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Knowledge Base

Alternatives to a limited company

02 June, 2008

Since the implementation of IR35 in 2000 and, more recently, the introduction of the MSC rules from 2007/08 the decision of whether to operate through a limited company has become more onerous. This article discusses the options available to enable you to make a decision that is suitable for your business requirements.

PAYE with agency or payroll system

The advantages are that it is very quick and easy to set up and there are none of the responsibilities of running a company. Salary payments are paid to your personal bank account after accounting for all PAYE and tax deductions. It is considered a good choice for anyone undertaking a short term assignment.

The disadvantages are that every time you join a new agency, you have to join a new payroll system and, currently, you are not able to claim any business expenses. Changing payroll systems can mean you are being taxed at the wrong level until all the HMRC paperwork is in the right place.

Umbrella Company

Quick and easy to join, the umbrella option is also a PAYE solution. Payments are made direct to your personal bank account after accounting for all NI and tax payments, meaning no future tax liabilities to you. Currently, if you are eligible, you are able to claim legitimate business expenses. The flat rate fee for the service is only charged for weeks worked and includes all the business insurances.

For further information on an umbrella company structure, visit our sister company, Trafalgar Contractor Solutions.

Self Employed

Following legislation in 1988 and updated in ITEPA 2003 operating under self employed status is not usually accepted by agencies and clients because of the potential tax and National Insurance liability to the agency or end client.

Trafalgar is able to produce annual accounts for self employed contractors, please contact us to discuss this alternative.

For information on setting yourself up as self employed, visit the Business Link website.

Composite companies

Composite companies are now prohibited. Composite companies were seen to give a worker/shareholder all the benefits of operating as a limited company such as expenses and dividends but none of the responsibilities, risks or control of the company.

Off-shore Umbrella solutions

Tax liability risk has increased to clients and agencies with contractors and consultants using off-shore solutions. Also there can be considerable tax liabilities to you when funds are bought onshore.

Trafalgar does not offer Composite Company or any Off shore options and are unable to advise on these solutions. Trafalgar offers solutions that conform to HMRC regulations for UK contractors working within the United Kingdom.

Limited Company accounting fees for only £148 per month. We do your paperwork, you focus on running your business. Find out more, or contact us today.

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