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FAQ

At P.A.S.S., we've done our best to create a Web site that anticipates and satisfies our customers' needs. With that goal in mind, we've compiled a list of frequently asked questions. If you do not find an answer to your question here, contact us.

No liability to accepted or implied for your use of any information given here and you should always take specialist advise before implementing any actions in respect of your business.

Q. Should I remain as a sole trader or limited?

A. Provided your level of profitibilty is adequate it can be more tax efficient to set up as a limited company rather than a sole trader or partnership. However there are additional costs involved in doing so usually in maintaining Company Secretarial records, running a Payroll and preparing Statutory Accounts and Corporation Tax Returns. These costs can be unwards of £1000 per annum. Also there are legal demands placed on Directors. At PASS we can talk most of these hassles away from you.

Q. I have been told that I cannot dip into my companies money whenever I want. Why is this as it is my money?

A. It is NOT your money. It is the Companies money and you as director are the legal custodian of those funds and must look after them in the interests of Shareholders in accordance with the companies Memorandum and Articles of Association, the Companies Act and applicable tax law. The company is a separate legal person and its finances should be kept totally separate from those of directors. Money can only be removed from the company to pay legitimate business expenses, salaries and dividends. The tax consequences of salaries and dividends are different and if not dealt with correctly the penalties can be severe. At PASS-Accounting we can advise on the tax consequences of various actions and maintain the correct records of salaries and dividends for you.

If you are not able to be disciplined and keep your personal finances completely separate from your company and not dip into the companies coffers as and when you require cash then you should not trade as a limited company.

Q. What will it cost me to form a company?

A. You could form it yourself for about £50.00. See links for a number of on-line company formation agents. If you do this, however, you will be responsible for filing a variety of forms with Companies House and the Inland Revenue, preparing and issuing Share Certificates, etc. For a small additional fee PASS-Accounting will take all this hassle away from you and retain your records for as long as we continue to Act.

Q. I would like to form a bespoke company. Can you tell me why I should do this and what it will cost?

A. You will need to form a bespoke company whenever a standard generic form of Memorandum and Articles does not suit your needs. This may happen if, for example you need to pay different levels of dividend to shareholders and require 2 or more classes of shares or if you need to place restrictions on the ownership and transfer of shares. Costs of forming bespoke companies tend to be higher. We have tailored bespoke Memorandum and Artiles for a Lessee Management Company and these cost in the region of £500 to £1000 depending on how many changes are necessary. More complex changes to Articles can cost in excess of £1000.

Q. I am a Contractor working in the Construction Industry. Should I deduct tax on my sub contractors?

A. The Inland Revenue will answer a lot of your most basic questions and give detailed advice on the proceedures on their web site, http://www.hmrc.gov.uk/contractors/ and you should read through this before doing anything as the penalties for non-compliance can be severe. It will, however, be no surprise to find that the Inland Revenues attitude is geared to providing the maximim possible tax revenue and making life as simple as possible for themselves but everything is not always as black and white as it may seem. If you want to be on the safe side then it will always be best to treat your sub contractor as an employee and deduct PAYE and NI. However, your sub-contractor may not want to do this and the hit of both Employees and Employers NI may make this quite an expensive option for you. Just because a sub contractor does not want to do this and claims he is self employed does not mean you should go down this line as if the Inland Revenue decides that a person on a self employed contract is an employee and should have had tax and NI deducted from their wages, it could mean the employer having to pay the back tax, employers and employees N.I. for the past 6 years and will charge penalties and interest thereon. It will probably not be possible for you to recover this from your employees and a large assessment could put you out of business.

To protect yourself you should always take specialist advice in this area and ensure you have Contracts of Self Employment in place and that the Terms and Conditions of these contracts are adhered to and that they are reviewed regularly to ensure the conditions still apply.

Q. I have heard that section 660 is a problem. What does this mean?

A. A recent case (Artic Systems) found after appeal in favour of the taxpayer. Provided when you set up the company before you have commenced trading with both yourself and your spouse as shareholders there should currently not be a problem in paying dividends to your spouse. This, of course, enables you to use both your basic rate tax bands and save a significant amount of tax. The Inland Revenue may appeal this case further so it is possible the situation may change but for the time being you should not experience any problems.