Running a contractor limited company is an acquired skill. A contractor who establishes their own limited company will undoubtedly enjoy a range of notable financial advantages, but will also incur a variety of responsibilities at the same time. A limited company operates as a ‘person’ in its own right, yet despite this legal independence the contractor in charge is still required to independently manage their limited company with efficiency and integrity.
A limited company possesses a twofold purpose; namely to sign contracts with other parties and also to handle all income in the most flexible manner possible. The director of a limited company will need a bank account in the name of the company itself; they cannot continue to operate under their own name as a sole trader would. Similarly, a limited company must also provide any agents with a signed timesheet in order for an invoice to be raised and funds received.
Because of the need to run a limited company with efficiency, all receipts need to be kept in order to ensure that both tax and VAT requirements are consistently met. At the close of each financial year, the director of a limited company will also be required to send HMRC a completed corporation tax return and a comprehensive overview of all company accounts. It therefore goes without saying that company accounts need to be kept in good order; very possibly by employing a specialist contractor accountant to optimise records.
Those contractors who are self sufficient may need to deal with various forms of salary and dividends, and will also need to conform to what is often known as ‘the red tape’; a set of regulations relating to annual return that are necessitated by incorporation at a Companies House. Running a limited company is certainly not without its difficulties, and the vast majority of contractors find that they benefit significantly from some professional help in terms of both advice and financial considerations.
ICS offer a range of contractor accountancy and payroll solutions including a Limited Company Service. With three levels of support you can choose the level best suited to you. Our most popular level, the Plus, includes inclusive insurances for the contractor. A comprehensive package, we provide free IR35 reviews for every contract you undertake. It is often a common misconception that you can’t work via a limited company if you fall within IR35 but this is not the case; it simply affects the way you pay yourself. To discuss in more detail please call us on 0800 195 3750.