seriously looking at going self employed …currently tramping for stobarts good job but had enough of tramping …my question is any one gone on to it and wished they never done it …cause all im earing off lads that i know have done it …its the best thing they have ever done
I am self employed but been told by the agency and my accountant to either start a limited company or go PAYE. So I am going to start a limited company and claim everything I can 
I have spoke to a few drivers now and it is the way to go AND get on that flat rate VAT malarkey if you can to claim your VAT back
Downsides not mentioned…
- Claiming everything you can and on paper making your income far lower than it actually is for tax purposes will massively affect your ability to get credit. If you earn £26k gross but after expenses etc it comes to £10k then as it says £10k on your P60 or accounts then that is what you are classed as earning by lenders. They don’t give a stuff that the rest of what you say are expenses only exist on paper, they can only take what is on your P60 or net figure on your accounts.
Nowadays affordability tests are applied by lenders to loans and mortgages. If your declared income is quite low then there’s a very good chance you’ll be declined even though in reality you do earn plenty to easily afford it.
-
You have no protection under employment law. This leads to several disadvantages:
a) Your services can be dispensed with at a moments notice.
b) They don’t actually have to pay you on time or in fact at all. You’ve merely raised an invoice and if they decide to dispute it or not pay it then you’ve got several months of county court to try and get your money.
c) All responsibilities of an employer fall onto you - buying and providing PPE, sick pay, maternity/paternity, compensation claims if you get injured at work.
d) As an agency worker you lose protection under Agency Workers Rights Regulations. That means that you’re not entitled to the same pay as the place you’re at if they pay more once you’ve been there 12 weeks or if they’re using the Swedish Derogation, pay when there’s no work. -
Future tax liability. HMRC have already altered the guidance in their tax manual from April 2014 for what counts as true self-employment in regards to agency work and looking at it there’s not a single agency that is operating under the new guidelines. HMRC can, do and are on a witch hunt. At some point in the future it may be the agencies you worked at that get targetted and subsequently you. If they decide you didn’t fall under the category of self employed, even if Ltd, then everything you’ve claimed as an expense over the years would be disallowed, treated as income which tax is due on and you would be sent a tax demand for the amount. You would be responsible for paying it, not the agency, as under UK tax law individuals are responsible for ensuring they pay the correct amount of tax even if they’re on PAYE.
-
Income based benefits liability. Related to 3, if HMRC do decide that your income you claimed was an expense wasn’t then any income related benefits you’ve received such as working tax credit would be recalculated based on what HMRC decide was your true income and any overpayment would become immediately repayable.
Ah yes if you want credit cards mortgage car on hp then yes you have a point. I don’t have any credit as I binned that ion my thirties. A lot to be said for staying debt free and guess what, you actually have more money in your pocket and can afford those things you desire.
Likewise but to give you an idea of just how bad the affordability tests are, even though I own two houses, have money in the bank yadda yadda apparently I couldn’t afford a £4k loan repayable over 12 months for double glazing - was interest free so was worth doing. That is because they have a table for expenses which they apply even if you don’t actually have those expenses. For example we rarely go out for a drink but there’s an amount for that which is automatically deducted from your income for the calculations.
So I ended up paying in cash from the money in my ISA the affordability test says I couldn’t possibly afford to save. 
alder:
I am self employed but been told by the agency and my accountant to either start a limited company or go PAYE. So I am going to start a limited company and claim everything I can
You can’t claim any VAT back if you’re on the flat rate scheme. 
Conor:
Downsides not mentioned…
- Claiming everything you can and on paper making your income far lower than it actually is for tax purposes will massively affect your ability to get credit. If you earn £26k gross but after expenses etc it comes to £10k then as it says £10k on your P60 or accounts then that is what you are classed as earning by lenders. They don’t give a stuff that the rest of what you say are expenses only exist on paper, they can only take what is on your P60 or net figure on your accounts.
Nowadays affordability tests are applied by lenders to loans and mortgages. If your declared income is quite low then there’s a very good chance you’ll be declined even though in reality you do earn plenty to easily afford it.
You have no protection under employment law. This leads to several disadvantages:
a) Your services can be dispensed with at a moments notice.
b) They don’t actually have to pay you on time or in fact at all. You’ve merely raised an invoice and if they decide to dispute it or not pay it then you’ve got several months of county court to try and get your money.
c) All responsibilities of an employer fall onto you - buying and providing PPE, sick pay, maternity/paternity, compensation claims if you get injured at work.
d) As an agency worker you lose protection under Agency Workers Rights Regulations. That means that you’re not entitled to the same pay as the place you’re at if they pay more once you’ve been there 12 weeks or if they’re using the Swedish Derogation, pay when there’s no work.Future tax liability. HMRC have already altered the guidance in their tax manual from April 2014 for what counts as true self-employment in regards to agency work and looking at it there’s not a single agency that is operating under the new guidelines. HMRC can, do and are on a witch hunt. At some point in the future it may be the agencies you worked at that get targetted and subsequently you. If they decide you didn’t fall under the category of self employed, even if Ltd, then everything you’ve claimed as an expense over the years would be disallowed, treated as income which tax is due on and you would be sent a tax demand for the amount. You would be responsible for paying it, not the agency, as under UK tax law individuals are responsible for ensuring they pay the correct amount of tax even if they’re on PAYE.
Income based benefits liability. Related to 3, if HMRC do decide that your income you claimed was an expense wasn’t then any income related benefits you’ve received such as working tax credit would be recalculated based on what HMRC decide was your true income and any overpayment would become immediately repayable.
It’s worth the newer members noting that Conor has a penchant for being very doomsday and always writing the worse possible scenarios which, 99% of the time never cause anyone any problems whatsoever. I’m sure he’ll be back any moment now to counter this and tell me that 300 tax and VAT inspectors are currently walking up my garden path as I write and will ■■■■ ■■■■ me for eleventy gazillion pounds because I failed to declare 1p on my earnings last year, but that’s Conor for you.
Left hand down!:
It’s worth the newer members noting that Conor has a penchant for being very doomsday and always writing the worse possible scenarios which, 99% of the time never cause anyone any problems whatsoever. I’m sure he’ll be back any moment now to counter this and tell me that 300 tax and VAT inspectors are currently walking up my garden path as I write and will ■■■■ ■■■■ me for eleventy gazillion pounds because I failed to declare 1p on my earnings last year, but that’s Conor for you.
It’s true he may seem a bit of a doom and gloom merchant on this subject but remember
“Expect the best, plan for the worst, and prepare to be surprised”
This subject comes up alot on here so my advice would be do your research and remember there’s always at least two sides to any discussion, do what’s best for you and yours. What works for one may not work for another.
Hth
Ps
It works for me but it took me quite a bit of time and research to get to this point.
was going to go down ltd company route flat rate vat with accountant… business bank account
Left hand down!:
It’s worth the newer members noting that Conor has a penchant for being very doomsday and always writing the worse possible scenarios which, 99% of the time never cause anyone any problems whatsoever. I’m sure he’ll be back any moment now to counter this and tell me that 300 tax and VAT inspectors are currently walking up my garden path as I write and will ■■■■ ■■■■ me for eleventy gazillion pounds because I failed to declare 1p on my earnings last year, but that’s Conor for you.
I am merely pointing out the downsides that everyone seems to want to conveniently pretend don’t exist. Would you rather be faced with the complete facts or just want to hear the good things? Would you rather know before you start writing everything off against tax that it may bite you in the backside if you want to move house, buy a car etc or would you rather find out when you’re applying for a mortgage, loan or to rent a house and find you’ve failed the income test?
As for the tax man, the IT Consultancy brigade who used to do things exactly the same as haulage and agencies do now were quite blase about it all as well right until HMRC waded in with IR35 and started handing out the tax bills.
Left hand down!:
alder:
I am self employed but been told by the agency and my accountant to either start a limited company or go PAYE. So I am going to start a limited company and claim everything I canYou can’t claim any VAT back if you’re on the flat rate scheme.
Actually yes you can as long as its for a capital expense ie company vehicle
And only once a year
Conor:
Left hand down!:
It’s worth the newer members noting that Conor has a penchant for being very doomsday and always writing the worse possible scenarios which, 99% of the time never cause anyone any problems whatsoever. I’m sure he’ll be back any moment now to counter this and tell me that 300 tax and VAT inspectors are currently walking up my garden path as I write and will ■■■■ ■■■■ me for eleventy gazillion pounds because I failed to declare 1p on my earnings last year, but that’s Conor for you.I am merely pointing out the downsides that everyone seems to want to conveniently pretend don’t exist. Would you rather be faced with the complete facts or just want to hear the good things? Would you rather know before you start writing everything off against tax that it may bite you in the backside if you want to move house, buy a car etc or would you rather find out when you’re applying for a mortgage, loan or to rent a house and find you’ve failed the income test?
As for the tax man, the IT Consultancy brigade who used to do things exactly the same as haulage and agencies do now were quite blase about it all as well right until HMRC waded in with IR35 and started handing out the tax bills.
On one hand yes you are correct about the IT industry being targeted a number of years ago in relation to fake self employment and being classed as disguised employee’s, however on the other hand it should be noted that the IT industry was worth a hell of a lot more to the tax man than the haulage industry. For instance some of those IT contractors who were targeted would of been on the same amount and more A DAY than most Ltd Co. HGV drivers would invoice for the week. The rest would of been on 2 or 3 times a week more than your average Ltd Co. HGV driver.
I’m not for a second saying there won’t be some sort of clamp down on the haulage industry but I bet that any clampdown is more aimed at the umbrella companies who scam and rip off drivers rather than the drivers who set themselves up as a Ltd Co. and do all their own invoices, books, tax returns etc. I would also be willing to bet a substantial amount that the haulage industry is very close to the bottom of their interest. Off the top of my head as I type this I would say that the medical profession & the teaching/education industry would be higher on HMRC’s radar for bogus S/E.
I would also hasten to add that were you to get investigated there is no clear cut answer as to whether or not you would pass the self employment test, not every case can be interpreted by a few sentences of text from the HMRC guidelines.
You are right about the income assessment test but if you manage to get the right balance between putting expenses through the business to reduce tax and income from salary and dividend payments from your profits it is still very possible to show finance companies/banks/credit providers that you have a decent income.
As well as having to be IR35 compliant there is also a very little known but very important piece of legislation which is actively being pursued, the managed service company legislation, so depending on your company and the type of “accountants” you use the managed service company legislation has teeth and will bite!
alix776:
Left hand down!:
alder:
I am self employed but been told by the agency and my accountant to either start a limited company or go PAYE. So I am going to start a limited company and claim everything I canYou can’t claim any VAT back if you’re on the flat rate scheme.
Actually yes you can as long as its for a capital expense ie company vehicle
And only once a year
Yes, you are correct and I should’ve been more specific. But for the most part, he won’t be able to claim the VAT back on day to day running costs/expenses.
HMRC:
Claiming back VAT on capital assetsIf you use the Flat Rate Scheme, you can’t normally claim back the VAT you spend on capital assets you buy for your business. This is already taken into account in the flat rate percentage for your type of business. However, you may be able to claim back the VAT on certain capital asset purchases with a VAT-inclusive price of £2,000 or more. You make these claims by putting the amount of VAT you were charged in Box 4 of your VAT Return.
These are the rules for claiming back VAT when you buy capital assets:
it must be a single purchase of capital goods with a VAT-inclusive price of £2,000 or more. That doesn’t mean you are restricted to claiming back the VAT on a single item - for example, you could buy a pizza oven, fridge and dishwasher, as long as you buy them at the same time from the same supplier and the price is more than £2,000 including VAT
it must be a purchase of capital goods, not services. Capital goods are goods you can use in the business but are not used up by it - for example, a van, computer or bottling machine are capital goods, but not the fuel, printer ink or bottles that go in them. A van leased or hired to you is a continuous supply of services, but one bought on hire purchase is considered a supply of capital goods
you can’t claim back VAT on goods that you intend to either resell, or incorporate into other goods to supply on to someone else
you can’t claim back VAT on goods that you will let, lease or hire out - for example, a bouncy castle
you can’t claim back VAT on goods that you intend to use up (consume) within a year
building materials and work are not capital goods. You can’t claim back the VAT if you have building work done (even if it includes expenditure on materials), and you can’t claim back the VAT if you buy building materials yourself for someone else to build with
as long as all the other conditions are met, you can claim back all the VAT even if the goods will have some private use. For example, if you buy a van but employees are allowed free use at weekends to move private belongings, you can still claim back all the VAT
there is an upper limit on claims for certain items. If you buy something that falls within the Capital Goods Scheme you must write and tell HMRC and leave the Flat Rate Scheme immediately. Goods that fall within the Capital Goods Scheme are computers or items of computer equipment with a VAT-exclusive price of £50,000 or more, or land and buildings, civil engineering works and refurbishments with a VAT-exclusive value of £250,000 or more
IR35 Isn’t a problem in most cases and its very easy to get round
Left hand down!:
alix776:
Left hand down!:
alder:
I am self employed but been told by the agency and my accountant to either start a limited company or go PAYE. So I am going to start a limited company and claim everything I canYou can’t claim any VAT back if you’re on the flat rate scheme.
Actually yes you can as long as its for a capital expense ie company vehicle
And only once a yearYes, you are correct and I should’ve been more specific. But for the most part, he won’t be able to claim the VAT back on day to day running costs/expenses.
HMRC:
Claiming back VAT on capital assetsIf you use the Flat Rate Scheme, you can’t normally claim back the VAT you spend on capital assets you buy for your business. This is already taken into account in the flat rate percentage for your type of business. However, you may be able to claim back the VAT on certain capital asset purchases with a VAT-inclusive price of £2,000 or more. You make these claims by putting the amount of VAT you were charged in Box 4 of your VAT Return.
These are the rules for claiming back VAT when you buy capital assets:
it must be a single purchase of capital goods with a VAT-inclusive price of £2,000 or more. That doesn’t mean you are restricted to claiming back the VAT on a single item - for example, you could buy a pizza oven, fridge and dishwasher, as long as you buy them at the same time from the same supplier and the price is more than £2,000 including VAT
it must be a purchase of capital goods, not services. Capital goods are goods you can use in the business but are not used up by it - for example, a van, computer or bottling machine are capital goods, but not the fuel, printer ink or bottles that go in them. A van leased or hired to you is a continuous supply of services, but one bought on hire purchase is considered a supply of capital goods
you can’t claim back VAT on goods that you intend to either resell, or incorporate into other goods to supply on to someone else
you can’t claim back VAT on goods that you will let, lease or hire out - for example, a bouncy castle
you can’t claim back VAT on goods that you intend to use up (consume) within a year
building materials and work are not capital goods. You can’t claim back the VAT if you have building work done (even if it includes expenditure on materials), and you can’t claim back the VAT if you buy building materials yourself for someone else to build with
as long as all the other conditions are met, you can claim back all the VAT even if the goods will have some private use. For example, if you buy a van but employees are allowed free use at weekends to move private belongings, you can still claim back all the VAT
there is an upper limit on claims for certain items. If you buy something that falls within the Capital Goods Scheme you must write and tell HMRC and leave the Flat Rate Scheme immediately. Goods that fall within the Capital Goods Scheme are computers or items of computer equipment with a VAT-exclusive price of £50,000 or more, or land and buildings, civil engineering works and refurbishments with a VAT-exclusive value of £250,000 or more
I think most are actually right enough to work out how it works for themselves. Or get proper advice from an accountant before starting rather than getting half baked advise off here