Frequently Asked Questions about Limited Companies
We have collated a list of questions many contractors ask us for your benefit.
How much tax will I save?
Many people do save tax by being paid through a limited company as there are legitimate means of limiting your national insurance liability. Phone us on 01329 834 930 and we will be able to provide you with an illustration.
Why wouldn’t I be able to operate as a Limited Company?
The ability to operate through a limited company is oftern best suited to those working on a short term or fixed term contract and who are not caught by the IR35 rules. Essentially, these are the rules issued by HMRC which define who is an employee.
Are there lots of forms to complete when I first sign up at Red & Black?
At Red & Black we pride ourselves in taking the weight off your feet and making the process as smooth as possible for you. When you apply over the phone, we take the details from you and fill out a simple application form and then ask you to sign it and return it to us along with our terms and conditions.
Apart from registration, what else does Red & Black need from me?
We are regulated by law to perform some identity checks on you. We will need to see proof of your address and or date of birth. In addition to this we also require your P45 or P46 if you have one. These are the forms you get from your employer when you leave working.
How long does it take to process a registration?
Once we have got your registration form, a form of identity, your Red & Black account will be ready for you to use within 24 hours on receipt of your proof of identity.
How do I pay myself a dividend?
We often recommend paying a dividend in preference to drawing a salary as it can be the most tax efficient way to extract funds from your limited company. HMRC, the British tax authorities, prefer to see dividends being paid on a quarterly basis and supported by the appropriate paperwork. We can discuss how much salary to take from the business and how much dividend to take in our telephone consultation with you.
How do I know how much to VAT, Income Tax and National Insurance etc, to pay?
Red & Black do all the accounting and complete all the returns on your behalf.
How are my VAT Returns handled?
You send all details of payments and receipts to Red & Black together with the VAT return form you have received from HMRC. Red & Black then complete the form and file it when you have signed it.
What happens when I register for VAT?
Once you register, we will send you an email detailing the set up process and containing the set up forms you will require. The majority of which will simply need your signature and date, and then return to us. We will then call you shortly after sending the email, to ensure you have received it, and that you understand how you are to proceed.
How do I get my money?
You can extract cash from your company through:
- Dividend payments
- Reimbursement of expenses on a monthly basis.
It should be noted that we will not be a signatory to your bank account and so will have no control over your money.
You will be both a director and an employee of your company. You will pay yourself a monthly salary by means of a standing order from your company bank account to your personal bank account. You can claim certain expenses and offset these against your taxable profits. (We will advise you on these.) Additionally, you can get your company to pay a dividend provided there are sufficient profits after tax and you meet tax and accounting laws in this area. (We will help you with these.)
How are my PAYE Returns handled?
Each quarter of the tax year, Red & Black will send you a payslip showing you your National Insurance liabilities and Income tax. With this, you pay HMRC what you owe them accordingly. We can talk about his in greater detail during your telephone conversation with us.
Can I employ someone to work for my limited company?
Your limited company is free to employ other individuals. In order to comply with the accounting and tax rules, we ask you to send us a copy of their P45 or P46 form and their salary details so that we can get the right tax code to make the correct deductions from their pay for tax purposes.
I already have my own Limited Company. Can I move it to Red & Black?
Yes! If you already have an accountant helping you with your contractor accounting, then you will need to send us their details so that we can contact them and ask them for clearance to engage you as a client.
What happens after I am registered for VAT?
Once we have received your set up documents, together with bank account and PAYE and contract information you will be fully registered. We will then arrange a convenient time to call you for a telephone consultation. We guide you through the7 process, answer any questions or queries you may have, and ensure that you remain as tax efficient as possible.
How do I raise invoices?
We will provide you with a legally compliant invoice template for you to complete. If you chose our With Bookkeeping Service, we ask you to enter basic details on a spreadsheet and email this to us on a quarterly basis. If you choose our Without Bookkeeping service, we ask you to complete a more complete template showing expenses, receipts and to update details of your bank account.