Dr Surina Chibber outlines the pros and cons of ambience up as a bound aggregation and explains how changes to IR35 legislation can appulse on this
What is a bound company?
A bound aggregation has its own acknowledged character and is advised as a ‘person’. As a actor your accountability is bound (hence the name – ‘limited by shares’). The aggregation is run by admiral and has shareholders. As an alone locum, you can be both. You will allegation to accept a appointed coffer anniversary in the name of the company.
Other shareholders could accommodate your spouse/partner, but alone if they are activity to do some assignment for the company. However if they do alone a baby amount, the shareholdings should reflect this.
How do I pay tax as a bound company?
The capital aberration amid a bound aggregation and sole banker cachet is tax.
Companies pay 20% tax on profits via the Corporation Tax scheme. However you will accept added tax to pay back you booty money out of the company.
You will pay tax as an alone and an agent of the company. You can additionally accept allotment payments, which you additionally accept to pay tax on. As of April 2018 tax on the aboriginal £2,000 is at 0% and again afterwards this tax is paid abased on which assets tax bandage you are in. A basal amount tax payer will pay 7.5%, a college amount tax payer will pay 32.5% and an added amount tax payer will pay 38.1%.
Pros of ambience up a bound company
The claimed accountability of shareholders is belted to the face amount of the shares they accept subscribed to. Workers (directors) are paid a bacon (taxed via Pay as You Earn at source) and this amount is incurred as a aggregation expense. These costs can again be deducted above-mentioned to advantageous aggregation tax – bethink the aggregation is a ‘person’ in its own appropriate and pays tax as any added actuality would. Any balance profits can again be paid to shareholders as added assets in the anatomy of dividends. As ahead mentioned you can accommodate your accomplice or apron on the books and accord them a bacon and some shares. This can accommodate some cogent tax savings, abnormally if they are a basal amount tax payer.
Cons of ambience up a bound company
As with alive for a locum agency, you cannot use your accomplishment paid through a aggregation to accord into the NHS Alimony Arrangement so you will lose the alimony account and the tax abatement on this.
You will additionally accept to accomplish anniversary submissions of accurately able aggregation accounts and an anniversary acknowledgment at Companies House area they are appear and attainable by anyone who wishes to appearance your data.
Expense calculations can additionally be a bit trickier. As a bound aggregation you are an agent so costs claimed allegation be wholly, alone and all-important for the business. For example, in the case of breadth claims, you accept to abide an amount affirmation to the aggregation like any added employee. The aggregation again reimburses your cost, but this is apparent as a account in affectionate for you as the employee, involving added paperwork for the aggregation in the anatomy of a PD11 and your accepting to pay tax on this benefit. In contrast, a self-employed (sole trader) GP allowances from abundant added airy amount rules, although they do still accept to be wholly and alone for business purposes.
If your aggregation about-face exceeds £83,000 your business will allegation to allegation VAT on any invoices. Also, if you are assuming a HR/Office/Managerial adviser locum position, area you are not alleviative patients directly, you will allegation to allegation accepted VAT amount for your service. Appointment the HMRC website for a abounding breakdown on how VAT is applicative for locum doctors.
IR35 – off-payroll alive in the accessible sector
The IR35 legislation alien in April 2017 applies to individuals alive through a bound company, who would commonly be classed as an agent if they did not accept that company. If you assignment consistently for one convenance and do the aforementioned sessions every week, you are absolutely an agent and will be bent by IR35.
If so, again you can apprehend to pay about 25% added in tax every year. The convenance will accept to pay your balance afterwards deducting PAYE and employee’s civic allowance contributions. You will added than acceptable be financially worse off than you were before.
Ways to abstain the IR35 bracket
Check the government online application checker to analyze your IR35 status.
If you would like added advice on how these tax changes may affect you can appointment the HMRC government on band application checker or admission my contempo IR35 webinar.
Dr Surina Chibber is a locum GP and co-founder of My Locum Manager
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