Can I set myself up as a director/company?

[Newjobfinally]

After months of job seeking I am hopefully going to offered a temp to perm contract. The contract will initially be for 6 months, then reviewed and maybe made perm.

I know some changes have happened but am I better off and am I allowed to set myself up as a company to maximise earnings?

I googled but lost in info and got lost! Was hoping someone can breakdown plainly for me please. Thankyou!

Not if you are employed by another company no you can't set up (and be employed as) a Ltd company. If you are employed whether temp or perm you are employed as Jo Bloggs, person.

If you subcontract your services ie you are responsible for own tax and NI but get a day rate or hourly rate from a range of sources - you carry out work for x y and z companies - you might be better off setting up a Ltd company. Bit in that case you need an accountant

Actually it's quite common for supply teachers to do this. You invoice and get paid through a limited company. IDK how it all works but I've come across a lot of people who have done it so it's definitely doable for some contracts.

There are laws in the UK intended to stop people from setting up as a company to maximize earnings from an otherwise ordinary job. Google IR35 for more info.

Being a contractor outside IR35 is great, but you can't just decide to do that with any old contact. There are also costs associated with setting up a business that you would need to pay for yourself.

As a director of a company the responsibility for ensuring you act correctly in terms of compliance with law or professional standards is yours. Therefore the first step is definitely to educate yourself and/or to seek professional advice and assistance.

I hope this doesn't come across overly negative. It really is a great way to work! However it is easier to just be an employee and more can go wrong if you aren't careful.

It sounds like you will be an 'employee' They dictate the times, work, and you don't have other clients you can chose between.
I think it now falls on the company who contract you to decide now whether you are an employee or contractor and fall under payroll but it would be slightly dodgy if they decided you were a contractor given what you said.

Lots of people do the Ltd company route but they generally have lots of different things on and can pick and choose their work.

Is the role inside or outside IR35? If inside, you’ll be paid like an employee via PAYE. If outside, then you’re self employed and could set up a limited company and pay yourself through that. Roles outside IR35 are rarer though.

Thanks all.

I guess another question is can I ask for the role to be set up as IR35, is this common to negotiate with big companies?

is there a huge cost benefit to me if I can?

thanks again

You can’t choose with IR35. Either a job is IR35 or it isn’t - there is guidance on the HMRC website. Generally speaking if the employer requires you to be in a certain place at a certain time to do a certain thing it counts as employed and the employer must pay tax and national insurance for you. It is the employer’s responsibility to check whether the role is employed for tax purposes or not, it’s not up to you. You could ask but in my org there is a checklist you must complete to decide if you can offer a tender-type contract to a sole trader or limited company or whether it has to be an HR employment contract. Kwazi said he’d remove this law but Jeremy now says they’re keeping it.

It would be helpful if you would tell us what kind of work you are talking about.

For example, a cleaner is self employed and can set up a Ltd company.
A shop floor worker in Tesco cannot be self employed in that role.

A person could be both also.

It's not that straightforward.

If you set yourself up as a company the tax benefits aren't that great anymore TBH.

Also you'll need to submit annual company accounts, unless you know how to do this you'll need an accountant to do it.

My accountant is £140 per month and most will only do this kind of monthly payment over a full 12 months or a one off payment of £1400-£1500.

Personally, for a six month temp to perm I would say it's not worth it.

Also most companies do temp to perm on a Fixed Term Contract now which means you're a bog standard employee paying tax on PAYE so it wouldn't be an option then anyway.

As PPs have said you and the company can't 'choose' whether a job is within IR35 or not. There are specific rules and guidance around what is in IR35.

Being outside IR35 is basically for consultancy type work - where the company has no need for a permanent skill set and only requires you for a specific assignment or piece of work.

The fact that this is already being positioned as a temp to perm suggests this isn't the case, in which case it would be inside IR35 which removes most of the tax benefit.

Really, you need to find an accountant and discuss with them if you're even thinking of setting up a Ltd company and considering yourself outside of IR35.

They can then ensure you have all the correct advice.

Again, having been a contractor for several years but now perm after the IR35 rules came in...my advice would be that unless your new employers require you to set up a company it isn't worth the hassle of...

• Setting up the company, a business bank account and registering with Companies House

• Finding an accountant

• Keeping track of all income and expenses to submit to your accountant and ensuring this is 100% accurate

• Creating and submitting monthly invoices to your employer to be paid (and hoping their finance processes are efficient enough that this happens quickly)

• Reviewing and approving the annual business accounts

• Reviewing and approving the annual corporate tax return

• Reviewing and approving quarterly VAT returns if you're over the VAT threshold

• Reviewing and approving your personal tax self-assessment submission

• Arranging to pay both your corporate tax and personal tax on time (or face penalties) and your VAT if over threshold. All three payments go to different HMRC accounts

• Having mandatory public liability insurance

• Keeping all records for six years

Also - no sick pay, no paid holiday, no pension contributions.

You also need to be good with money and not tempted to overspend when you have ££ sitting in a bank account for a tax payment you'll need to make.

And the whole thing drags out because if you work let's say Feb - Sept that's over two tax years so your accountant will want 2 x payments for £1400 because you'll need to do company accounts and tax returns for both 22-23 and 23-24 tax years. The deadline to pay your tax for 23-24 is 31 Jan 25!

So for money you earn this summer - there will be admin tasks (like paying tax) you might need to remember to do in January 2025.

I mean...your decision but it's not a small admin task.

Hopefully I've given enough info here to make it clear why I say it just isn't worth it for six months. Save yourself a lot of time and headaches and go Fixed Term Contract.

One last point - on top of all of the above...

If the shit hits the fan, let's say with some unexpected global pandemic and you get your contract terminated and there are no other roles available because the global recruitment market freezes for 18 months...

While employees continue to work or get almost full salary on furlough. You will get £500 a month max for 18 months.

Obvs one hopes nothing like COVID is rolling around in the next six months but having personally failed to adequately prepare financially for a global pandemic and very nearly losing everything I'd worked for including my house, my car, my impeccable credit history and my sanity I would counsel against being in such a position to anyone else.

<ends self pitying monologue>

You don't necessarily need an accountant I don't think, you can do your own company tax return but it might be a bit of a faff if you're not used to it. You need to pay for your own pension. No sick pay.