Ltd & VAT

[blackjack]

Already a member and have been for years.

 

If the company was found liable in your scenario, and the directors folded the company, the directors would then be liable for any financial short falls. Especially in the case of a sole director.

 

The advice was to the OP

You know as well as i do the point I am making is, as a sole trader his personal assets would not be as well protected as if he traded as a limited company.

Unless you disagree with that wind your neck in.

[Highland Forestry]

Ok, so to get this roughly clear my (made up figures and "annualised") tax liabilities are,,,,,

 

I turnover £85k (im over the VAT threshold and need to register for VAT)

My profit on the £85k is £35k

Allowable business expenses (materials etc) £50k

 

Im paying Self assessed on the whole 35K so thats £5500

 

What is the VAT situation? do i pay Vat on the 50k? (thats £10k!) but i get that back right?

Do i pay VAT on my profit of £35k ? (thats £7k)

*****************************************

 

Now, if i go Ltd, I could pay myself 12k (all i need)

 

So im now paying income tax on 12k which is £905

Im paying corporation tax at 19% on £23k which is £4375

 

Im assuming the VAT stays the same?

 

In the Ltd scenario above, you would be PAYE and so would pay NI and Income Tax like anybody else, after your £6850 odd tax free allowance.

 

OR, you take your tax free allowance through PAYE which works our very roughly at £130 a week and then pay yourself a dividend.

 

The company would pay corporation tax on the profit of £35k and then your dividend is tax free up to a certain level.

 

As Steve has said, the VAT is a completely separate thing, you charge an extra 20% ontop of your sale price and then hand it all over to the tax man every quarter minus the VAT you have paid out yourself.

[Highland Forestry]

The advice was to the OP

You know as well as i do the point I am making is, as a sole trader his personal assets would not be as well protected as if he traded as a limited company.

Unless you disagree with that wind your neck in.

 

I don't disagree with you at all - but the point i'm trying to make is that allot of people are scared in to starting a limited company for the wrong reasons.

There are allot more expenses involved in running a limited company, like having to use a chartered accountant for starters and the additional returns and subsequent late filing penalties if you don't make them on time at companies house.

 

I think from a risk management and tax point of view running a Ltd company is probably sensible if you go in to it well informed and with your eyes open..

 

And then you get the fun and games with the VAT, the PAYE and the CIS, and shortly the mandatory Workplace Pension scheme and RTI PAYE

[AardvarkTreeServices]

I don't disagree with you at all - but the point i'm trying to make is that allot of people are scared in to starting a limited company for the wrong reasons.

There are allot more expenses involved in running a limited company, like having to use a chartered accountant for starters and the additional returns and subsequent late filing penalties if you don't make them on time at companies house.

 

I think from a risk management and tax point of view running a Ltd company is probably sensible if you go in to it well informed and with your eyes open..

 

And then you get the fun and games with the VAT, the PAYE and the CIS, and shortly the mandatory Workplace Pension scheme and RTI PAYE

 

There are some extra costs in running a company but not significant. Theres no requirment to use a charterd accountant. Anyone can prep accounts but they need to be auditted once turnover is hundreds of thousands. Sole traders and ltd cos both pay penalties for late filing.

 

PAYE, CIS and mandatory pensions apply to all employers as far as I know regardless of whether you are sole trader or ltd co.

 

VAT is the same for sole trader or ltd co.

 

As has been mentioned, ltd co offers protection of directors personal assets so

long as the directors are not negligent or fraudulent.

 

Big plus for ltd co is the savings that can be made in NI which can be far

more than a couple of hundred extra to administer a ltd co:thumbup:

[likeitorlumpit]

Ok, so to get this roughly clear my (made up figures and "annualised") tax liabilities are,,,,,

 

I turnover £85k (im over the VAT threshold and need to register for VAT)

My profit on the £85k is £35k

Allowable business expenses (materials etc) £50k

 

Im paying Self assessed on the whole 35K so thats £5500

 

What is the VAT situation? do i pay Vat on the 50k? (thats £10k!) but i get that back right?

Do i pay VAT on my profit of £35k ? (thats £7k)

*****************************************

 

Now, if i go Ltd, I could pay myself 12k (all i need)

 

So im now paying income tax on 12k which is £905

Im paying corporation tax at 19% on £23k which is £4375

 

Im assuming the VAT stays the same?

 

Not quite

If you are buying in materials you then need to use the nett price. Add this to labour costs. Add on your profit then add VAT onto the lot. Bearing in mind you will have other overheads that you need to charge nett i.e. fuel/trucks/tools.

It will put up your costs as it is basically a tax on your labour costs and your profit but if you want to expand then you have little choice.

Use the few advantages of limited liability to get a bit back and start that hampster wheel up again.

[gensetsteve]

I have been tucked up by limited companies by £600 for 20 years nearly every year. The last one paid 80k off his personal mortgage and spent over 100k on bmws and servicing. After the receiver took 200k at £197 an hour there was nothing left. I asked why the director was not prosecuted I was to it 180k was not worth going to court for. So in my opinion LTD = do what you like

[likeitorlumpit]

I have been tucked up by limited companies by £600 for 20 years nearly every year. The last one paid 80k off his personal mortgage and spent over 100k on bmws and servicing. After the receiver took 200k at £197 an hour there was nothing left. I asked why the director was not prosecuted I was to it 180k was not worth going to court for. So in my opinion LTD = do what you like

 

So what you are saying is max out all your accounts then fold and it's free money. Surely there must be a way of getting directors to be responsible.

I had a company only owed us about £400 who folded laying off 20 staff but the 2 directors had the premises in their pension plan and it couldn't be touched. Worth about 4 million. I think they had drained the company to buy it. We got letters from the administrators about the situation for years whilst it was being dealt with. They must have taken the rest in administration costs.

So it seems limited has some benefits if you are that way inclined.

[Highland Forestry]

There are some extra costs in running a company but not significant. Theres no requirment to use a charterd accountant. Anyone can prep accounts but they need to be auditted once turnover is hundreds of thousands. Sole traders and ltd cos both pay penalties for late filing.

 

PAYE, CIS and mandatory pensions apply to all employers as far as I know regardless of whether you are sole trader or ltd co.

 

VAT is the same for sole trader or ltd co.

 

As has been mentioned, ltd co offers protection of directors personal assets so

long as the directors are not negligent or fraudulent.

 

Big plus for ltd co is the savings that can be made in NI which can be far

more than a couple of hundred extra to administer a ltd co:thumbup:

 

I was under the impression that you still have to use a chartered accountant even if you do your own book work, and you submit abbreviated accounts rather than audited accounts until you reach a certain turn over?

[daveindales]

I was under the impression that you still have to use a chartered accountant even if you do your own book work, and you submit abbreviated accounts rather than audited accounts until you reach a certain turn over?

 

No, You don't have to use a chartered accountant, if your a ltd company