Currently through Umbrella, thinking of moving to Ltd

[ee61re]

I've been contracting for several years now, through an Umbrella.

I originally went down the umbrella route for the sake of simplicity, and also because my initial foray into contracting was meant to be a short term 'temp to perm' gig. That didn't work out, and here I am, several years later.

Outside of work, I do a fair bit of voluntary work with local theatre groups, on the technical side of things, and I've built up a stock of equipment, etc, that could potentially be rented out, etc.

Is there anything to stop me creating a Ltd to use for the day job (IT solutions Architect / Consultant) as well as for the theatre stuff, and also for the more piecemeal "can you look at my PC / home network, etc"?


Rob

[Dave Marples]

Hi Rob

There is absolutely nothing stopping you from setting up a limited company to undertake all of these activities, but neither is there anything stopping you from undertaking the ‘non-umbrella related’ activities as a sole trader and completing self employment pages as part of your tax return (but you must advise HMRC of your self employment within 3 months of it commencing).


If the corporate route is chosen, then when the company is set up, it will have a memorandum & articles of association which states what the “objects” (activities) of the company are and these need to be drawn up widely enough to allow your company to undertake all the relevant activities. Please follow this link to Companies House
http://www.companieshouse.gov.uk/abo..._by_shares.doc

which gives you more detail. When you set up a company, your accountant will be able to advise you on the best form of wording.

Having everything under ‘one roof’ in a company is possibly the most straightforward option and may well be the most tax advantageous. It will, however, bring with it higher compliance costs and the possible spectre of IR35 in respect of the contracting work.

There is one other consideration which is VAT. If everything is under one roof, and the fees from your ‘day job’ alone are above the £68K VAT threshold, then you will need to charge VAT on all sales made by the Company; in effect making your other work 17.5% more expensive. If you therefore remain within the umbrella and operate the other work as a sole trader OR set up a company for the ‘day job’ and undertake the other work as a sole trader you will be trading via two sepearte legal entities and each of these entities will have their own VAT threshold, so unless the other work really takes off, you are unlikely to need to register for VAT as a sole trader. This is particularly relevant if the end customers for your 'other' work are not VAT registered.

Good luck

David