tax planning for the newly self employed: payroll/limited company/partnership

Email out: 08032011
‘Thank you for your e-mail with additional information.’
My pleasure.

Limited companies

‘1) Is it secure enough to use your private home address as the registered address?’
Absolutely. If you request the services of an accountant/solicitor to be your registered office then normally there is a charge.
If you want I can be your registered office but let me explain.
The registered office receives all sales literature some of which can be relevant to your company.
You will also receive letters from HMRC (Her Majesty Revenue and Customs) and Companies House. For those clients where I do not act as agent I ask that they scan these documents to me and I will deal with them. Accountants have these documents coming into their offices all the time.
I act for several limited companies. For some of these I act as the registered office and for others I do not. As I said yesterday I always work with my clients and try to fit in with their needs. It is right that you show concern as it means that you will manage and control your company perfectly. In my experience those individuals who worry about these things get them right.
HM Revenue and Customs
In due course a form is received asking you to enter the accounting year end of the company and the personal tax /NIC details of the directors together with the company year end. I complete this task for the limited company and post out this form to HMRC.
Twice a year HMRC will write to you once reminding you to pay any corporation tax on the profits of the company (nine months after the financial year end of the company) and once to remind you that accounts are due (twelve months after the year end of the company.) Called pay and file: pay first and file second.
Companies House
One a year to inform you that the annual return of the company is due (being the anniversary of the company formation) and once a year for the annual filing of the accounts.
If you elect for a company authorisation code from Companies House then they will only write to you if these documents are not received in time.


All accountants make written notes about these time limits on their client files and so will be aware of these time limits anyway.

‘2) My wife is not going to work in the company once we start up the business (maybe sometimes for help though, ), in this case, do you think it is still good idea for her to be a director or she can be just a shareholder?’

A director is a paid employee of the company. A payroll can be set up for the limited company with you as the only employee. Once the company becomes successful she can then be entered onto the payroll. Sounds good to me.
Of course she can be a shareholder without being a director and so will take her reward as dividends. Please note though, that this reward is not tax deductible in the limited company accounts and so there is an implied cost of 21% to the company. It depends on her individual work arrangements. If she has other earned income (from employment elsewhere) then it is not a good idea for her to be on the payroll. If however, she has no other income then she can be a paid employee without being a director and then made a director later on; or be a paid director from the beginning.

Partnership
Limited companies are hassle, expensive and a cheaper and better way for your business could be a simple partnership with you each having 50% of the share of the profits. Could work and will save you money and you should consider this vehicle. Can discuss further at our meeting.





David Barry and Company Ltd
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