Ltd company setup

[josadler7]

Hi
At late notice I secured a contract job (a year ago) but I didn't have my own company so a friend offered that I work through his with a fee of 5% to cover processing the payments. At the start of the new tax year I set my own company and my employer s happy to transfer the contract but I am not vat registered. Additionally my friend having initially been happy with finishing our arrangement,seems to have misunderstood, thinking I would continue with the contract through him but paying into my company and is somewhat unhappy. Should I just go ahead or?

[Tom Braider]

Can't advise you on what to do now but has your friends company been operating PAYE on the money it's been paying you? If not, you've both got problems. See an accountant immediately about legislation regarding agencies.

[buildersmate]

Yup, this is exactly what HMRC sought to clamp down on as it is seen as a means of avoiding tax and NI. So the rules were changed to make it tax evadance (illegal), not tax avoidance (legal). What you have been doing with your friend up to the end of the tax year had to be managed in a particular way with HMRC (by declaring that you were operating in a particular manner, so that tax and NI were deducted correctly).
What you are now intending to do to is more legit provided that you can demonstrate to HMRC that your limited company is providing a service and not that it is just you providing personal services through your limited company.

[MarkRae]

The point about tax evasion vs tax avoidance is apposite, as is the point about contacting a professional.

On the assumption that Ed and the mods will agree that I'm not advertising here, I'd strongly suggest that you contact the people I use for all my tax / VAT / NIC stuff with my own limited company:

http://donaghueandcompany.co.uk/