Accounting for Contractors

Accountancy services for contractors

Limited company set up and advice

Once you have decided that contracting is the right long term option, operating your contract business via a limited company is the best option for most contractors. It gives you control over your business finances and is more advantageous for tax purposes. Before you begin trading as a limited company you will need to:

• Form your limited company. To set up a limited company it must first be “incorporated” by registering it with Companies House. We can help you decide on an appropriate name for your company, register it with Companies House as well as prepare and send your annual accounts to them.
• Open a dedicated business bank account in the name of your company. We’ll help you decide which business account is best for your company. Banks and building societies usually charge fees for business banking, we can provide independent advice to ensure you get the best deal.
• Decide on the best VAT position. We can advise on whether to join the flat rate VAT scheme. This is a scheme set up by HMRC to make it easier for contractors to charge and collect VAT. Depending on your industry it may be advantageous for you to join because you will charge your clients at the flat rate of 20% and may pay at a lower rate, for example, IT and software consultants pay 14.5% giving them a net benefit of 5.5%. Check the rates for your industry here.
  
• Register for PAYE – most limited company contractors will want to pay themselves small salaries taxed via the PAYE system with the bulk of income being drawn from dividends. However, as an employee of the company you need to account for PAYE and National Insurance due to HMRC each month.
  
• Set up Professional Indemnity Insurance – this is vital for contractors that offer advice or professional services to their clients. It is designed to cover any potential losses caused by faulty advice made to the client.
• Invoice Clients and Record Expenses – this is where it gets exciting, getting paid for the work that you do! In order to make sure you get paid everything that is due you need to keep accurate records of invoices charged to your clients and the expenses that you claim. We use these to prepare your annual accounts and VAT returns.

IR35 advice

IR35 legislation was brought in by the government to prevent employers from using limited company contractors in roles that were essentially the same as full time positions. Both employers and contractors would benefit by avoiding having to pay income taxes and national insurance.

As a contractor, understanding whether you fall inside or outside IR35 can be complicated. We will help make sure you stay on the right side of the legislation. This can mean the difference between paying significantly more tax as a ‘disguised employee’ or realising the tax efficiency benefits of operating as a limited company.

Contractor accounting and tax advice

Our team of contractor specialists will save you time so that you can focus on the work that you do best. Our service includes:

• Monthly payroll and Real Time Information (RTI) submissions
• Management of invoices and expenses using Xero
• Tax efficient advice on how much to pay yourself each month
• Quarterly VAT returns, annual accounts and corporation tax return
• Self Assessment tax returns

Construction Industry Scheme (CIS)

Anyone who uses subcontractors for construction work within the property sector must register as a contractor with HMRC. As a contractor, it is your responsibility to collect taxes from your subcontractors and ensure that the right amount is paid to HMRC. You are also required to complete monthly returns showing which subcontractors have worked for you during the month and any payments you have made. All of which can add a considerable burden to your business. We can help with :

• CIS registration
• Monthly CIS returns
• Annual CIS reporting
• CIS disputes and penalties
• Rebates relating to CIS