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Owner/ Directors of limited companies

For those running the business through a limited company, the position is very different.  Salaries and dividends there from possibly could be simply adjusted.  Although other considerations may apply, it may not be necessary to treat the business as terminated.  

To help Take up:

:A "Job-like" Assignment?

You may have an “edge” over others competing for assignments.  You have your own limited company, which is fully registered.  If the company invoices your client, the client should have no worry over whether he could be liable for deducting tax and National Insurance, he is protected from that.  However, if the contract between you and the company is liable to IR35, then it would cause you to increase your salary. On that income PAYE would be payable by the company, but it would probably attract no Corporation Tax.  The “trick” is to ensure that the terms of the contract puts it outside of IR35 of course, but if this is not possible – at least you should have some income. Note that IR35 might apply to just the one contract – others can still be outside of it.

To keep a contract outside of IR35, the essential features remain the right of substitution and lack of obligation to provide work, or to be paid except for work done.  There are other factors too.  

Essentially, this all means that you could effectively take a job, which would otherwise be an employment and treat it fairly normally through the company.  

Your “employer” saves the National Insurance contribution, which would be 12.8% of equivalent salary over £ 476 per month (for 2009/10) and also all the other potential employer liabilities.  This saving is significant for him (but of course he has effectively transferred it all to you).

Or:

Another employment?

If taking up another employment, unless signed-off with a form P45, the same as above for the self-employed applies:  if there is continuing employment income from your own company, regard should be had to the PAYE code that is applied to a new salary.  Unless the code recognizes the other income, you could be under-paying tax.

Tax Losses

Tax losses generally are capable of being set off against the preceding year’s profits, or carried forward. The rules are to be temporarily extended to allow carry-back of up to £ 50,000 loss to up to 3 preceding years.

If the business is terminated carry-back is extended to more years.  Company losses cannot be set off against the owner/director’ income.  (Note: Losses may inhibit the ability to pay dividends.)  

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