more than you thought possible, through a new beginning in contracting…

 

Advantages of contracting include:

 

  • Higher take home pay – even if they actually work less hours than before, contractors can still earn around 2.5 times the earnings of permanent employees.

 

  • Greater career choice and flexibility – You decide which contracts to take, when and for how long so you can have as much or as little variety in your career as you wish. There has been an increase of 7.7% year-on-year in available contract jobs, so you should have plenty of choice.

 

Remember! Contracting isn’t an easy option but it should make you stronger and more confident in controlling your own career. If you’re willing to put in the groundwork and time, contracting can reward you as much as the effort you put in.

 

  • Design your life around work, not the other way around  Once you discover you can earn the same amount working for fewer hours, you can decide whether to use the extra hours to earn more or to take advantage of time for family, hobbies, travel, volunteering, studying or pursuing other passions.

 

  • Work wherever you like  Few things are more soul destroying than a two-hour commute each day. Many contractors work from home. Imagine the bliss of getting up and having a one minute commute! You can even work in the garden, park or coffee shop, wherever suits you best.

 

  • Be your own boss  When you decide to go contracting, your professional development and career progression are completely up to you and you control your own destiny.

 

Read our blog “Five Reasons to be Your Own Boss in 2016” to see why now is the perfect time to start contracting.

 

  • Control when you work, for whom and for how long  If you only want to work certain hours or days, then you can! You could arrange your contracts so you’re free in term time or all summer, whatever suits you.

 

It’s also up to you how much time you can give to each contract and whether the work is suitable for you. If it doesn’t interest you, there’s always the option of turning it down!

 

This freedom empowers you to use your skills and experience on your terms to further your career aspirations and goals.

 

If you’re interested in contracting, why not speak to people who are already contracting and ask their opinions and advice? There’s lots of support for contractors via online business communities and support groups. Similarly, a good contractor accountant will take away any financial worries.

 

Who wouldn’t want to wake up every workday full of energy and passion, knowing that you can go as far and as fast as your own efforts will take you?

 

If you are facing any stage of redundancy, we hope that by bringing them to your attention, we have given you insight into some of the advantages to be gained through contracting.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Feeling unloved? It’s time to switch accountant

It’s time to switch accountants

Like strawberries and cream, gin and tonic or Batman and Robin, your contractor accountant should be your perfect other half, steering you on the path to contracting success. It’s their responsibility to keep you compliant, feeling assured and taking home as much of your hard earned contractor pay as possible.

 

But what happens when the relationship turns sour and you no longer get the support or service you need and deserve? If you resonate with any of the following examples, then it might be time to look elsewhere:

 

switch accountant

 

Don’t settle for second best, have the accounting relationship you deserve

If you’ve made the decision to switch accountants, then changing over to Intouch really couldn’t be easier.

 no switcher fees

With no switcher fees* for joining us, or charges for leaving, there really is nothing stopping you from discovering the perfect contractor accountancy relationship.

 

Call us, we’d love to speak to you

Why not discuss your current circumstances with one of our expert advisers? Switching is so easy to do and we’ll even speak to your current accountant for you, so you won’t have to worry about any uncomfortable conversations. There really is nothing for you to lose…but lots to gain!

 

Keep on loving what you love

Love contracting, love your professional freedom, love your take home pay. Whatever it is that you love about contracting, make sure you have the perfect relationship with your contractor accountant to help you achieve contracting success.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Everything’s about to change for Umbrella workers – make sure you’re prepared

Calling all Umbrella workers

Are you currently contracting under an Umbrella? Have you considered how the changes coming in April will affect you?

 

Read on to know what’s coming, what you’ll be losing and what you can do to make the right choice for you.

 

Announcements made in the 2015 Budgets, the Autumn Statement and the draft Finance Bill shook the UK’s 200,000 Umbrella workers, as the feared changes were confirmed. Fundamentally, Umbrella workers’ take home pay is under threat from increased taxation. Come April 2016 strict new rules are to be imposed. How will they affect you?

 

Your professional life will change

In April this year:

  • Your tax relief on travel and subsistence expenses will be restricted, where you are subject to supervision, direction or control (SDC)
  • You’ll automatically be deemed as subject to SDC by HMRC and your Umbrella must determine otherwise with the help of the client
  • Greater compliance checks will be enforced
  • Other expenses you claim will be taxed under PAYE
  • By law you will have to submit a Self-Assessment Tax Return to obtain tax relief on other expenses
  • Umbrella charges may increase to pay for the additional compliance

 

So what are your options?

  • Be moved over into a Limited Company by your current Umbrella provider if (or when) they offer this service
  • Run the risk of other untested models designed to avoid the changes
  • Set up your own Limited Company
  • Return to permanent employment
  • Stay with your Umbrella and see if the model still works for you.

 

Many contractors work under an Umbrella because their services complement their professional requirements. But this is all about to change.

 

Umbrellas in their current form will need to implement major changes to the way they operate in preparation for April’s changes. What they will look like is as yet unknown, meaning they’ll be untested and unproven.

 

If contracting is a long term career choice, then it’s worth revisiting your options.

 

Tempted to go Limited?

If your current Umbrella provider is offering you their Limited Company services, it may be tempting (and seem easier) to stick with them. But you could end up paying more for a service that doesn’t meet your requirements. It’s worth checking out what specialist contractor accountants offer to make sure you’re getting the service you need to run your company smoothly and help you stay compliant.

 

We’ve compiled the essential checklist of what every Umbrella-to-Limited contractor should expect from their prospective service provider:

checklist

 

To help with your research why not download our essential checklist? You can do so by clicking on this link:  The essential checklist (104 downloads )

 

Final thoughts

Change is imminent, but it’s how you prepare yourself now that will put you in the best stead for April. Whatever decision you make, always ensure it’s the best one for you, both personally and professionally. Don’t be persuaded by your existing provider that their solution is your only choice.

Before you get caught up in your research, why not make use of our free take home pay calculator to give yourself an idea of how much you could be taking home as a Limited Company contractor.

 

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Five reasons to be your own boss in 2016

Be your own boss in 2016

With the recent announcements in this year’s Autumn Statement (or lack of them!), the future of contracting is appearing to be more attractive than ever.

 

So why should you consider contracting in 2016? Here we explore the professional and personal benefits you can gain by contracting with our top five reasons to contract in 2016 and beyond:

 

Career progression

career progression

If you’re in permanent employment there will often be a limit to the level of progression you can achieve. But as the boss of your own Limited Company the climb up the ladder of success is endless, as you control your own destiny.

Fancy branching out into a new field of expertise? Or are you seeing a trend for a specific type of contract within your field of profession? Your professional development and career progression is completely up to you, so why not go for it! Whilst the sky’s the limit, you’ll have to be driven enough to build up your network, promote yourself and have the determination to succeed.

 

 

Tailoring your skills

skills

Whilst contracting allows you the freedom to design your working life to your requirements, it also means that it’s completely up to you to do so! From scouting for contracts, creating and managing your business website to networking and managing your time, you’ll never stop learning. Permanent employment means you move to the beat of someone else’s drum, but as a Limited Company contractor you’ll need to find your own rhythm.

But don’t let being Limited limit you! There are so many tools out there to help you hone your skills and time management, without distracting you from your contract at hand.

 

Flexibility

Page_4_iStock_000009697091Large

Tailoring your work life around your personal life (and not the other way around) is one of the major benefits of contracting. You make the rules, so if you only want to work certain hours or days to fit around your family life or favourite hobby, then you can!

 

It’s also completely up to you what time you feel you can give to certain contracts and when work is suitable for you. Fancy a break in the summer, or don’t want to work on your birthday? Choosing your contracts means you can decide when you work and for how long!

 

Remember! Being flexible in the early days of contracting means that you’ll build up your network and client list far quicker, allowing you to be more selective once you’ve established yourself. If previous clients know your calibre of work but are aware of an impending holiday, they’ll be more likely to hold off hiring anyone else until you’re back, especially if you’ve worked for them before and they’re keen to have you back.

 

Financial independence

Hand and money staircase isolated on white

Imagine a job where you can charge what you like for the work you do. Within reason, you can charge clients hourly or daily rates that just aren’t possible in permanent employment.

 

But whilst financial independence is probably one of the most popular goals for any professional worker, it’s worth bearing in mind that you’ll need support to ensure you get the most from your take home pay. This is where enlisting the services of a professional contractor accountant comes in, as they will be able to make sure you are taking advantage of all the taxable benefits available to you whilst maximising your take home pay.

 

New challenges

page_3_iStock_000033300086_Large

You’ll face new challenges; from learning new skills and working patterns, to winning business and learning how to deal with gaps in contracts, every contract will teach you something new about the world of contracting.

 

But whilst there will be a few obstacles to overcome, the financial, professional and personal achievements from going Limited far outweigh those offered in permanent employment.

 

How Intouch Accounting can help

Whether you’re just starting out and wondering what contracting can offer you, or are a seasoned pro but feel you need more from your current accounting solution, Intouch can help you at every step of the way. From incorporating your Limited Company free of charge and explaining how it all works, to making sure you’re supported when it comes to key deadlines such as your Self Assessment Tax Return, your Personal Accountant is here to provide guidance and support, whenever you need it.

 

To find out more about the services Intouch provide, why not visit us, email us, or better still,  speak to one of our advisers on 01202 375 562.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

And the winner is…

And the winner is…

We recently ran a contractor insight survey with one of the UK’s top recruitment search engines for technology professionals.

 

The survey gave us a strong insight into the current contractor industry, from professionals who have either previously worked as contractors and are now back in permanent employment, or are currently contracting through their own Limited Company or using an Umbrella. The results from this survey will aid us in continuing to offer contractors the specialist advice, support and services they need in order to contract successfully.

 

Whilst we received lots of fantastic feedback, one lucky participant was picked at random to win £150 Amazon vouchers! We are pleased to announce that the winner is (drum roll please…..) Kulvinder Jhalli!

 

Kulvinder had this to say about winning, I’m so pleased to have won the vouchers! As a contractor it’s great to be able to give my feedback and feel like my opinions and experiences have been heard.

 

Congratulations to Kulvinder and a big thank you to everyone else who filled out our survey. We will be displaying the results in the upcoming weeks, so keep your eyes peeled.

 

Wishing you all a very pleasant and peaceful festive period and New Year!

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Can I get a mortgage as a contractor?

Can I get a mortgage as a contractor?

As a contractor, one of the most commonly asked questions is whether or not it is possible to secure a mortgage. Quite understandably, many contractors are unsure as to what their position is, given the fact that they’re not in permanent employment. It’s common knowledge that it’s becoming increasingly difficult to secure a mortgage following the Mortgage Market Review in 2014.

 

Yes, a contractor can secure a mortgage

As a very top-line answer; yes, of course a contractor can get a mortgage. Lenders aren’t there to prevent individuals from owning their home, simply to reduce risk associated with it. So it all comes down to taking the right route to ensure an application is made to a lender who understands contracting. In theory, so long as a contractor is able to provide two or three years’ worth of income details (for example, wage slips, accounts, dividends documentation) or, if operating as a sole trader, SA302s, it should be possible to secure a mortgage. However, unfortunately, it’s rarely that simple.

 

Many lenders do not understand contracting

One of the main problems in this area lies in that many lenders may not understand what a contractor is. Whether you’ve been contracting six months or six years, there ARE lenders out there who understand your situation and are happy to lend to you, so long as the standard criteria are met.

 

Different contractors operate in different ways

It’s important to understand that contractors can operate in different ways; sole traders or company directors primarily. With a company director for example, lenders will be looking at the combined salary and dividends drawn in a financial year, however this can cause problems for contractors who leave profits within the business. In this instance, it’s necessary to apply to a lender who will consider and take into account the company’s retained profits.

 

Many advisers are inexperienced
It is commonly seen, further to the above, that the majority of advisers in banks are inexperienced in dealing with anyone other than employed individuals, so when a contractor makes an application, they themselves are unsure as to what is and isn’t able to be assessed. This further backs up the justification for carrying out the research and finding a suitable lender who understands the trading style.

 

The bottom line is that a contractor will need at least one year’s accounts in order to be considered, however in reality, having two or three year’s accounts will make a larger number of lenders accessible.

 

Proving a steady income

So long as it can be proven that a steady income is earned and that, in the case of a director who pays a smaller wage and dividend, there are retained profits which can be taken into account, there’s no reason why a contractor should struggle to get approval on a mortgage. Our top tip here, however, is to speak with a specialist mortgage broker who fully understands the options available, has a track record of securing mortgages for contractors and that, as with all mortgage applications, the base criteria of affordability and the correct paperwork are met.

 

If you want any further information on getting a mortgage as a contractor, contact one of our team on 01202 375 562. Also, why not contact us to see how Intouch Accounting can help keep you compliant and maximise your income?

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Claiming Christmas expenses through your Limited Company

Claiming Christmas expenses through your Limited Company

Can I claim Christmas party expenses through my Limited Company?

The interest-free sofa adverts have started and the supermarkets are full of advent calendars, yes you’ve guessed it, it’s now officially Christmas. If you’re currently contracting within a corporate environment the annual Christmas party is probably a hot topic amongst permanent employees.

 

But there’s no need to feel left out, as HMRC give even the smallest of Limited Companies the ability to take advantage of a tax exemption for any allowable costs of their Christmas event. So you can still have a good old merry knees-up for your Limited Company’s most valued member of the team.

 

In this blog we take a look at the rules surrounding Christmas party expenses and what you can claim for. We also look at why it doesn’t have to be lonely this Christmas, as the rules for claiming can extend to others if you’re a single-person Limited Company contractor.

 

How much can I claim for?

If you take advantage of the tax exemption for annual events it means that you’ll only have to pay for 80% of the costs. HMRC usually spend most of the year telling you how to stay compliant and reinforcing the the taxes you must pay, so why not make the most of their generosity at this time of year?

 

Which HMRC rules apply to Christmas party expenses?

For your event to qualify for a tax exemption, the event must meet the following criteria:

The event must run annually - If you’re going to party once then you’ll have to do it every year (sorry about that….!) The event doesn’t have to be restricted to Christmas though, it could be a summer party or Easter event. The point here is that whichever event you choose to celebrate it has to be annually recurring. Do bear in mind though that if you decide to have an event for just one member of staff, you must still account for the expenses and that they will not be treated as tax allowable.

The event should be available to all employees in one location - That includes all directors, staff and guests. The guests of directors can include spouses or civil partners. Children of the directors or employees are also included within this. This inclusion therefore means that if you wanted to hold a Christmas party for you and your family, there’s nothing saying that you can’t. Part time employees are also included in this, so you could have a party for them, their partners and children.

There’s a limit of £150 per head - If you were planning on treating yourself or your employees to a Christmas party in the North Pole, it’s worth bearing in mind that there’s a limit of £150 per head. This is the absolute maximum and HMRC will make no exceptions. This is not an allowance and therefore it is the receipted amount that is an allowable expense.

The £150 includes VAT, transport costs and the total cost for any accommodation. The total amount is then added together and divided up between the number of guests attending the event.

If you’re feeling generous and thinking about footing the bill for any costs over the £150 per head, don’t! Even a penny over will mean that the exemption will be void and the total cost will be taxed. It’s not worth the extra large bill just before Christmas, so if you’re in doubt speak to your contractor accountant to be sure everything has been calculated correctly.

 

If you like to party throughout the year

Annual events don’t have to be limited to just one per year. You could hold one whenever you wish, as long as the total combined costs of all events do not exceed the £150 per head threshold for the tax exemption to still apply. If you do happen to go over the threshold for any particular event, HMRC will only apply the tax exemption to expenses for the events that have fallen within the allowable limit.

 

Giving gifts to employees

It’s also worth bearing in mind that you are entitled to claiming back any costs for ‘trivial’ gifts you purchase for your employees. Now this doesn’t mean that you can buy them all a brand new Ferrari and claim the cost back! These gifts must be in keeping with the season, so giving your employees a bottle of wine or turkey is acceptable, but giving them a case of wine or a Christmas hamper would be considered as a non – trivial gift and therefore not allowable.

 

It is always best to discuss any annual event expenses with your contractor accountant, to ensure that you are covered by the tax exemption before you part ways with your pennies. If  you’re thinking about switching accountant, or even becoming Limited in the New Year, call our team on 01202 375 562, or email us at enquiries@intouchaccounting.com.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.