IR35 Help and Advice

Keep up to date with the latest IR35 rules and download our guide on the intermediaries legislation, aka 'IR35'
IR35 Explained
Keeping outside of IR35
IR35 news

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Business Expenses

Find out what you can claim as business expenses with our tips and advice below.
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Director Loan

If you are the director or participator of a Limited Company and you withdraw money from the company without registering it as a dividend or salary, you have technically received the money as a director's loan. This money is not yours and belongs to the company.

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Limited Company

Skytaxis dedicated to helping contractors, Consultants, IT workers, Doctors and freelancers save time and money by handling their financial affairs. We can take care of all your paperwork and liaise with Companies House and HMRC on your behalf, and give you the expert advice you’ll need to make sure you’re not paying a penny more tax than you absolutely need to.

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Frequently Asked Questions

Most of our clients who work through a limited company with Skytax take home up to 85% of the total invoice value from the agency. Saving through an umbrella company is 60% to 65%.

Working through limited company benefits contractors by savings in National Insurance, Flat rate VAT savings and benefits of wider range of expenses.

With Umbrella company, contractors pay 13.8% Employer’s National Insurance (which are paid by the agency, if contractor is the direct employee of the agency), Umbrella company fees which ranges from 15-25 GBP per week and they can claim only limited expenses.

Almost all the accountants suggest working through Limited Company in order to keep most of the hard earned money.

Once you fill in the join us form, Skytax will register your limited company with in three working hours. All the paper work will be sent to you through an email the same day which will be required to open up a business bank account. In most of the cases, we shall get the bank manager from high street bank, to give you a call and process your bank account application on the phone the same day.

Skytax will be able to take over your existing company. All you need is to fill in the Join us form and selecting yes in the question ‘Do you already have a company’ on the Join Us Form. The take-over is simple. If you already have an accountant, we shall request all the necessary documents from them and register Skytax as your agent with HMRC.

There are different business options and each represents a different ‘package’ of tax benefits, cost, and administration effort. Most contractors choose to operate as a Limited Company. The popularity of this option stems from the fact that it tends to be the most tax-efficient and the take home income is maximum through limited company. Many of Skytax’ Clients take home up to 85% of their total income from the agency.

The administration and paper work is not more than several minutes (average 20 minutes) per month. A contractor needs to send invoices, record expenses on the expense form, pay money to HMRC and speak to the accountant once or two in a month.

The money can be taken out of the company in three forms.

1. Director’s salary. Skytax recommend a salary of £8060.00. There is no National Insurance on this amount of salary.

2. Dividends. The net profit after expenses and corporation tax can be taken out as dividends. There is no National insurance on dividends. Therefore it makes Dividends the most tax efficient way of drawing money.

3. Expenses. When the director incurs expenses on behalf of the company, he or she can take it out from the company’s account.

IR35 legislation covers people who register themselves as self-employed (usually setting themselves up as a Limited Company) but then provide services to their client on a basis which to all intents and purposes is identical to being an employee of the client company. There are various tests that can be used to determine whether a given contract is being provided on a self-employed or full-employed basis, and therefore whether the contract is ‘caught’ by IR35.

If a contract you are working on is caught by IR35, there are specific rules set out by HMRC that tell you how to determine how much tax you need to pay. HMRC also specifies that you must pay the majority of your income as salary, although there are some expenses you may deduct from this total.

Your gross salary for tax purposes is calculated as follows A

Deduct 5% allowance for expenses (5% of A) (B)

Deduct qualifying expenses and any pension contribution (C)

Deduct Employer’s NI (D-8060)*13.8/113.8) (E)

Gross Salary (D-E) (F)

Despite the introduction of the IR35 regulations, working as a Limited Company is still an effective way for most contractors to work. For many contractors, operating as a Limited Company will reduce the amount of tax they are required to pay, and also offers the following benefits:

1. Travel expenses (provided you do not work at the site for more than 24 months)

2. Pension contributions Subscriptions to organizations and publications relevant to your work Professional Indemnity Insurance

3. Meals and accommodation you consumed while travelling on business

4. Internet usage, Mobile phone requirements

5. Postage and Stationery Incidental personal expenses such as newspapers you may have bought while working away from home

6. Finally, if you work from your own home and can demonstrate that you incur some expenses specifically in the course of your work, you can claim

No. The National Minimum Wage Legislation does not apply to the Directors. Skytax recommends a director’s salary of £8060.00 which is the most tax efficient way.

The overriding rule is that to be claimed as an expense, the product or service must “wholly and exclusively” for the use of your business and have no “duality of purpose” – ie, it must be solely for the use of your business, and completely for the use of your business. („Incidental.non-business use is, however, allowed). Skytax has produced a detailed guide on the expenses. Please go to our resource section and download the expense guide for free.

Your accountant does not necessarily need to see the receipts. We in Skytaxt require all the clients to submit the expense form on monthly or quarterly basis. However it is important to remember that it is the responsibility of the director to keep receipts for all the expenses. For Mileage, a contractor should keep a log book and a mileage sheet.

Guides

This section is based on the questions being asked by our clients over several years. However if does not answer any of your question, please drop us an email at info@skytax.co.uk or fill in the request a call back section on our website and we shall get back to you as soon as possible.

Take Home Pay Calculator

Use our oh-so-simple Take Home Pay Calculator to find out in detail just how much money you’ll take home. It takes into account income tax and national insurance so you won’t have to get your calculator out!

Calculate your take home pay

Dividend Calculator

Want to find out how much tax you’ll pay on your dividends? It’s easy! Simply tap the numbers into our dividend calculator to find out.

2016-17 Dividend Tax Increase Calculator

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Free resources

We believe in education and in providing useful information that can support all of our customers. Our bank of free resources is all part of our service to you.

Knowledge Centre

Limited
Vs Umbrella

PDF (123 KB)

Limited
Vs Sole Trader

PDF (119 KB)

Expenses
Guide

PDF (159 KB)