A PSC is a limited company which is becoming more popular among contractors because it’s often the most tax efficient way to work and limits your personal liabilities.
Working through a PSC does carry additional legal and financial responsibilities.
If you are thinking about setting up a PSC, in order to assess the financial implications, you’ll need to consider whether you are subject to IR35 legislation for each piece of work you undertake. We offer unlimited free IR35 reviews with one of our accountants given that your status under this piece of legislation can change frequently.
Once you know whether a limited company is a viable option for you, we can take care of the formation of your company, guiding you every step of the way.
To register your company with Companies House you will need to have decided upon a unique company name, company directors (usually yourself), share allocation and a registered office address. This can be your home address or another address of your choosing. Registration is relatively quick and simple once these administrative tasks are complete.
Once registered, you will be issued with a Certificate of Incorporation, Memorandum & Articles (which govern the running of the company and specify directors and shareholders) as well as Share certificates. These documents can be used to open a business bank account.
- Paying yourself
Most limited company contractors pay themselves a mixture of salary and dividend in order to enjoy the best rate of take-home pay. This usually means taking a low monthly salary followed by dividends based on profits after tax has been deducted. A low salary reduces National Insurance contributions though the benefit of this should be weighed up against the fact that your salary is deducted from turnover before Corporation Tax is calculated. We will help you make the right choice.
- Business expenses
Expenses associated with the running of your limited company, such as public liability insurance and equipment you may need to do fulfil your contract, can be offset against corporation tax. HMRC operate strict rules on what constitutes a legitimate business expense, which must be ‘wholly, exclusively and necessarily’ associated with business purposes.
- Filing records
It’s important you keep accurate financial records throughout the year, including a record of income and expenditure. You’ll need to retain copies of invoices sent and received, receipts and bank statements as well as details of any liabilities.
You will need to file either Abbreviated Annual Accounts (balance sheet only) or full Annual Accounts to Companies House within 9 months of the company’s year end. You will also need to file a set of full annual accounts to HMRC within 12 months of the company’s year end. A full set of accounts will include a Directors’ report, an accountant’s report, profit & loss account and a balance sheet.
Plus, you will need to register for Self-Assessment so that you can complete a Self-Assessment tax return each year.
There’s a lot to do! Crest Plus offers complete support to limited company contractors, helping you ensure your accounts and paperwork are properly prepared and filed on time in accordance with the rules.
Please get in touch on 01244 684700.