Apologies for a reasonably long first post and raking up an old(ish) thread but I am currently looking at a career change and becoming an electrician and have decided to go the limited company route for the business plan, however some of the advice I have been given by accountants, HMRC and companies house varies considerably from some of what has been said above, so I would be interested in people’s views on my current understanding and reality.
The advice I have been given is that if you have significant private assets then limited co status protects these should the worst happen and you are personally sued for negligence etc (company will have prof indemnity insurance). It should not be considered as an option to avoid paying day to day creditors, as someone above pointed out a new company would require some form of guarantor in place to get a sizeable credit line anyway.
The accounts can be completed /filed by the company themselves and under the small company’s exemption do not need to be fully audited (goal posts are more than 50 employees and turnover in the millions or assets in the millions) and therefore you don't need an accountant if you don’t want one. In my research on these topics I found out my father’s company (consultancy business) could be flat rate VAT registered and potential paying tens of thousands of pounds less in tax to HMRC - something his £1,000 a year accountant has failed to spot for several years - co-incidentally the flat rate VAT registration would mean less work for the accountant and my father in producing the accounts.... My current thinking is that flat rate doesn’t look attractive for an electricians business due to volume of purchasing, but interested what others are doing?
In terms of income tax - as a limited company most people I talk to recommend the route of paying a salary equal to the tax free earnings threshold and then paying any additional profits as dividends - the company will pay corporation tax on the profits but the first 20odd K of dividend is then free of personal taxation due to a 10% rebate. Also shareholders don't have to be employees, they only have to be over a certain age, so wives etc can be shareholders and receive dividends under the same conditions.
One of the other things I have read a lot of discussion on relates to company registered addresses and the implications if you use your own address - plenty of stuff on this on contracting forums - but for 50 quid a year there are plenty of companies that will sell you the use of their office address and space on the wall for the plaque - This is what I plan to do, has anyone had bad experiences doing this??
I would also be interested in how the leasing of tools and van works as I currently plan to privately buy the van and charge the company 45p per mile in mileage as allowed under AMRA as an expense. My current tools will be sold into the company using prices found on somewhere like ebay - the prices I charge the company have to be seen to be realistic i.e. I can't charge the company 2K for a 3 year old Makita drill!! I was told that any money I made leasing things to the company would need to appear on my personal tax bill and would be pretty obvious to HMRC from the company accounts so there was no realistic way to hide it but interested to hear how it works in practice?
Before anyone decides to flame me for being a career changer going the Electrical Trainee route I will point out that I have an HND in Electrical engineering plus a Degree in Electrical and Electronic and in addition to having spent the last 17 years in a technical electronic engineering role I have also spent the last 8 years renovating properties in my spare time including full house rewires that have sailed through inspection by LABC / qualified electricians.
Thanks
Paul
