Many more contractors will now form limited companies as a means of complying with the complexities of IR35. By forming a limited company you will be in control and there will be no third party administrator to deal with. You will be company director, operate the company bank account and be responsible for running the business in a way that suits you. It is the most tax efficient way of working, so you will keep more of what you earn. You will be able to claim a wide range of expenses, from accountancy fees to equipment etc. You will be able to claim VAT back on a wide range of expenditure.
As you will be genuinely self-employed and as long as you have the right contracts in place, you will have nothing to fear from IR35.
Furthermore as a limited company you will have protection from liabilities for your company debt. So if it became insolvent you, as a director, would not be liable unless it could be proven you acted fraudulently or improperly under company law.
On the downside, there will be more paperwork as you will have to comply with company law requirements to file accounts and returns to Companies House and various other administrations. However there is plenty of free help and advice available and you can always appoint Duport as company secretary to take away some of that burden.
What is the quickest way to form a Limited Company?
You can buy a ‘ready made’ company from Duport or elsewhere. As the name implies these companies are ready to go. The name and the articles of association can be simply modified. Changes will be notified of names, directors, company secretary, and registered office to Companies House. Duport has direct links with Companies House and you can download the correct forms on our website or contact Companies House directly.
Alternatively you can incorporate your own company. Again because of our links with Companies House this can be done in a couple of hours. It is advisable to contact an accountant and get advice about your specific requirements.
What should I do if I want to form a Limited Company now?
You can read more about limited companies on the Duport website. We have researched a wide range of subjects to help you and your business. You can search for a company name here and either apply online, or talk directly to one of our knowledgeable staff who can guide you through the process. Duport, unlike many formations agents, has a team of staff who will freely answer your queries, and as a responsible business is dedicated to giving you as much quality information as possible.
What are the legal requirements for a Limited Company and are there any special considerations for freelancers or contractors?
Limited companies need at least one director and a registered office. Your company name will have Ltd or Limited at the end. There is no longer a requirement to appoint a company secretary, though many companies find it useful. In reality freelancers and contractors choose often chose their spouse (see also further information on Duport website). If you don’t have a suitable person to act as your company secretary, Duport can provide this service for you.
You need a registered office – an official address. This could be your home (but check with mortgage and lease restrictions), or again you can use Duport. Scottish companies must have their registered office in Scotland.
Other legal requirements include filing annual accounts and an annual return with Companies House and a tax return to HMRC. You must also register for VAT if company turnover is over £85,000.
One thing contractors in particular should bear in mind is that because directors are not strictly an employee unless they have a contract, many freelancers draw up a contract specifying duties, salaries etc, and because of the IR35 rules it would be advisable to take specialist advice if in any doubt. Again, if you choose to become a limited company and want help with this Duport can put you in touch with the right people.
