Setting up SIMPLE ltd company. DIY?

[MrMarmite]

Hi

Sorry for long first post, though have been reading here awhile

I currently run a parternship with my wife. We provide a "service" and hold no stock/items or debt. We have no capital investment and work "from home". Simply, we provide a service, get paid, and then annually do our company and tax returns.

We only work, say, 2-6 months a year, (by choice) and total income, £10-20k. Minus expenses etc.

Because I like it, and its simple, I do all our accounting/tax etc.

Certain new clients will only work with us if we are a "limited" company, so we may need change to become a ltd company.

All the research I've come across seems to over complicate things and cater for more complex companies than ours, and thus I am drowning in information that isn't applicable.

The business is, for example, us providing advice. Hence general expenses only, no working capital required, no fixed assets, no good will, nothing worth worrying about. Just me and the missus.

What I think I want is:-
1- Convert to a ltd company (with zero balance sheet, assets etc)
2- 2x directors, me and the wife, 50/50.
3- Draw "salary" below NI/PAYE threshholds every month
4- Pay corporation tax and pay divies (if any) at the end of the year.

Problems I have:-
- Inome isn't consistant throughout the year, may be £5k for 2x months, then £0 for 4x months. Today, we draw the 5k and put into savings and deal with tax/NI and the end of the year. With PAYE this may not be possible? As if first 4 months are £0 then nothing to pay us, then £5k for 2x months may be at end of year and can't then split across PAYE....? (Can't have running cash as (a) not enough, and (b) if we over pay PAYE we may not get 2x months of £5k....!)

- I love to DIY - but is it worth getting a company to set up the ltd co for us?

- Can the PAYE be done DIY? (Remember how simple our business is, its only husband/wife and never any employees)

- We do keep accurate and detailed accounts (MS Office Accounting). Is it simple to sumbit these to Company House?

- Assuming I am currently "myco", can I simply create "myco ltd" (assumung name isn't taken, which it isn't), then "close" "myco", rename bank account, and start "myco ltd" with 0 books. (of course profit/cash in "myco" would be declared in partnership tax return)

- Finally, I have no idea of any costs of running a ltd co! A Partership is "0". What is the setup costs? Annual costs etc? Again, for a simple company.

Pointers welcome - shame I can't just lie and say "I am myco ltd, just pay bank account ......"


Thanks!

 

[Fairway]

Hi Don't know a huge amount about limited companies but in terms of setting it up, just go to companies house. I think it is about £80 and very simple to do not worth paying someone else.

 

[MrMarmite]

Hi Don't know a huge amount about limited companies but in terms of setting it up, just go to companies house. I think it is about £80 and very simple to do not worth paying someone else.

I've also seen some "online" companies doing it for similar/same, but not sure I would trust any of them yet

Setting up costs are one thing, its the main running costs/responsiblities I guess I'm more blind to.

(edit: Maybe thread title should be "Setting up and Running a SIMPLE ltd company. Costs? DIY?" but can't edit it. Doh)

 

[Scalloway]

Doing DIY for PAYE and bookkeeping is simple, filing the necessary returns for HMRC and Companies House are not.

 

[MrMarmite]

Doing DIY for PAYE and bookkeeping is simple, filing the necessary returns for HMRC and Companies House are not.

Why are they complicated?

Assuming a simple business, with accurate accounts (income and expenses already accounted for), what makes the returns complicated? What do HMRC ask for that isn't a straight forward answer? Any sample forms for SIMPLE companies?

(I happily accept some companies, with fixed assets, employees, capital costs, cars etc may well be complicated, but a company with 2 equal directors, income of £20k and expenses of £5k pa ....?)

 

[Scalloway]

The cheapest way to file with HMRC and Companies House is to use the HMRC form CT600 which you download. Using this ensures they both get their information in the approriate format, otherwise you need to buy software.

If you look for CT600 on this forum you will find umpteen posts from people who cannot figure how to make it work. I use it now and again and I will admit, as a qualified accountant, I find it a bit baffling at times.

You can find sample ltd company accounts here

http://www.vtsoftware.co.uk/final_accounts/small.pdf

 

[ITsoldUK]

As a business owner not an accountant I know you can set up a litd very easily and I have gone down this route in the past.

It really does depend on you and your business.

For me and my line it really is overkill. Huge amounts of red tape and paperwork mountains IMHO.

It was just too much for my little old venture and I could not warrant the time spent managing this side against drumming up new business. Plus the expense of an CA to go through my books which in effect is just a three line return due to the simplicity of my business.

But that is just me...I am sure it pays for many to go down this route.

 

[MrMarmite]

Cheers. Good advice.

 

[SBlundell]

Your general approach is correct.

And as others have highlighted, setting up the company is very straight forwards. However, it is the annual compliance costs that soon mount up. There is a couple of online accountants on here & generally even they will be annual Ltd co costs of £400+.

Theoritically the Companies House & CT600 filings can be done yourself, but there is a lot of work involved & many pitfalls. I don't know of MS Office Accounting, but I doubt it would do fully compliant statutory accounts.

Of course, I would say this because I'm an accountant .

From what you've said I would imagine a Ltd co is far more complicated than you need, other than these potential customer issues. Have you tried discussing it with them & trying to find out why they particularly want Ltd & seeing if you can find an alternative?

 

[10032012]

It might be a good thing. You need an accountant - some are rip off merchants others will save you more money than you pay them.

Forming a limited company is relatively simple. 50/50 shareholding and 2 directors... all fine.

I think you need to pay yourself £634 per month to avoid paying tax and NI. You will still get NI stamp however but simply not pay in.

*Don't take my word for it, ask an accountant!*

You wont need to pay corporation tax so soon but make sure you are registered with the HMRC for it. Dividends don't have to be paid at end of the year - you can spread them monthly or quarterly. This will be better than taking salary due to tax reasons.

Costs for limited company is annual return fee and accountancy costs (i.e. for accounts etc.) mostly.

 

[SBlundell]

I think you need to pay yourself £634 per month to avoid paying tax and NI. You will still get NI stamp however but simply not pay in.

Actually £107 p/week (£5,564 p/a or £464 p/month) to pay no NI, no PAYE (assuming standard coding) & still entitlement of contribution based benefits.

However, lowest NI rate is employers at £144 p/week or £7,488 p/a. So usually would recommend about £7,500 up to £8,105* (personal allowance) which would leave you with still no tax on your salary & a very small amount of NI contributions, which are theoritically easier to trace than £nil contributions + entitlement (depending on your faith in Government IT systems ).

Obviously there are other factors that may affect it - but right ball park .

* - Employee NI starts at £146 p/week, or £7,592 so usually a touch under this

 

[MyAccountantOnline]

I freely admit to a bias opinion - yes you can muddle through and possibly prepare some accounts and a tax return and save yourself accountancy fees but -

1. Is the hassle really worth it - would you not be better using that time on your business to generate income?

2. Can you be certain you are taking advantage of all relevant tax savings?

I've been an accountant for a very long time now and hand on heart don't think I've yet seen a set of company accounts and a tax return prepared by a non-accountant which have been entirely correct and where they haven't missed out on some tax savings.

Accountants don't need to be expensive.

As for forming a company you can DIY for £18 here and may find online agents offering a basic formation for even less (some free).

 

[SetupaCompany]

As others have said, the actual formation of the company is very easy. We are a company formation agent and our form will literally take you 4 minutes to complete, all that is needed is the registered company address and details of the directors, shareholders and secretary if you are having one.

What is more complex is the annual requirements for a trading Limited company and this is where I would certainly recommend involving an accountant. For one thing it will make the process so much simpler and leave you free to concentrate on doing what you do best - running your business.

The biggest reason though is that a good accountant will help ensure you are operating your business and the way you withdraw funds in the most tax efficient way and that you are getting all of the tax relief you are entitled to. This would become particularly important if your business grows and you start to earn more cash from it but even now you may see some benefits.

 

[qul]

it costs £18 to setup the company, and its quite straightforward, at https://ewf.companieshouse.gov.uk/93ffb56ec06818a1ca84422b942fe6b1/runpage?page=welcome

you and wife could have 1 share each of £1. annual return at companies house is £14.

during the year its easiest use a loan to the directors, whereby you take cash out of the business with the intention of paying it back. you then use dividends/salary near the end of the year to "repay" the loan. but need to be a bit careful with the timing and board minutes/payroll paperwork to get the dividends/salary declared in the right periods etc.

it is a bit hassle to prepare statutory accounts and to complete corporation tax returns correctly, although HMRC do have a number of guides that may help.

it may be worth getting some quotes (eg from users of this very forum!) as it could be cheaper than you think, and would take the hassle out of dealing with the red tape.

 

[Moneyman]

speaking as someone who has been at the start of over 20 companies.
pay the guys at a company formation company the £60-£100 to do it all. mess it up and one day it might come back and bite you. Get one of the ones where you get the physical books and the share certs in a book etc. You will never regret it.

I was dealing with a company once where something wasnt correctly lodged 5 years back and the whole sale got stuck in a jam. I think something strange like the directors technically were made directors before the company got formed officially. wrong date on a form or something. The director the appointed other directors and then died. you just dont want to know the hassle it took 5 years later on a company with 25 employees.
JUST PAY THE MONEY.

on the dividend PAYE stuff. get an accountant as it is one of those things that depends on so many other personal factors.