 |
ClearSky Accounting Specialist contractor accounting. No nonsense fixed fee service from £95/month. Find out more. |
Frequently Asked Questions
This section contains answers to many of the questions often asked by contractors (both new and veterans). Alongside the concise answers (provided by our team or appropriate 'experts'), we also provide links to further sources of information. Please feel free to email us your questions.
Directories - Leading umbrella companies and contractor accountants.
Latest Contractor Questions
Can I gift a share in my company to my wife? Are there any tax consequences?
The issue of splitting limited company shares with a spouse or partner has been the subject of much confusion and debate over the past few years.
(Feb 1, 2012)
If I want to close down my limited company, can I extract any remaining profits tax efficiently?
If you are considering closing down the company you have used for contracting, we look at how any remaining profits can be extracted in a tax efficient way.
(Jan 27, 2012)
What salary should I pay myself as a limited company contractor?
One of the most commonly asked questions asked by limited company contractors is what salary should you pay yourself?
(Nov 25, 2011)
How is net take home pay calculated for umbrella company employees?
One of the most frequently asked questions by umbrella company contractors is how much income they will receive after all deductions have been made?
(Nov 3, 2011)
If the number of status enquiries is so low, why bother taking out IR35 protection?
Last month, HMRC published data which showed that there had been a startling drop in IR35 status enquiries in recent years. With this in mind, why should contractors bother taking out contract reviews and IR35 insurance protection?
(Oct 10, 2011)
Umbrella companies - what are special expenses dispensations?
If my umbrella company has a special dispensation for expenses, does this mean they can save me tax?
(Oct 10, 2011)
Contractor travel expenses - what is the 24 month rule?
An explanation of the 24 month rule with respect to contractor travel and subsistence expense claims.
(Aug 1, 2011)
Can I download an IR35 contract from the web?
Why compliance with IR35 involves a lot more preparation than simply downloading an IR35 contract from the internet.
(Jul 30, 2011)
How does a PAYE umbrella scheme operate in practice?
If you join an PAYE umbrella company, how does a typical scheme operate?
(Jul 23, 2011)
Income protection insurance - should my limited company pay the premiums?
What is income protection insurance?, and would a contractor be better off taking out a policy via their own limited company, or on an individual basis?
(Jul 7, 2011)
Do I need professional indemnity insurance cover?
Do you need to take out contractor PI insurance policy?, and how to make sure you are adequately covered.
(Jun 29, 2011)
Why don't IT contractors set up as sole traders?
The most popular way to start up in business in the UK is as a sole trader. So why do IT contractors avoid this route, and work via their own limited companies or via an umbrella company scheme?
(Jun 23, 2011)
How do I move from an umbrella company to my own limited company?
David Houston explains why switching between an umbrella and a limited company should be a fairly straightforward process,
(Jun 8, 2011)
How are limited company dividends taxed?
Limited company contractors, who fall outside IR35, draw income in the form of salary and dividends. How do you work out your tax liability on the dividends you declare?
(May 6, 2011)
Does my limited company have to appoint a secretary?
From April 2008, since the introduction of an initial wave of Companies Act 2006 legislation, limited companies no longer have to appoint a company secretary.
(Apr 18, 2011)
Umbrella company charges - how much should you pay in commission?
How do umbrella schemes charge for their services?, and are there any things you should look out for when comparing the fees charged by different umbrella companies?
(Feb 23, 2011)
What is a PAYE umbrella company?
What is a PAYE umbrella company?, how do they operate?, and further information on selecting the right scheme for your individual needs.
(Jan 24, 2011)
Does my contractor limited company name matter?
When setting up as a limited company contractor, what should you look out for when choosing a company name?
(Dec 14, 2010)
Do I need to register my ltd company for VAT?
At what stage do limited company contractors have to register for VAT?
(Nov 30, 2010)
Why don't IT contractors operate as sole traders?
A brief overview of sole trading, and given how easy it is to set up, why don't IT contractors operate as sole traders?
(Nov 1, 2010)
Can an umbrella company be 'IR35 compliant', or 'HMRC approved'?
Umbrella companies use a variety of slogans to advertise their services, and to differentiate themselves in a very competitive market. But do any of these claims mean anything?
(Sep 22, 2010)
Do I need to inform HMRC if I pay my wife a small salary via my company?
A reader asks if he needs to inform the authorities if he wants to pay his wife a small salary for 'administrative' work done for his company.
(Sep 14, 2010)
I haven't received a VAT registration number yet. Can I still include VAT on my invoices?
How contractors should account for VAT on their invoices before a VAT registration number has been issued.
(Sep 10, 2010)
Should I still bother with IR35 contract reviews if IR35 is going to be abolished?
Why contractors should not be complacent over IR35, despite the current OTS review.
(Sep 6, 2010)
VAT return errors - what should contractors do?
What should contractors do if they have made an error on a previously submitted VAT return?
(Aug 23, 2010)
Are IT contractors better off using the Flat Rate VAT scheme?
Are limited company contractors generally better off registering for the Flat Rate VAT scheme, or the standard VAT scheme?
(Aug 16, 2010)
How much do contractor accountants cost?
How much do contractor accountants charge, and what other factors you should consider before signing up?
(Jun 11, 2010)
Should contractors use the HMRC contract review service?
Why contractors are advised against using HMRC's own IR35 contract review service.
(Jun 2, 2010)
What factors would trigger an IR35 investigation by HMRC?
We look at what factors would typically trigger an HMRC investigation into a contractor's tax affairs.
(May 27, 2010)
How much does it cost to set up a company?
There are various ways contractors can set up their own limited companies; via an accountant (a popular way), via a company formations agent, or direct with Companies House.
(May 19, 2010)
How do you register your limited company for corporation tax?
If you have set up a limited company for your contracting business, how do you register to pay corporation tax?
(May 7, 2010)
What is BN66 and how does it affect contractors?
How does BN66 prevent double taxation treaty abuse, and how does it affect contractors who have used offshore tax avoidance schemes in the past?
(Apr 12, 2010)
What expenses can I claim via my limited company?
The expenses you are allowed to claim through your limited company are dependent on the IR35 status of your contract.
(Mar 29, 2010)
What payment options do umbrella companies provide?
What umbrella payment methods do umbrella schemes offer their clients? - BACS, Faster Payments and CHAPS
(Mar 15, 2010)
How do you authorise your contractor accountant to act on your behalf with HMRC?
When you sign up to a new contractor accountant, one of the first things you'll be asked to do is to authorise the accountant to act on your behalf with HMRC.
(Mar 9, 2010)
Can I reclaim expenses from before I formed by contractor limited company?
Can contractors claim for any expenses incurred before they formed their limited companies?
(Feb 26, 2010)
Do I need to submit my VAT returns online?
HMRC have asked us to remind our visitors that VAT will shortly be moving online, so paper based filing will soon become a thing of the past.
(Feb 9, 2010)
Can some contractor umbrella companies save me more tax than others?
Some umbrella companies appear to claim they can save contractors more tax than others. Why such claims should be treated with caution.
(Jan 19, 2010)
What are the benefits of using an umbrella company?
Most contractors operate via an umbrella or limited company. So what are the pros and cons of contracting via an umbrella company?
(Jan 4, 2010)
What is a Managed Service Company?
How to identify a Managed Service Company provider, and ensure that you are not caught by the MSC rules.
(Aug 18, 2009)
How much money can I distribute in dividends?
If you are a limited company contractor, how do you extract dividend income from your company?
(Aug 10, 2009)
When are my limited company annual accounts due?
If you have set up a new limited company for your contracting business, when do you have to submit your company accounts to Companies House?
(Aug 5, 2009)
What would trigger an IR35 investigation?
What events might lead to an 'IR35 investigation', and how should IT contractors protect themselves against such an eventuality.
(Jul 29, 2009)
What hourly / daily contract rate should I charge?
How to work out what hourly rate you need to achieve in order to secure your target annual gross income.
(Jul 29, 2009)
How do I set up a contractor limited company?
The steps you must follow if you want to contract via your own limited company.
(Jul 28, 2009)
