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Contracting / Limited Company advise & tips please


Big Mark
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Now working as a contractor for a car company so rather than go under Umbrella scheme I was advised to set up a Limited company. I've VAT registered and found an accountant (sort of) but not 100% sure what I should and shouldn't be doing and what I can and can't put through as expenses etc.

 

At pressent my company invoices the recrutier for hours worked x hourly rate x VAT at 20%. (first invoices has just been paid) And I know I'll need to file VAT returns every 3 months where I think I'll need to pay back 14%.

 

But some things are a bit unclear:

 

I've heard mixed reports about claiming mileage, some have said that I can claim 45p per mile against tax for my daily mileage from registered comapny address (home) to work plus £10 a day for food. Is this true and how?

 

Someone says he puts his car mods through his ltd company as "development costs" can I do this too?

 

I'm struggling to get my head around what is a company expense and what is personal, so the miles and food for example I guess would be against my tax liabilities, car developemtnts, pc equipment, stationary, startup cost are company deuctions??

 

Like I said, any hints and tips and advice would be great.

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Mark,

 

You should be able to pay circa 12% to the tax man from what I recall. The motor mileage allowance is 48p for the first 10,000 miles per financial year and then it will drop to circa 25-28p/mile if you exceed 10k in the first FY. You only claim the mileage though and not the fuel cost. If the mileage is associated with your business then it doesn't need to be from your home address; i.e. it just needs to be in the interests of your company. Also, if you are using your home as your registered address then you could claim circa 35% of your total bills against your business. You will need an office, a place to sleep, garage space for your company vehicle etc etc

 

Unless your business is directly related to car mods then stay well away or else you'll hang yourself!!

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Technically my business is just a shell really as I'm a contractor, but my role is as a project engineer with the power train division so enginer / chassis mods could fall under this?

 

So how does mileage allowance work? How exactly do I claim it? Is it off of my tax bill or do I invoice my company it as an expense??

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Technically my business is just a shell really as I'm a contractor, but my role is as a project engineer with the power train division so enginer / chassis mods could fall under this?

 

So how does mileage allowance work? How exactly do I claim it? Is it off of my tax bill or do I invoice my company it as an expense??

 

You will claim the mileage back via the business to help offset your tax. You should chat with your accountant to make sure that you are choosing the right option.

 

If you are the owner of the business then the shell-thing does not come into it, i.e. you can claim directly for all services and costs which are associated with your business, i.e. food, accomodation, hotels, mileage, tools, ICT stuff etc etc. It all adds up. If you need something for your business then stick it through the books ;-)

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Thanks mate. I've only had one chat with the accountant so far and that was at the very start, probably need to see him soon as guessing I'll have to file a self assessment for this financial year.

 

Get the relationship going with your guy and he'll advise you well Mark. It's the small things that add up so make sure you chat with him for an hour to establish your rights.

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Pretty much covered the question(s) but I would recommend you get a decent accountant who specialises in contract hire & knows the in's & outs. Claiming mods as under development can be done but you'll be in murky waters with the tax man! How long is the contract? Beware of IR35.

 

Time for a nice new expensive laptop to kick start your business & start up costs ;)

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As Abz mentions, be VERY careful with IR35, this can really catch some people out. I worked for 12 years as a limited company contractor so know quite a lot of the in's and out's. I'll have a re-read tomorrow (when less tired) and can hopefully add some input to the responses already provided.

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I've been warned about IR35. Accountant said to find friends with Limited companies and for us to do work for each other so that it looks like I'm not working for the one contract.

 

My contract runs until the end of the next financial year and will probably keep on being renewed as 70-75% of the staff are contractors apparently.

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Yes take heed of what others have said regarding IR35. I was consulting for my present employer for a good few years before I went PAYE with them. They themselves were happy to continue but the auditors KPMG flagged it 2 years in a row so we had to come to an agreement and went "on the books" so to speak. Another colleague stuck to his guns and got into all sorts of hassle with HMRC over it, to the degree they almost made it a mission to cause him grief. But I am talking 10 years ago so maybe things are not so tight now, at that time IR35 had not long been in force and I think everyone was running scared.

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I've got a mate that's been contracting for 15+ years, I'll have to pin him down and see how he's avoided IR35

 

There are loads of loopholes and always the chance that it will not get picked up. But in my case the contravention had been identified by the auditors and once that has happened both the company and myself wouldn't have had a leg to stand on if HMRC got involved.

 

We have a Security guy who has been working for us (contracting) for over 16 years with no issues, but apparently there are some exceptions to the IR35 thing when it comes to close protection and Security.

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Keep in mind that IR35 is VERY different from the 24 month rule (RE expenses). They came in at the same time and many get them confused...

http://www.contractorcalculator.co.uk/contractor_travel_expenses_tax_24_month_rule.aspx

 

Missus and I have been contracting in IT for about 7 years now. We are both very happy with it, but has taken awhile to become happy with working with a LTD and a couple of different accountants, some good and some bad. PM me if you would like specifics ;)

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Mark,

 

The motor mileage allowance is 48p for the first 10,000 miles per financial year and then it will drop to circa 25-28p/mile if you exceed 10k in the first FY. You only claim the mileage though and not the fuel cost. If the mileage is associated with your business then it doesn't need to be from your home address; i.e. it just needs to be in the interests of your company.

 

Spoke to my accountant today and got a LONG email of info, so things are a bit clearer.

 

Regarding claiming mileage his exact words were "Mileage allowances can be claimed for recorded BUSINESS mileage. This provides a recoverable rate of £.45 per BUSINESS mile for the firsyt 10,000 BUSINESS miles and £0.25 per BUSINESS miles in excess of 10,000

 

It is important to note that BUSINESS miles do not include regular travel (commute) from your residence to your principal place of business (HOME TO WORK) but will allow for mileage undertaken from work to another site/location or when travelling directly to/from home to another site/location."

 

So as I only go to the same site to work each day I guess I can't claim a penny. Annoying as if I went under an umbrella scheme I was told I could claim for my mileage from home/business address to work each day.

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Spoke to my accountant today and got a LONG email of info, so things are a bit clearer.

 

Regarding claiming mileage his exact words were "Mileage allowances can be claimed for recorded BUSINESS mileage. This provides a recoverable rate of £.45 per BUSINESS mile for the firsyt 10,000 BUSINESS miles and £0.25 per BUSINESS miles in excess of 10,000

 

It is important to note that BUSINESS miles do not include regular travel (commute) from your residence to your principal place of business (HOME TO WORK) but will allow for mileage undertaken from work to another site/location or when travelling directly to/from home to another site/location."

 

So as I only go to the same site to work each day I guess I can't claim a penny. Annoying as if I went under an umbrella scheme I was told I could claim for my mileage from home/business address to work each day.

 

Now that is where it gets interesting, because technically your place of business is where your LTD is registered (which is more than likely your home address), therefore your travel to your contracted client is claimable. However, that is where the 24 month or 40% rule comes into play.

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As my contract runs for around 13 months then I'm right in saying that under the 24 month 40% rule that I can claim the mileage, works out at 110 miles per day so will be a nice earner?

 

Sounds like it (but would still confirm with your chosen accountants)... the 24 month rule is about what happens after 24 months.

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