Advice needed about setting up a ltd company

[Claireodon]

I am registered with an employment agency and have secured a temporary position through them. However, the agency rep has now dropped on me that the rate of pay he promised me earlier this week is only available if I am a ltd company. At the moment I am a self-employed sole trader. He has given me the number of a company who can register me as a ltd co.

I have had a quick look on the internet to find out about setting up ltd companies and it seems that it is much cheaper to just do it yourself. I am just looking for advice about whether to proceed with doing this. If I work through an agency do I invoice them? If I don't continue doing contract work in the long term is it worth it? What is the point in a recruitment agency if they want everyone to be ltd companies?

A couple of years ago, this happened to my sister. She set up as a Ltd Company and named our Mum as the other director. There was a company that dealt with my sister's pay and dividends, they did it all for her at a large cost each month. However, they weren't very good at what they did, cos later on she had a tax bill for about £6000, which they hadn't warned her about. It makes me cross, that these people are making sole traders into Ltd Companies, when they clearly are not. You could always ask an independant accountant for there advise.

Check out the IR35 regulations for service companies before making any decisions. IIRC DH got royally screwed by the Govt because of these.

You should try to get some advice. Your tax situation could become quite complicated, your post suggests that you might just be contracting to one 'employer' so you need to be careful of how you are treated by the Revenue.

The actual setting up of a limited company is quite straightforward, it's the implications of the arrangement that are more complex.

I've just set myself up as a ltd company as am in a similar position with regards to agency work. I got some recommendations for an accountant who has done it all for me. Probably cheaper to do it myself but my accountant is experienced in IR35 stuff and knew what he was talking about. Get a recommendation and talk to an accountant. :-)

You can google company formation and get a new company for £17.99 which I have done. As for IR35, then you are probably going to fall foul of it but there is a risk / reward issue to consider.

You could use an umbrella company which bills on your behalf and which allows you to offset your legitimate (and some other) expenses against your gross income, thus reducing your tax bill and consequently raising your effective net income. The lower your income the better an umbrella is as expenses are fixed, not pro rata. Google for it.

At the end of the day, if you are Ltd, your rate should be uplifted by the statutory holiday allowance and the employer NI fees. That is over 20%.

The key IR35 question in layman's terms is whether you could send someone else to do the job you are doing, as a plumber could send a different plumber. If your "employer" would not allow that, then you will be classed as an employee and subject to PAYE. With careful thought, including what other things your company does, trading in other things perhaps, you can get nearer the edge of IR35. If this is not intended to be a long term thing, then you should be ok whatever but if it is a long term thing, then you should look into closing and opening new companies to thrown them off the scent.

Can I suggest you speak to an accountant who is used to dealing with this? Yes, you can easily set up a company yourself and quite quickly become proficient at invoicing the recruitment company for your services. However, you should get advice on your tax situation and the potential pitfalls. We use Hilton Sharp Clarke, based in Brighton and I find them excellent. They deal with this situation everyday.