Getting started with your company – first don’t be daunted, its not that difficult, and Whitefield are here to guide you through.
Take some clear time to read the papers we’ve sent you and the Our PSC helpsheets which have been honed over a number of years to cover most issues relevant to PSCs.
Your company is now ready for you to trade through and invoice from. However there will still be some things to happen:
- Please get the formation paperwork back to us ASAP
- If you are VAT registering now, then this will take a week or two for HMRC to process (occasionally it will take longer, in more complex cases). You can invoice your client / agent before your VAT number arrives but they may withhold the VAT element of your invoices until you supply a VAT number
If you are not VAT registering now, please remember to tell us if your turnover (i.e. sales income) exceeds the VAT threshold – the test is on a rolling 12 month basis (or less if the company hasn’t been trading 12 months). The current VAT threshold is on our VAT page, and in the “Vat summaries and rates” tab of our spreadsheet.
If you want to apply for the Flat Rate Scheme – it no longer benefits most PSCs with the new Low Cost Trader rules – then do so once your registration is through if not done at the time of registration. We recommend avoiding the annual accounting scheme.
- Make sure you get your business bank account open as soon as possible. You must run a separate company account, and you cannot use a personal bank account for business transactions. For speed and simplicity, we suggest your existing personal bankers, as for a new business banking arrangement identity and verification (ID&V) can cake a while.
- P45 – please send this through to us as soon as you receive it from your previous employer.
- Keeping accounts – we recommend use of our spreadsheet format – click here for guide notes, and here for the downloadable excel sheet. You can, if you prefer, use your own spreadsheet or similar however almost all our PSC clients use our spreadsheet as it is designed to allow paperless communication.
- IR35 status – its important that you decide on your IR35 status. This has to be assessed on a contract by contract basis. We offer an IR35 contract review service, cost is £200 + VAT, although its ultimately your responsibility to make the decision on IR35 status as director of the company. As a rule of thumb a contract being caught by IR35 will increase the overall tax liability by 50%-100%. To use our review service, please see the guidance here you’ll need to let us have our completed pre review questionnaire as well as the contract you wish us to review.
- Salaries – generally we would recommend £12,000 pa (2019/20) for the main contractor in the company and £8,520 (2019/20) for a spouse who doesn’t earn elsewhere. These figures can, of course, be changed if appropriate – please discuss with us as necessary – see our guide to salaries and dividends. Once your salary level is agreed we’ll run your payroll for you and deal with RTI submissions.If your income is caught by IR35 the IR35 dictates the salary level for you at approximately 95% of income after expenses.Have a look at our help sheet How does it all work in practice for more commentary on salaries and dividends.
- Setting aside for tax bills – Have a look at our table of likely take home percentages based on being inside or outside of IR35 at various income levels, and we would recommend that a tax reserve be maintained based on these figures + 5 % margin for error. Anything over and above that can be drawn for living expenses. This is obviously intended to be on the cautious side – the actual tax liability should come in much lower. Each Spring we will review the companies position as part of a structured tax planning program before the end of the tax year; at that stage, dependant on IR35 status, we can look at dividend and salary levels and fine tune amounts already put through.
- For more PSC resources, visit our PSC resource page