Why is trading through a Limited Company tax efficient?
As the business owner and sole employee you can pay yourself through a combination of salary and dividends. Dividends do not attract either employee or employer’s national insurance and carry a lower rate of tax than salary.
What if I already have a company set up?
SAIL can take over the administration for you. Speak to the SAIL team for help.
Does National Minimum Wage apply to Directors?
Yes it does. Your SAIL Account Manager will advise you of the level of salary which is most appropriate for your circumstances.
Do all expenses require receipts?
Except for mileage you must have a receipt for everything. You should also keep all receipts for six years in case of any future audit by HMRC.
Where will the registered address for my limited company be?
If you elect a package in which SAIL acts as your company secretary and registered office then the registered address will be care of SAIL Business Solutions.
What happens when I join?
We form your company for you, and assist in opening a business bank account if needed. We will also register you and your company with all of the relevant government bodies. Your SAIL Online Portal will be registered and your welcome pack sent to you with all the details you need. Most importantly, your SAIL Account Manager will be on hand to help with any queries.
How is corporation tax applied?
Corporation tax is payable on business profits. It is not impacted by the level of dividends which are taxed at different rates in your personal capacity depending on whether you are a higher or basic rate taxpayer.
What are your minimum contract terms?
There is no tie in period with our standard Directors and Directors Plus Packages. There are minimum terms of six months on the Paid Monthly in Advance package.

We are confident that you will not want to leave once you have started working with SAIL. However if we form a company for you and you decide to leave before starting to use the rest of the service (this is set at a standard 6 week minimum period) then we would levy a charge of £125 plus VAT for carrying out the company formation.

How do I know how much tax to pay and when it is due?
When you submit an invoice to SAIL, you will receive a Client Advice statement which details your PAYE & NI, corporation tax and VAT liabilities.

SAIL will also notify you when you need to pay these taxes to HMRC.

What expenses can I submit?
You can claim for expenses that are incurred for performing your contract provided they are business related. These include, but are not limited to travel, accommodation, food and drink, stationery, equipment, training and professional fees.


For food and drink the suggested levels are:

  • If you are away from home for more than 5 hours you can claim £5 if you incur the cost of one meal
  • If you are away from home for more than 10 hours you can claim £10 if you incur the cost of a meal or meals.

For more information, visit the HMRC website: http://www.hmrc.gov.uk/manuals/eimanual/eim05231.htm


Mileage:

Business mileage is mileage you travel doing your job. It can include travel to a temporary work place but it doesn’t include:

  • normal travel between home (or anywhere that is not a workplace) and your permanent workplace
  • private travel

You can currently claim 45p per mile for the first 10,000 business miles you travel in your car each year and then 25p per mile after that. This mileage includes travelling to and from home and your temporary locations and between different sites.

You can also claim 24p per mile on a motorcycle, and 20p per mile on a bicycle. Both have no cap on mileage.

For more information, visit the HMRC website: http://www.hmrc.gov.uk/incometax/relief-mileage.htm


Training and Professional Fees:

If the training or qualification is a requirement for your assignment or professional status then you can normally claim for it. Non-work related qualifications are not considered a legitimate business expense.

The checklist of the HMRC approved organisations: http://www.hmrc.gov.uk/list3/index.htm
You must be able to provide evidence you actually incurred the expenses if HM Revenue and Customs ever asked you. This is usually achieved by keeping receipts for six (6) years.

Explain the Flat Rate VAT scheme to me
You are only obligated to register for VAT once your company’s turnover exceeds the VAT registration threshold. However a voluntarily registration under the Flat Rate VAT scheme could enable you to make further savings.

An example of where the Flat Rate VAT scheme could add value is shown below:

Invoice to client:

Invoice Value £1,000.00
VAT Charged £200.00
Total £1,200.00

VAT to pay over to HM Revenue & Customs = £1,200 x the Flat rate VAT % of 10% (this rate will be based on the business sector you operate in and the 10% rate used in this example is purely for illustrative purposes) = £120

Potential savings in this example (£200 less £120) = £80 less additional amounts payable to SAIL £5 = £75 total saving produced.

How do I invoice my agency?
When you submit your accounting data through the SAIL Online Portal you will receive an invoice via e-mail which you forward to your agency or end client for payment. This invoice can also be downloaded directly from our website.
What are my obligations to SAIL?
There are very few obligations to SAIL. We simply ask that you:

  • Complete your time sheet and expense claim form so we can prepare your accounting records
  • Send us a copy of your business bank statements
  • Respond to letters and emails from us
  • Pay our fees each period and do so in a timely manner
What is IR35?
IR35 is tax legislation that affects all contractors and has to be given serious consideration. The legislation applies to each contract you engage upon rather than to your actual company, so IR35 may apply to one contract but not the next.

The aim of the IR35 legislation is to stop people leaving full time employment and then returning to the same job immediately as a contractor and working through their own Limited company to reduce their tax liability and their NI payments.

How can IR35 impact you?
If your contract replicates a permanent employee contract with regard to the same level of risk, responsibility, liability and control as a permanent employee, then you would probably be classed as inside or caught by IR35 legislation.

This means you will have to pay full tax and full National Insurance and reduced expenses. This is because HMRC believe that you are not taking the financial risks nor do you have the same level of control as a director of your own limited company, and therefore should be treated as an employee.

HMRC have twelve tests to consider when deciding on whether a contractor is within or outside the IR35 rules. However, the three key areas to consider are:

  1. Control:
    This relates to things such as start and finish times, when you should work and contract duration. It is crucial to be able to display self-control within the projects that you work.
  2. Substitution:
    This relates to whether it is the contractor who is employed, or whether you or the client can substitute someone should the need arise.
  3. Mutuality of Obligation:

This asks if the contractor is exclusive to the clients or can take on work from other clients. It also states that neither client nor contractor should have an obligation to offer or accept more work if they choose.

For further information, you should contact HMRC or review their guidance PDF. http://www.hmrc.gov.uk/ir35/guidance.pdf