[Stephen.C]

Any of you done this what are the benefits and the downsides? Our accountant is suggesting we would now benefit but i'm a bit unsure, we have a meeting set up in two weeks to discuss this so if you chaps can give me as much info as possible I would be greatful.

[dannymack]

How many times this question been asked !!!!

[Ian Lancaster]

Apart from the tax and National Insurance aspect, don't forget that as you will become an employee of your Limited Company you are required by law to have Employers Liability insurance, even if you are the only employee.

[PoleKing]

Accountants fees will double, possibly more.
Remember-your accountant is in business too.
He'll be wanting to squeeze more money out of you whether it's much better for you or not...

[Window Lickers]

This isn't that accountant that was charging extortionate money previously is it Steve?

[deeege]

Apart from the tax and National Insurance aspect, don't forget that as you will become an employee of your Limited Company you are required by law to have Employers Liability insurance, even if you are the only employee.

You sure about that Ian?

[PoleKing]

Apart from the tax and National Insurance aspect, don't forget that as you will become an employee of your Limited Company you are required by law to have Employers Liability insurance, even if you are the only employee.

You sure about that Ian?

He's right DeeGee. (Are you in Scotland?) it's certainly the case in England.

[deeege]

Firstly, if you are a husband and wife team, or your sons/daughters assist then you generally do not need EL cover. If you’re in doubt, then usually a good way round it is to insure them jointly with you – that way all the cover applies to them as well as you. The exception to this is if you are a Limited Company with 2 or more working directors then you MUST by law have this cover even if you are a husband and wife team under the Employers Liability (Compulsory Insurance) Act 1969. There is an exception to this legal requirement which is a Limited Company with only ONE working person who is a director and owns fifty per cent or more of the issued share capital, i.e. there are no other persons whatsoever doing any work in the company.


The above was copy/pasted from a quick google search, this was always my understanding of the requirement for employers liability insurance.

Is the above incorrect then?

[Sean Dyer]

when ive worked it out theres not alot in it  , you save the 8% you normally pay in NI class 4 (i think its 4 ) as a sole trader

BUt the accounts process is much more complex and formal but if you have a good accountant it seems to work well, i find it works when your getting to the turnover levels that are just below vat

I am thinking of incorporating in the next 12-24 months but in my case my wife works with me so the two of us could be directors so as a hypothetical scenario if we turned over 60 k with 10 k in expenses , as sole traders thats

50 k profit , 20 k tax free wages and roughly 30 k profit taxed at 28% which is 8400 (this is very rough i know the ni thresholds are slightly lower)

as ltd - it d be both of us paid our 10 k a year tax free as a paye employee and then the profit left would be paid tax on by the company at 20% corporation tax ie £6000

so theres a £2400 saving (roughly ) so if the extra accounting fees etc still workout wed be a couple of grand better off!

You take the extra money as dividends

If your accountant is suggesting it get him to prove its better and if so go for it

The only other reason to incorporate it to stop your personal assetts ie house etc being liable through your business , this is not always an issue with window cleaning but could be , most of the time its the money though

one other plus is the prestige of being limited , and being a Director . Altogether now OOOOOOOooooooooh

hope that helps

[PoleKing]

Firstly, if you are a husband and wife team, or your sons/daughters assist then you generally do not need EL cover. If you’re in doubt, then usually a good way round it is to insure them jointly with you – that way all the cover applies to them as well as you. The exception to this is if you are a Limited Company with 2 or more working directors then you MUST by law have this cover even if you are a husband and wife team under the Employers Liability (Compulsory Insurance) Act 1969. There is an exception to this legal requirement which is a Limited Company with only ONE working person who is a director and owns fifty per cent or more of the issued share capital, i.e. there are no other persons whatsoever doing any work in the company.


The above was copy/pasted from a quick google search, this was always my understanding of the requirement for employers liability insurance.

Is the above incorrect then?

Before we went limited I found similar information.
But (and this is only from memory) the information has been superseded a bit...perhaps clarified.
I can't really remember the details but it had something to do with paying the 2nd director. As in, if the 2nd director is getting paid the same amount without putting in any capital then they are deemed to be doing a similar amount of work. So the one person doing the work doesn't count.
I know that's vague.
I spent ages trying to get out of paying the ridiculous premiums and decided, on balance, I COULD argue that I didn't need ELI but if push came to shove I the event of a claim-I wouldn't be covered.

So, in answer to your question-no. But grey. (From my research)

[Stephen.C]

This isn't that accountant that was charging extortionate money previously is it Steve?

NO

[PoleKing]

when ive worked it out theres not alot in it  , you save the 8% you normally pay in NI class 4 (i think its 4 ) as a sole trader

BUt the accounts process is much more complex and formal but if you have a good accountant it seems to work well, i find it works when your getting to the turnover levels that are just below vat

I am thinking of incorporating in the next 12-24 months but in my case my wife works with me so the two of us could be directors so as a hypothetical scenario if we turned over 60 k with 10 k in expenses , as sole traders thats

50 k profit , 20 k tax free wages and roughly 30 k profit taxed at 28% which is 8400 (this is very rough i know the ni thresholds are slightly lower)

as ltd - it d be both of us paid our 10 k a year tax free as a paye employee and then the profit left would be paid tax on by the company at 20% corporation tax ie £6000

so theres a £2400 saving (roughly ) so if the extra accounting fees etc still workout wed be a couple of grand better off!

You take the extra money as dividends

If your accountant is suggesting it get him to prove its better and if so go for it

The only other reason to incorporate it to stop your personal assetts ie house etc being liable through your business , this is not always an issue with window cleaning but could be , most of the time its the money though

one other plus is the prestige of being limited , and being a Director . Altogether now OOOOOOOooooooooh

hope that helps

You're forgetting the 40% tax bud

I found it to be worthwhile after £60k.
(But my accountant is expensive)

[Sean Dyer]

when ive worked it out theres not alot in it  , you save the 8% you normally pay in NI class 4 (i think its 4 ) as a sole trader

BUt the accounts process is much more complex and formal but if you have a good accountant it seems to work well, i find it works when your getting to the turnover levels that are just below vat

I am thinking of incorporating in the next 12-24 months but in my case my wife works with me so the two of us could be directors so as a hypothetical scenario if we turned over 60 k with 10 k in expenses , as sole traders thats

50 k profit , 20 k tax free wages and roughly 30 k profit taxed at 28% which is 8400 (this is very rough i know the ni thresholds are slightly lower)

as ltd - it d be both of us paid our 10 k a year tax free as a paye employee and then the profit left would be paid tax on by the company at 20% corporation tax ie £6000

so theres a £2400 saving (roughly ) so if the extra accounting fees etc still workout wed be a couple of grand better off!

You take the extra money as dividends

If your accountant is suggesting it get him to prove its better and if so go for it

The only other reason to incorporate it to stop your personal assetts ie house etc being liable through your business , this is not always an issue with window cleaning but could be , most of the time its the money though

one other plus is the prestige of being limited , and being a Director . Altogether now OOOOOOOooooooooh

hope that helps

You're forgetting the 40% tax bud

Even more saving then


Told you it was hypothetical i dont pay tax  

Yeh, if as a sole trader your paying tax at the higher rate , incorporating is a no brainer surely !

[Stephen.C]

How many times this question been asked !!!!

Don't Know mate how many, thanks for your input.

[deeege]

Firstly, if you are a husband and wife team, or your sons/daughters assist then you generally do not need EL cover. If you’re in doubt, then usually a good way round it is to insure them jointly with you – that way all the cover applies to them as well as you. The exception to this is if you are a Limited Company with 2 or more working directors then you MUST by law have this cover even if you are a husband and wife team under the Employers Liability (Compulsory Insurance) Act 1969. There is an exception to this legal requirement which is a Limited Company with only ONE working person who is a director and owns fifty per cent or more of the issued share capital, i.e. there are no other persons whatsoever doing any work in the company.


The above was copy/pasted from a quick google search, this was always my understanding of the requirement for employers liability insurance.

Is the above incorrect then?

Before we went limited I found similar information.
But (and this is only from memory) the information has been superseded a bit...perhaps clarified.
I can't really remember the details but it had something to do with paying the 2nd director. As in, if the 2nd director is getting paid the same amount without putting in any capital then they are deemed to be doing a similar amount of work. So the one person doing the work doesn't count.
I know that's vague.
I spent ages trying to get out of paying the ridiculous premiums and decided, on balance, I COULD argue that I didn't need ELI but if push came to shove I the event of a claim-I wouldn't be covered.

So, in answer to your question-no. But grey. (From my research)

You are talking about 2 (or more) directors though. In that situation EL IS required.

What Ian said was "ltd companies with only the director doing the work would legally require EL insurance". I'm not sure this is the case. Hiscox certainly didn't think it was from my correspondence earlier this year.

[PoleKing]

Firstly, if you are a husband and wife team, or your sons/daughters assist then you generally do not need EL cover. If you’re in doubt, then usually a good way round it is to insure them jointly with you – that way all the cover applies to them as well as you. The exception to this is if you are a Limited Company with 2 or more working directors then you MUST by law have this cover even if you are a husband and wife team under the Employers Liability (Compulsory Insurance) Act 1969. There is an exception to this legal requirement which is a Limited Company with only ONE working person who is a director and owns fifty per cent or more of the issued share capital, i.e. there are no other persons whatsoever doing any work in the company.


The above was copy/pasted from a quick google search, this was always my understanding of the requirement for employers liability insurance.

Is the above incorrect then?

Before we went limited I found similar information.
But (and this is only from memory) the information has been superseded a bit...perhaps clarified.
I can't really remember the details but it had something to do with paying the 2nd director. As in, if the 2nd director is getting paid the same amount without putting in any capital then they are deemed to be doing a similar amount of work. So the one person doing the work doesn't count.
I know that's vague.
I spent ages trying to get out of paying the ridiculous premiums and decided, on balance, I COULD argue that I didn't need ELI but if push came to shove I the event of a claim-I wouldn't be covered.

So, in answer to your question-no. But grey. (From my research)

You are talking about 2 (or more) directors though. In that situation EL IS required.

What Ian said was "ltd companies with only the director doing the work would legally require EL insurance". I'm not sure this is the case. Hiscox certainly didn't think it was from my correspondence earlier this year.

Only one WORKING person implied (to me and the insurers at least) (Aplan but I can't remember the actual insurer) that more people were directors but not doing the work...

This is interesting though.
I've interpreted the 'rules' one way. You-another.
I wonder how they would be interpreted in the event of a claim though. That's what it's all about isn't it?
Hiscox are a very reputable insurer with (so I'm lead to believe) a very good track record on payouts but would a less...reputable insurer try and wangle a way out?

[deeege]

Exemptions
■ companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company.

The above is a direct quote from the HSE website. In Ian's case where he has franchisees each running their business' as independent LTD companies then EL insurance is NOT required.

Do you employ Darren? Or just use subcontractors? If you don't employ and are the sole director you may be costing yourself a few quid.

[PoleKing]

Exemptions
■ companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company.

The above is a direct quote from the HSE website. In Ian's case where he has franchisees each running their business' as independent LTD companies then EL insurance is NOT required.

Do you employ Darren? Or just use subcontractors? If you don't employ and are the sole director you may be costing yourself a few quid.

Ah, here's the difference between me & you bud-if you're only employing you-that's only you and by the looks of it might exempt you from the EL as you've described.
On paper, it's me and the wife employed. I'm (I think) manual (or something) director & she's clerical director.
So that's gonna move the goalposts a bit.
All I remember clearly was that at the time (April) I couldn't see a way round it, and I really did try.

[deeege]

Exemptions
■ companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company.

The above is a direct quote from the HSE website. In Ian's case where he has franchisees each running their business' as independent LTD companies then EL insurance is NOT required.

Do you employ Darren? Or just use subcontractors? If you don't employ and are the sole director you may be costing yourself a few quid.

Ah, here's the difference between me & you bud-if you're only employing you-that's only you and by the looks of it might exempt you from the EL as you've described.
On paper, it's me and the wife employed. I'm (I think) manual (or something) director & she's clerical director.
So that's gonna move the goalposts a bit.
All I remember clearly was that at the time (April) I couldn't see a way round it, and I really did try.

Ah ok so there's 2 directors, same situation as me then.

I still think my point is valid for Ian and his franchisees though. Ian?

[PoleKing]

Exemptions
■ companies employing only their owner where that employee also owns 50% or more of the issued share capital in the company.

The above is a direct quote from the HSE website. In Ian's case where he has franchisees each running their business' as independent LTD companies then EL insurance is NOT required.

Do you employ Darren? Or just use subcontractors? If you don't employ and are the sole director you may be costing yourself a few quid.

Ah, here's the difference between me & you bud-if you're only employing you-that's only you and by the looks of it might exempt you from the EL as you've described.
On paper, it's me and the wife employed. I'm (I think) manual (or something) director & she's clerical director.
So that's gonna move the goalposts a bit.
All I remember clearly was that at the time (April) I couldn't see a way round it, and I really did try.

Ah ok so there's 2 directors, same situation as me then.

I still think my point is valid for Ian and his franchisees though. Ian?

We got there in the end bud.