Lion in Winter

I'm forming an LLC, for reasons too complicated to explain here. I will need tax accountant help. I have been quoted the following, coming out to 190.50 pounds per month. This seems high to me (this is a company with just two directors, self and OH, and one source of income, and no employees), but maybe this is just what it costs. Any guidance or experience out there?

• Preparation and submission of monthly payroll documents to HMRC – from £45 + VAT per run;
• Preparation of Limited Company Accounts and submission to Companies House - £850 + VAT per annum;
• Preparation of Corporation Tax Return and submission to HMRC - £75 + VAT per return;
• Drafting of Annual Confirmation Statement and submission to Companies House - £60 + VAT;
• Preparation of self-assessment tax return and submission to HMRC - £120 + VAT per return:
• Preparation of forms P11Db, P11D and S336, if necessary - £140 + VAT;

Please note, our above quote does not include any bookkeeping or preparation of VAT returns.

christmasoompa

Why do you need monthly payroll if you don't have employees? You should be able to take that figure off which will bring it right down.

If it helps for comparison purposes, I pay mine £170pcm, mine does include VAT returns though, and doesn't include my self assessment as it's dead simple so I just do that myself. But it does include everything else on your list.

HTH.

Lion in Winter

Thanks Christmas. Apparently "directors" are "employees" since we take a salary (ie that's how we get money out of the company to use).

This makes me feel a little bit better about my 190 quote. I might let them do the self assessment for the first year until I figure out which way is up and then take it on myself.

christmasoompa

Ah yes, directors will need payroll if you take a regular salary (you could choose just to take dividends). You could shop around and may save a bit, but there's also a value in having an accountant you like and trust, so if s/he has been recommended and you get on well, it may be worth paying a bit more. Mine is amazing and I wouldn't be without her!

Good luck.

Lion in Winter

Don't HMRC get upset if we use dividends instead of salary.? I know we can augment the salary with dividends, and are proposing to pay ourselves the "tax free" amount each, so low salary, but the LLC is our only source of income so not having any salary might look fishy to HMRC, no? Plus salaries are apparently a company expense so reduces our corporation tax. The whole thing makes my head hurt.

I'm not asking for, or expecting anyone to give, tax advice by the way. I know better than that

christmasoompa

HMRC won't get upset but it may make more sense to pay a small salary and the rest in dividends, depending on other income/earnings. It's my only job so I take a small salary up to the allowance, then pay myself in dividends over that, sounds like you'll do similar. My husbands takes dividends only as he's a 45% rate tax payer in his 'proper' job. I don't actually think we could pay him a salary as he is a shareholder in the business, but doesn't do any work for it at all, so what would his salary be for?

Your accountant should be able to advise on the most efficient way of doing it.

tdrinker

It's worth asking the accountant to talk you through the options for extracting money from the company so you are confident you understand the recommended structure - and also, that you accountant understands the tax rules as these change and your accountant needs to be on top of this. In general, a mix of small salary and dividends is recommended due to tax rates / exemptions and national insurance rules. The accountant can also advise you on record keeping, maximising tax deductible expenses, etc., as you want to set this up for maximum efficiency from day 1. Talking these issues through will allow you to judge whether the accountant is someone you feel comfortable working with, i.e. can they explain things clearly, are they patient with your questions, and so forth.

Agree it's worth paying the accountant to prepare the year 1 tax return; after that, you can take it on or not depending on your interest and aptitude for the work.

Lion in Winter

Thanks, both. This all makes sense. I think iti's fair to say that my aptitude for number is 0 so it always takes me a lot longer than it does anyone else. My taxes in the US were simple and I did them no problem. But I'm still a bit at sea here.

Christmasoompa, may I ask how often you vote yourself dividends? Quarterly? Monthly? Don't answer if it's too much personal info of course.

christmasoompa

Can't really give you a sensible answer to that I'm afraid, as we transfer most of our profits to another business (property investment), so dividends are just as 'as and when' thing and no fixed schedule.

Lion in Winter

Ah, ok, thanks. As long as there is flexibility it probably doesn't matter anyway.

Pulaski

HMRC taxes what you do, and you can do anything that is legal, including paying yourself exclusively using dividends. Choosing whichever strategy minimizes your tax bill is legitimate tax planning.

So while salaries will reduce your corporation tax they will increase your personal income, though if you keep that low, below your personal allowances, that would make sense, but then you can get back the tax paid on dividends by filing a tax return. .... So do what works for you, and is legal, and don't worry about what you think is fishy ... HMRC have bigger fish to fry!

Lion in Winter

I didn't so much think myself that it might be fishy, but I read some online advice on another accountant's site that taking too many dividends might cause HMRC to think I was engaged in some sort of deliberate tax evasion things. I'm not using that accountant.....

And while I of course plan to remain legal, I do hope that HMRC are actually frying those bigger fish. I think I pay more tax than bloody Amazon

And what do you mean I can get back the tax paid on dividends by filing a return? You mean if my income is below a certain threshhold?

Pulaski

With all due respect, that accountant is an idiot, and nobody should be using them.Yes, if your income is below your personal allowance.

BTW You said you're forming an "LLC", but is it actually an "Ltd"? I don't think LLCs exist in the UK. Which brings me to the question of if you even need to form a legal entity?

Partnerships are a very common way to operate small businesses in the UK precisely because of the administrative burden and expense of forming and operating an Ltd, especially if you are not engaged in a business activity that exposes you to a lot of risk, of either causing harm or running up large debts that you may need to insulate yourself from.

​​​​​​​With a partnership you would still need partnership accounts, a separate bank account, and need a separate tax computation, but you'd have more freedom to move money back and forth, and you wouldn't have to worry about dividends at all. .... All business income accrues to the partners, and is taxed as such.

Lion in Winter

Got it on the dividends. And no, not using that accountant.

Yes, sorry, it's an Ltd - just one of those passing "which side of the Atlantic am I on" moments in the brain. This was deemed most advantageous from a tax perspective for our situation. I do need a legal entity due to the way/by whom I am employed, although it is pretty simple.

scrubbedexpat142

As I recall, sole traders & partnerships are classed as "self employed" and if solely dependent on one customer are then not, in the eyes of HMRC, truly self employed.
In LiW​​​​'s circumstance a limited Company is essential. (I think!).