My brother and I started contracting! Any advice re: Ltd company??

[KILOCHARLIE]

Hi all, just found this site after starting my first contract this week. I started as per an umbrella company but are quickly regretting the decision (despite not even handing in my first timesheet!) and was hoping for some advice please.

As well as myself on a contract for a daily rate of £145, my brother is also on the exact same contract after starting work two weeks ago. We are both interested in setting up limited companies, whether it be one each or both of us in the same one. I am unsure what would be the benefit of us both being directors of the same company or whether it may be more beneficial for one to be a director with the other as an employee of that company, but I have heard there may be a way to use this to our advantage over each having our own.

We are both low spenders but have separate finances, although both hope to both get mortgages / purchase houses in the next few years despite us being aware how hard this may be being self employed along with the current restrictions on obtaining such finance.

Furthermore, we both live at home with my mother who is currently unemployed and is in receipt of Job seekers allowance. We are both expected to pay rent to her once we start getting paid but the amount is currently negotiable and I would hope this would somehow be deductible so would be grateful for any advice. Also she has expressed a possibility of us being able to employ her under our company / companies to make use of her tax free allowance, again whether it be as a director or as an employee. I would be grateful for any advice on this matter.

Thanks all for any pointers you could give us. This looks like a great community so happy for any feedback no matter how positive/negative! I hope to learn as much as I can as there seems plenty of info to get my head around to make the best of our situation and hopefully get the best outcome for myself and my family!

[GillsMan]

Hi all, just found this site after starting my first contract this week. I started as per an umbrella company but are quickly regretting the decision (despite not even handing in my first timesheet!) and was hoping for some advice please.

As well as myself on a contract for a daily rate of £145, my brother is also on the exact same contract after starting work two weeks ago. We are both interested in setting up limited companies, whether it be one each or both of us in the same one. I am unsure what would be the benefit of us both being directors of the same company or whether it may be more beneficial for one to be a director with the other as an employee of that company, but I have heard there may be a way to use this to our advantage over each having our own.

We are both low spenders but have separate finances, although both hope to both get mortgages / purchase houses in the next few years despite us being aware how hard this may be being self employed along with the current restrictions on obtaining such finance.

Furthermore, we both live at home with my mother who is currently unemployed and is in receipt of Job seekers allowance. We are both expected to pay rent to her once we start getting paid but the amount is currently negotiable and I would hope this would somehow be deductible so would be grateful for any advice. Also she has expressed a possibility of us being able to employ her under our company / companies to make use of her tax free allowance, again whether it be as a director or as an employee. I would be grateful for any advice on this matter.

Thanks all for any pointers you could give us. This looks like a great community so happy for any feedback no matter how positive/negative! I hope to learn as much as I can as there seems plenty of info to get my head around to make the best of our situation and hopefully get the best outcome for myself and my family!

Quick answer from me: I don't believe it's worth setting up a LtdCo on such a low daily rate. I think the hassle of running a LtdCo wouldn't be commensurate with the turnover you're company would be looking at.

I really can't understand the thinking where rent you would pay to your mother would be a tax-deductable expense from your LtdCo? Are you on a wind-up?

[tractor]

...

Hi all, just found this site after starting my first contract this week. I started as per an umbrella company but are quickly regretting the decision (despite not even handing in my first timesheet!) and was hoping for some advice please.

As well as myself on a contract for a daily rate of £145, my brother is also on the exact same contract after starting work two weeks ago. We are both interested in setting up limited companies, whether it be one each or both of us in the same one. I am unsure what would be the benefit of us both being directors of the same company or whether it may be more beneficial for one to be a director with the other as an employee of that company, but I have heard there may be a way to use this to our advantage over each having our own.

We are both low spenders but have separate finances, although both hope to both get mortgages / purchase houses in the next few years despite us being aware how hard this may be being self employed along with the current restrictions on obtaining such finance.

Furthermore, we both live at home with my mother who is currently unemployed and is in receipt of Job seekers allowance. We are both expected to pay rent to her once we start getting paid but the amount is currently negotiable and I would hope this would somehow be deductible so would be grateful for any advice. Also she has expressed a possibility of us being able to employ her under our company / companies to make use of her tax free allowance, again whether it be as a director or as an employee. I would be grateful for any advice on this matter.

Thanks all for any pointers you could give us. This looks like a great community so happy for any feedback no matter how positive/negative! I hope to learn as much as I can as there seems plenty of info to get my head around to make the best of our situation and hopefully get the best outcome for myself and my family!

There are many things that you and your brother need to understand before embarking on this venture.

The first and most important is to separate your mother, gerbil, rent and any other personal considerations from your business plan and any subsequent business. Really, this is serious advice.

If this is a wind up, then sure you can pay your parrot, uncle's dog's cousin all on PAYE and get away with it.

[JB3000]

Hi all, just found this site after starting my first contract this week. I started as per an umbrella company but are quickly regretting the decision (despite not even handing in my first timesheet!) and was hoping for some advice please.

As well as myself on a contract for a daily rate of £145, my brother is also on the exact same contract after starting work two weeks ago. We are both interested in setting up limited companies, whether it be one each or both of us in the same one. I am unsure what would be the benefit of us both being directors of the same company or whether it may be more beneficial for one to be a director with the other as an employee of that company, but I have heard there may be a way to use this to our advantage over each having our own.

We are both low spenders but have separate finances, although both hope to both get mortgages / purchase houses in the next few years despite us being aware how hard this may be being self employed along with the current restrictions on obtaining such finance.

Furthermore, we both live at home with my mother who is currently unemployed and is in receipt of Job seekers allowance. We are both expected to pay rent to her once we start getting paid but the amount is currently negotiable and I would hope this would somehow be deductible so would be grateful for any advice. Also she has expressed a possibility of us being able to employ her under our company / companies to make use of her tax free allowance, again whether it be as a director or as an employee. I would be grateful for any advice on this matter.

Thanks all for any pointers you could give us. This looks like a great community so happy for any feedback no matter how positive/negative! I hope to learn as much as I can as there seems plenty of info to get my head around to make the best of our situation and hopefully get the best outcome for myself and my family!

You should get your contract reviewed for IR35.

If your contract is outside of IR35 you should speak to your agency about whether or not contracts could be re-written so that you could be paid via your own limited company.

If your agency agrees, you should contact an accountant asap regarding everything else as you clearly don't have a clue what your talking about.

[TykeMerc]

At that rate, no Ltd wouldn't be sensible, twice that rate it would be pretty debatable.

2 people sharing a company? Not a wise idea as dividends have to be paid equally to the holder of each of the same type of share, this would become excessively complicated.

Your normal rent being tax deductible? No, we're contractors not MP's.

Paying your mum when she doesn't have a function in the business? No again we're not MP's, you can't do that and stay the right side of the law.

All answers assume that the "questions" aren't from one of the endless moronic sockpuppets allowed to troll the professional forums at will, but to be honest it's a tad tricky to answer them with a straight face.

[TheCyclingProgrammer]

This person posted an identical post on the MoneySavingExpert forum and I've already answered them there so I'm not going to repeat myself...except to say again it hardly seems worth the effort on such a paltry rate. It just equivalent to what, £35k gross salary maybe?

[TheCyclingProgrammer]

Paying your mum when she doesn't have a function in the business? No again we're not MP's, you can't do that and stay the right side of the law.

This might seem pedantic, but there's no law that says you can't pay somebody a salary for doing nothing. You can pay who you want whatever you want for doing whatever or **** all.

It's just then a matter of whether or not the salary is tax deductible for the company's CT bill, to which you need to apply the normal wholly and exclusively test and if you are paying somebody for doing nothing then it obviously fails that test and no deduction is permitted. But it's certainly not illegal or breaking any rules in itself.

[TykeMerc]

This might seem pedantic, but there's no law that says you can't pay somebody a salary for doing nothing. You can pay who you want whatever you want for doing whatever or **** all.

It's just then a matter of whether or not the salary is tax deductible for the company's CT bill, to which you need to apply the normal wholly and exclusively test and if you are paying somebody for doing nothing then it obviously fails that test and no deduction is permitted. But it's certainly not illegal or breaking any rules in itself.

I agree it's a pedantic point and yes you're completely right. However as you pointed out since the tax position would actually be a hindrance to the company it's a damn silly thing to do

[TheCyclingProgrammer]

I agree it's a pedantic point and yes you're completely right. However as you pointed out since the tax position would actually be a hindrance to the company it's a damn silly thing to do

Oh I agree. Although there is a school of thought that I'm sure some accountants subscribe to, that if the person is a company director then the legal responsibilities of that are enough of a justification for at least a modest salary somewhere between zero and the basic allowance.

I'm not sure I agree and as an example my wife gets a salary of £200 a month for being company secretary, doing basic admin and some of my bookkeeping duties (I'm trying to offload as much as I can!). Some would say I should pay her all the way up to her personal allowance but I wasn't comfortable with that; others would say it's still too much.

[TykeMerc]

Absolutely.

In the scenario described in the post that started this thread it's clear that appointing his mum to a salaried position would be purely for use of her tax allowance, I'm fairly sure that HMRC would take a dim view of that if they ever got wind of it.