Company Name Check

Business Service Levels

Apply for a Consultation

Print this Page

u.k. taxation Tax Planning UK: Income Tax UK: Capital Gains Tax UK: Corporation Tax UK: Value Added Tax Individual & Corporate UK Non-Resident Taxation The Taxation of Share Options Supplying Services Through a Company or Partnership UK Inland Revenue. Basic Rules What Is IR35 About?

RELATED SERVICES UK Company with Bearer Shares Holding Entities: United Kingdom Register a Branch in the UK Company Formation in Northern Ireland Incorporate in the Republic of Ireland Seychelles: Protected Cell Company BVI Corporate Vehicle for Charitable Use Cyprus: VAT Registration Holding Companies in Hong Kong Boat and Yacht Registration Trademark Registration Incorporate a Public Company in America

BANKING SERVICES Setting Up Your Bank Accounts Opening a Bank Account in the UK Offshore Bank Account

We Accept

DOES THE COMPANY OR PARTNERSHIP I WORK THROUGH MEET THE FOLLOWING CONDITIONS? IF YOUR SERVICES ARE SUPPLIED THROUGH A COMPANY

The rules apply if: you (or your family*) control more than 5 per cent of the ordinary share capital of the company. Or, you (or your family*) are entitled to receive more than 5 per cent of any dividends from the company. Or, you receive, or could receive, payments or benefits from the company which are not salary, but could reasonably be taken to represent payment for the services you provide to clients.

IF YOUR SERVICES ARE SUPPLIED THROUGH A PARTNERSHIP OF WHICH YOU ARE A PARTNER

The rules apply if: you (or your family*) are entitled to 60 per cent or more of the profits of the partnership. Or, all or most of the partnership's income comes from providing services to a single client. Or, the profit sharing arrangements in the partnership are designed to ensure that you receive an amount based on the payments received for your services to clients. (* family includes an unmarried partner)

WHAT HAPPENS IF THE RULES APPLY TO MY CONTRACT?

Our Service

We provide a fast online service for company registration, LTD company formation, and business incorporation in England, Wales and Scotland. When first setting-up a business there are many issues to consider. You need to decide whether or not to incorporate your business, and to choose a structure for your business. There are several types of legal business entities which you can choose to operate as. For more information on these choices, follow the links below. We advise that professional legal and financial advice is obtained before a final choice of business entity is made. Sole Trader (Self-Employed) Limited Company Public Company Company Limited by Guarantee Limited Liability Partnership Branch or Place of Business Coddan is a leading service provider in the field of English, Scottish and Irish company formation and company registration. We can help you in starting a business in England & Wales Scotland and Northern Ireland. Over 95% of our companies are incorporated within 6 hours. The electronic submission of information enables a fast company start-up satisfying all of the required legal formalities: a director, a secretary, a registered office and shareholders. Our electronic filing software has been approved by Companies House.

Related Articles

--- Find Our Popular Pages --- Setting-up a Company Yourself Setting up a Limited Company Advantages of a Limited Company UK LTD Compared to other Business Structures Reasons to choose a UK LTD Formation UK LTD Tax and Liability Benefits Starting or Creating a Company Register a British Company Registering Company in England Limited Company Registration Company Registration Agent Cheap Company Formation Fast Company Formation Opening a Bank Account Open a UK Bank Account Open a Bank Account in London UK High Street Banks Accounts Setting a High-Street Bank Account What is a Company Limited by Guarantee? Forms for Incorporating a Club Incorporate a Foundation Starting, Running, Closing a Company Starting, Running, Closing a Company Restoring a Struck-Off Company Restoring a Dissolved Company Company Dissolution Dissolution and Restoration Choosing a Form of Business Ownership Business Organizational Structure Electronically Companies Formation Small Business Structures UK Business Start-Up Advice Starting-Up a Public Company Company Formations Benefits How to Register an Organization Methods of Setting-Up a Company Company Formation Procedure Starting Your Own Business London Registered Agent Private Limited Company Advantages Register a Company Limited by Guarantee Business Incorporation in Ireland Online Company Registration Agent Register Your Business in Scotland Offshore Trust and Foundation Formation Choosing Offshore Business Structure Offshore Corporations Advantages Non-Profit UK Company Incorporation FAQ for Company Start-Up Nominee Company Secretarial Service Electronic Company Setting Up Procedure Starting Limited Company Benefits Investment Holding Company Starting a Business in Delaware Delaware LLC Structures Why Incorporate in New York? Register Your Business in Florida Virtual Office Services in London London Serviced Offices for Rent Company Secretarial Service Incorporate or Form an LLC Incorporate in Delaware Today LLC Basics How to Form an LLC Why Incorporate in Nevada? New York Business Incorporation Company Formation in California Florida Company Registration Forming an Offshore Company for - £300 Why Establish an Offshore Trust? Non-Charitable Foundation BVI Business Incorporation Shelf Companies for Sale Delaware Ready-Made LLC Virtual Service in London Should I Start a Small Business? What are the Benefits of Starting Business? What are the Different Types of Business? Start a Home-Based Business How Do I Register My Business? Can I Operate a Small Business from Home? Guide to Starting a Business Limited Company vs Sole Trader How and Why to Register a Trademark Tax Information for Limited Companies UK LLP Formations Bookkeeping & Accounting International Corporate Accounting Audit & Accounting Bookkeepers &emp; Accountants Business Planning & Advice Payroll & VAT Registration Small Business Bookkeeping Bookkeeping & Tax Service Best Accounting Outsourcing Firm Fundamentals of Bookkeeping Accounting Software Accounting Terms Book-Keeping & Accounting Bookkeeping Software Solutions Small Business Advice Start in Business Business for Sale Business Start-up Basics Small Business Planning Complying with Data Protection Law Employing People Free Start-Up Business Guide Starting a Small Business Small Business Finance Start Up Advice Starting Up & Running a Business How to Set Up a Company in the UK Running a Small Business Small Business Support Services Work Permit & Work Visa Guide to UK Immigration UK Work Permits UK Work Visa Services HSMP Highly Skilled Migrant Programme UK Immigration UK Work Permit Permits UK Work Visa Service Do I need to Get a UK Work Permit? Obtaining a UK Work Permit UK Business Immigration Sole Representative Visas for Employers Citizenship and Naturalisation Business and Commercial Work Permits Visas for Persons Wishing to Start a Business Business Investors Visas Business Innovators Visas Training and Work Experience Visas UK - Study/Training Visas UK - Personal Immigration Registering a UK Trademark Fast Trademark Registration Trademark Search Trademark Registration Services How to Apply for a Trade-Mark How to Register Trade-Mark Brand Name Protection Online Trademark Registrations What is a Charity? Why Become a Charity? What Rules do Charities Have to Follow? Types of Charities Do You Qualify as a Charity? Applying for Charity Status Registration of Charity Applying for Tax Exemption Compulsory VAT Registration When to Register for VAT Value Added Tax Registration Pre-registration VAT Limits for VAT Registration Assistance with VAT Registrations VAT Registration Processing Should I Start a Small Business? What are the Benefits of Starting Business? What are the Different Types of Business? Start a Home-Based Business How Do I Register My Business? Can I Operate a Small Business from Home? Guide to Starting a Business Limited Company vs Sole Trader How and Why to Register a Trademark Tax Information for Limited Companies --- Find Best UK Prices & Packages --- Private Company Limited by Shares - £32.00 Public Company Limited by Shares - £52.00 Limited Liability Partnership - £125.00 Company Limited by Guarantee - £42.00 Flat Management Company - £42.00 Bearer Shares Company - £142.00 Holding Company - £52.00 UK Branch Office - £150.00 UK Place of Business - £150.00 Registered Office Address - £50.00 Nominee Secretary - £49.95 Nominee Director - £125.00 Nominee Shareholder - £100.00 Shelf Companies - £99.00 Private Company Limited by Shares - £32.00 Public Company Limited by Shares - £52.00 Limited Liability Partnerships - £125.00 Non-Profit Company - £42.00 Property Management Company - £42.00 Holdings Company - £52.00 Scottish Branch - £150.00 Scottish Place of Business - £150.00 Registered Office Address - £50.00 Nominee Secretarial - £49.95 Nominee Directorship - £125.00 Nominee Shareholders - £100.00 Shelf Companies - £99.00 Private Limited Company - £89.95 --- Find Offshore Fees and Packages --- Bahamas Offshore IBC - £805.00 BVI Off-Shore IBC - £525.00 BVI Guarantee Company - £960.00 BVI Limited Partnership - £960.00 Belize Offshore IBC - £450.00 Cyprus LTD Company - £1,100.00 Cyprus Guarantee Company - £1,100.00 Cyprus Limited Partnership - £1,100.00 Gibraltar Non-Resident LTD - £500.00 Hong Kong Limited Company - £660.00 Hong Kong Guarantee Company - £660.00 Hong Kong Limited Partnership - £660.00 Nevis Offshore IBC - £500.00 Nevis Offshore LLC - £500.00 Nevis Exempt Partnership - £550.00 Nevis Limited Partnership - £550.00 Nevis Exempt Company - £550.00 Nevis Private Company - £550.00 Nevis Public Company - £550.00 Panama Corporation - £490.00 Panama Foundation - £700.00 Panama Limited Partnership - £700.00 Seychelles Offshore IBC - £300.00 Seychelles Offshore PCC - £1,450.00 Seychelles Limited Partnership - £700.00 Seychelles Special Company - £950.00 St. Kitts Offshore IBC - £500.00 St. Kitts Exempt Partnership - £550.00 St. Kitts Limited Partnership - £550.00 St. Kitts Exempt Company - £550.00 St. Kitts Private Company - £550.00 St. Kitts Public Company - £550.00 St. Vincent Offshore IBC - £550.00 Off-Shore Shelf Companies --- Find Best USA Prices & Packages --- Alabama Alaska Arizona Arkansas California Colorado Connecticut Washington D.C. Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming --- Popular Offshore Jurisdictions --- Anguilla Argentina Bahamas Belize British Virgin Islands Costa Rica Cyprus Isle of Man Gibraltar Guernsey Hong Kong Jersey Netherlands Antilles Nevis Panama Portugal Seychelles St. Vincent Venezuela Uruguay --- Ready-Made Companies List --- UK Shelf Companies Scottish Ready-Made Business Arkansas Readymade Companies Delaware Off-The Shelf Companies Florida Aged Companies New York Vintage Companies Nevada Shelf Companies BVI Ready-Made Companies Belize Readymade Company Seychelles Shelf Companies Gibraltar Ready-Made Company Nevis Shelf Companies

Your company/ partnership should operate Pay As You Earn (PAYE) and pay NICs on any payments of salary during the year in the usual way. You may also have to pay an additional amount of tax and NICs, based on the payments received by your company or partnership for your services, at the end of the tax year or earlier, if you break your connection with the company or partnership during the year. Your company or partnership will also pay employer's NICs on the same amount. The following section tells you how to calculate any end of year payment.

WHAT SHOULD I DO AT THE END OF THE TAX YEAR?

At the end of the tax year you will need to check that you have paid the correct amount of tax and NICs. If not, you may have to pay additional tax and NICs. To calculate if any tax or NICs are due at the end of the year. Add up all the payments your company or partnership has received for your services, under contracts to which the rules apply. Deduct 5 per cent from this total. This is to allow for the costs involved in running your company or partnership. There is no need to show how this money is used. Add any other payments and the value of any benefits in kind (such as the use of a car) you have received directly, not through your company or partnership, for services provided under the contract, if they are not already taxable.

Deduct any allowable expenses met by your company or partnership. Deduct any earnings that you have received from your company or partnership in the tax year on which PAYE has been operated and NICs have been paid, and the value of any benefits in kind (such as a car) provided by your company or partnership on which tax and NICs are payable. Deduct the employer's NICs that your company or partnership has paid on the earnings (but not employee NICs) and Class 1A contributions due on the benefits in kind. NICs should be calculated on an annual basis, whether or not you are a director of the company, Card 12 Company Directors - National Insurance contributions).

Work out the amount which, together with the employer's NICs due on it, comes to the amount calculated after Step 6. The result is known as the 'deemed payment'. If the deemed payment is greater than zero you will need to pay more tax and NICs and you should include it in the calculation of PAYE and NICs for the pay period in which it falls. There is an example of how to calculate a deemed payment at the end of this leaflet.

COMMON QUESTIONS

Does the deemed payment have to be paid as salary on 5 April? No. The deemed payment is simply a means to calculate the tax and NICs due, whether or not any payment is actually made to the worker. It can be paid as salary, but the rules do not require this to happen. It may be given to the worker (or others) in the form of dividends, or may be retained in the company. You will not have to pay tax twice on the deemed payment if it is paid as dividends. Your Tax Office can explain to you how the tax payable on the dividends can be offset.

The deemed payment and employer's NICs due on it can be deducted when calculating your company's corporation tax. Companies should be aware an extra payment of tax and NICs may be due at the end of the tax year and budget accordingly. When must I pay any additional tax and NICs? Any tax and NICs due at the end of the tax year as a result of the calculation of the deemed payment should be paid according to the normal PAYE and NIC payment rules. The amount of the deemed payment and the tax and NICs due on it should, if possible, be included in the PAYE return by 19 April and in the Employer's Annual Return (Form P35), which has to be sent to the Inland Revenue by 19 May.

Most of the information needed to calculate the final tax and NICs liability should be available before 5 April and it should be possible to make an estimate of the tax and NICs due at that point. It will be important to keep records of relevant income and expenditure so that you can do this. However, if it is not possible to calculate the correct amount by 19 April, the Inland Revenue will accept a payment of a lower amount on account of the tax and NICs due, as long as it is made clear on the Employer's Annual Return (P35) that the amount is provisional.

There will be an interest charge on any of the tax or NICs due on the deemed payment, if it is paid after 19 April. But, if you make it clear on the P35 that the amount is provisional, no penalties will be charged if you pay the correct amount by the following 31 January. This concession on penalties will apply for the tax year 2000/ 01 and will be reviewed to establish whether it should continue to apply for subsequent years. If you do not send the final amount by 31 January following the end of the tax year, the Inland Revenue will take steps to collect any unpaid tax or NICs, and any interest due. In addition penalties may be sought in cases of negligent or fraudulent conduct.

What if I stop working through my service company or partnership before the end of the year? If you stop working through your service company or partnership before the end of the year, the deemed payment should be calculated in the normal way, and will be treated as having been made immediately before you stop. Please contact your Tax Office for further advice.

What expenses can I deduct in calculating the deemed payment? In addition to the flat rate deduction of 5 per cent, the following expenses can be deducted in the calculation. Any expenses met by your company or partnership that an employee of the client would have been able to claim against income tax if he or she had spent the money personally (such as certain travel expenses, professional subscriptions and premiums for professional indemnity insurance).

Any pension contributions paid by the company to an approved pension scheme for your benefit (but not for anyone else). What travelling expenses are allowed in calculating the deemed payment? This will depend on your pattern of working. If you work through your company or partnership for a series of clients in different places, you may be able to deduct the costs of travelling to your clients' places of business. Provided you do not expect to spend more than 40 per cent of your working time at any one site you are entitled to a deduction for all journeys from home to the clients' premises.

If you do spend more than 40 per cent of your time at a single site, but the engagement is both expected to, and actually does, last for no more than 2 years, a deduction for travel costs will also be available. What about company cars? If you use a car owned by your company or partnership for business travel, a deduction can be made in the calculation of the deemed payment for the costs of that business travel met by your company. You may use the actual costs or the Inland Revenue's authorised mileage rates. Expenses incurred in the course of private use of the car cannot be deducted in calculating the deemed payment.

If the company or partnership provides you with a car for your private use, you will have to pay tax on this benefit according to the rules which apply to other employees. The amount of the car benefit charge can be deducted (at Step 5) in calculating the deemed payment. Class 1A NICs paid on the company car benefit will be deductible in the calculation of the deemed payment, alongside other employer's NICs.

Your company or partnership will be able to set any costs of providing the car, including capital allowances, against its taxable profits. What do I need to put on my Self Assessment return? The deemed payment is treated as income from employment with the company or partnership. It should be recorded on your Self Assessment return on the supplementary employment pages. If you have any other income from employment with the same company or partnership you should record the total amount, including the deemed payment.

How do I apportion expenses between engagements that are affected by the new rules and those which are not? In calculating the deemed payment, you can deduct expenses paid by the company or partnership which you would have been allowed to claim against tax if you had been an employee of the client, and spent the money yourself. These expenses must relate specifically to your engagement with that client. You will have to keep suitable records to be able to identify the correct amounts. For example, this could be by reference to car mileage to work out what part of the motoring expenses related to engagements affected by the new rules.

If a client makes a single payment in respect of two or more workers, how will the income be split between them? This will depend on the particular facts and circumstances. If a company or partnership receives a payment in respect of services provided by more than one worker, the payment should be apportioned between them, by the company or partnership, on a reasonable basis. The Revenue will re- apportion any payment if it appears the company's or partnership's basis of apportionment is unreasonable. The company can appeal against the decision of the Inland Revenue.

What are my tax and NICs liabilities if I work overseas? If you work overseas your tax and NICs liabilities are the same as if you were employed directly by the overseas client.

Can I avoid the legislation by using an offshore service company? No. If you would have been liable to UK tax and NICs had you been employed directly by the client, you must pay UK tax and NICs under these rules, whether or not your service company is located in the UK.

If an offshore company fails to deduct and account for PAYE tax and NICs under the legislation, liability to pay tax and NICs can be transferred to you. Action to recover employer's NICs not paid by an offshore company could also include action against any assets of that company located in the UK.

The Inland Revenue has powers to obtain details of payments to offshore companies from the records of clients and agencies.

Where can I get advice about whether the legislation applies to my contracts? Advice can be given on existing contracts only. If you are not sure whether the new legislation applies to a particular engagement, advice will be available from local Tax Offices. They will give a written opinion about employment status for tax and NICs purposes.

The Inland Revenue will review the facts. This will involve looking at whether the relationship between a worker and a client would have been one of employment, if there had been no company or partnership. In order to do this, the Inland Revenue will review the contract or contracts which establish the relationship. They may also talk to you and to others. If you do not agree with the opinion given by the Inland Revenue, and further discussion has failed to achieve agreement, you can request a formal decision against which you can appeal.

IMPORTANT NOTE

Our corporate, tax and securities lawyers have extensive experience in the issues involved in all type of business entities, including corporations, private limited companies, public companies, limited liability companies, limited partnerships, general partnerships, limited liability partnerships and professional associations. Our lawyers advise clients in the choice of entity to utilize for any given business venture. Such advice includes the tax advantages of the respective entities as well as the non-tax or business issues involved in each type of entity.

Our lawyers continue their representation of such entities on an ongoing basis and advise the entity and its owners regarding the business issues which arise from time to time (such as labor and employment issues, tax issues, negotiating contracts, securities issues and licensing and regulatory matters). Our lawyers also represent many entities which are involved in negotiating mergers with other entities or acquisitions of other entities. This representation includes advising the business and the owners on the purchase or sale of a business and on tax-free mergers or other reorganizations of business entities, as well as structuring divisions of an existing entity into two or more new entities.

We structure a variety of commercial lending transactions including corporate loans, real estate development loans, asset based loans, agri-business loans, floor plans and home builder lines of credit. Members of our firm advise financial institution clients and their corporate counsel on a daily basis with respect to general lending issues including those relating to UK and Cyprus documentary stamp and intangible taxes, bankruptcy and creditors' rights, environmental concerns and problem loans. We have extensive experience in complex loan workouts.

The firm's Trusts and Estates attorneys specialize in estate and trust administration matters and the development of estate tax planning strategies designed to help our clients achieve maximum savings in income, estate, gift and generation skipping taxes. Our Trusts and Estates attorneys handle the traditional aspects of personal estate planning, such as the preparation of revocable trusts, wills and irrevocable trusts, and also deal with all aspects of tax controversies with the Internal Revenue Service dealing with estate, gift and generation skipping tax, including filing estate and gift tax returns, representing our clients in audits of those returns, and appeals to the IR and courts of proposed tax deficiencies.

Our attorneys monitor the latest developments in both tax and non-tax laws affecting estates and trusts and lecture extensively on those subjects around the country to numerous professional groups and organizations. The firm's Trust and Estate attorneys are proficient in analyzing and implementing the latest techniques to reduce estate and gift taxes, including, for example, family limited partnerships, GRATS and charitable remainder and lead trusts.

The firm's Trusts and Estates attorneys also advise our clients on the income, gift and estate tax consequences of charitable gifts; handle the negotiation and preparation of marital agreements; provide asset protection planning for individuals; and have extensive experience in the establishment of private and publicly supported charitable organizations, international estate planning and estate and trust litigation, as well as post-mortem tax planning. We recognize that a client's estate planning needs and matters that arise in the course of estate planning and administration frequently require expertise in other areas of the law, and we work closely with the firm's attorneys in other practice areas, including litigation, real estate, corporate and tax, to provide our clients with thorough legal advice.

Live Help:
Live Help is a real time "chat" feature which enables you to interact with a customer service representative without a phone call. Get answers to your questions while using our website. Clicking the "Live Help" button will start an on-line session with one of our representatives. Live Help is currently available during normal business hours. Outside of the above opening hours, our business center will be closed. When you click on the button, you will see an e-mail form that will allow you to send us a mail with your questions. Live Help is free! There are no hidden fees. We offer the service as a courtesy to our website visitors.

Dear visitors, while having a chat session with a customer, we are frequently requested to give a piece of advice on tax planning or business structuring. We would like to inform you that it is against our principles to provide online advice pertaining to these issues. The points that may be covered during a session include service description, package or service price, navigation at our website, ways of making an order, methods of payment etc. Yet, if you wish us to provide you with advice on tax or business structuring, you should be aware that this service is chargeable.

If you have any questions please E-Mail or call us: 0800 081 1510 or +44 (0) 207 637 3881, fax: +44 20 7681 3318.