Ltd & VAT

[PhilBeech]

If you have personal assets ie a house you would be crazy not to be Ltd.

You will be paying less tax and if for example you were sued for negligence or a large contractor went bust on you at least you will get to keep your house,you may think it could never happen to you but it happens every day,to some good people, cover your self go ltd.

 

That's just not accurate I'm afraid. And it hasn't been for some years.

Checkt the small print. On everything. Everywhere!

[Pumpy]

There's also a limited liability partnership, so liability shouldn't really be a consideration for going Ltd Co.

 

I think the benefits of Ltd. Co. status are more for multiple owners, to do with legal requirements of the directors, protection in-case it all goes pear shaped between partners, e.g. if one director decided to sell assets/empty the bank account and do a runner, you'd have legal protection as it would be theft from a Ltd. Co. but as a partnership it would be civil law and a long legal chase.

[Paul Jenks]

10% Tax and zero NI.

 

Dividends can only be paid from profits which is a problem if you run the business at a 'loss' for tax purposes.

 

They are paid to shareholders, not just Directors.

 

Whichever way you do things the Government wins:thumbdown:

 

HTH

 

Steve.

 

Dividends are paid from the taxable profits of a company. When a company declares a profit on their annual return, this is taxed at current corporation tax rates. Currently 19% for small enterprises. The directors then hold and AGM to decide how the profits are to be spent. I.e. re-invest, working capital, dividends, pay down debts. If a dividend is to be declared the shareholder/s are given the amount declared and no further tax is payable. Therefore the overall tax burden to the owner is less than if they either took drawings as a sole trader or a decent living wage as a director.

As directors are employees the company pays a NI contribution for the privilage of employing them regardless of whether they are paid a wage. If a dividend takes a persons earnings over the current 45% PAYE taxable earnings threshold, the recipient is likely to be taxed on those earnings above the threshold regardless of where they came from and whether corporation tax has been paid on the money.

 

If a company is run deliberately to record a loss they are breaking the law. Directors have a fiduciary duty to ensure their companies are run to make profit. One of the fundamantal reasons is to ensure that any creditors of the company, and this includes staff, are always remunerated.

[blackjack]

That's just not accurate I'm afraid. And it hasn't been for some years.

Checkt the small print. On everything. Everywhere!

 

Go on then enlighten me

[Highland Forestry]

If you have personal assets ie a house you would be crazy not to be Ltd.

You will be paying less tax and if for example you were sued for negligence or a large contractor went bust on you at least you will get to keep your house,you may think it could never happen to you but it happens every day,to some good people, cover your self go ltd.

 

If you are sued for negligence, one would hope that as a responsible company director, you would have the adequate insurance in place to be able to defend it.

You would run the risk of loosing your house whether you were a limited company or not..

 

Being a Ltd company is not a bulletproof shield, in fact it's a very watered down shield these days and the directors of the company will always be chased if it goes pop - that means any of your personal assets as well.

 

If you don't need to go limited, then I would say why bother.

 

The limited liability that a Ltd company affords is far more useful in terms contractual law, employers liability and managing risk operationally.

[blackjack]

For example, If an employee of the company carrying out company business caused the company to be sued and the company had insurance but the insurer did not pay out disputing the claim etc ,the company would be found liable ,the director/s may well decide to fold the company probably walk away, maybe start another company,if however the same scenario involved a soul trader he would be an easy target and likely stripped of his personal assets.

In reality this happens ,if you don't try to protect your personal assets when starting a business you could well find out the hard way.

Fact of the matter is you have more protection as a Ltd Company than as a soul trader no matter what anyone on here tells you.

If I were you I would be join the FSB for some impartial advice.

[Highland Forestry]

For example, If an employee of the company carrying out company business caused the company to be sued and the company had insurance but the insurer did not pay out disputing the claim etc ,the company would be found liable ,the director/s may well decide to fold the company probably walk away, maybe start another company,if however the same scenario involved a soul trader he would be an easy target and likely stripped of his personal assets.

In reality this happens ,if you don't try to protect your personal assets when starting a business you could well find out the hard way.

Fact of the matter is you have more protection as a Ltd Company than as a soul trader no matter what anyone on here tells you.

If I were you I would be join the FSB for some impartial advice.

 

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.

[Fencing]

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?

[Steve Bullman]

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?

 

you pay vat on the 85k @ 20%. But its not your money anyway in the first place...you are just collecting an additional 20% on top of your 85k from the customer then paying it to the vat man, after deducting any vat that you have paid out yourself

[Steve Bullman]

So your income would actually have been £104k with the vat, but thats still shown as 85k on your tax return