Off to see the accountant some time in the next week or so, and I’m sure he’ll explain stuff, but I would always rather ask a truck driver first, particularly one who has been down this road before me.
I’m going to be trading as a Limited Company, and I will be operating one vehicle at first which I will drive myself.
What’s the usual procedure in this situation? Will it be best if I am an employee of my company for example? Or something else?
If so, obviously I want to minimise my exposure to PAYE and N.I. etc and so pay myself as small an amount as possible. What is the minimum I can get away with paying myself? Can I claim nights out?
What other advice would people have? Apart from “Don’t do it!” of course! 
Your accountant will probably tell you that ltd wasnt the thing to do.
puntabrava:
Your accountant will probably tell you that ltd wasnt the thing to do.
I’m not sure about that, the only real alternative would be to go as a Sole Trader and I don’t think anyone sees any advantage to that- although I am willing to be corrected.
When I started in November last year I was advised by my accountant to go ltd company as its more beneficial from a tax perspective. Basically you will only get taxed on £6500 or something around that amount which will go down as salary. Night out money can be claimed tax free as you will be an employee of your ltd company, all they will ask is that you keep a record of nights out incurred (diary or notebook etc). The rest of your money will be given as “dividend vouchers”. These will be made out for the difference between your taxable salary and the money you withdraw as wages in the financial year and will be used as proof of your tax relief with HMRC. Any good accountant will keep you on the straight and narrow with regards your contributions, I over thought it all at first and was worried about falling foul of the tax system but my accountant keeps everything in check! Sorry this isn’t paragrahed and seems a bit monotonous but its late and I’m ready for bed! Anything else give me a shout! Cheers.
Harry Monk:
If so, obviously I want to minimise my exposure to PAYE and N.I. etc and so pay myself as small an amount as possible. What is the minimum I can get away with paying myself? Can I claim nights out?
It’s usually best to pay yourself the smallest salary possible and then take the rest of the profit (hollow laugh) as dividend. But in the 15 years I’ve run a ltd company the exact advice has changed several times, as various court cases between the Revenue and various oppressed small businesses have occurred.
At the bare minimum, you will have to pay yourself NMW - but obviously you can be the meanest of employers to yourself, and not pay breaks, etc. You may find that some kinds of dispensation on expenses are less easily given out to small business than to large ones - you’ll need proper advice from the accountant on this, because what’s acceptable or not to HMRC constantly changes, and some things can be negotiated with the tax office, though I certainly wouldn’t blunder around trying to do this myself.
There’s also the point of trying to avoid drawing attention to yourself by pushing things too far, even though more aggressive tax planners might recommend some clever wheeze - my strategy has been to use accounts who seem to have roughly the same desire for risky tax planning as I do (that’s a bit, not very much), and then take their advice.
Harry Monk:
What’s the usual procedure in this situation? Will it be best if I am an employee of my company for example? Or something else?
If so, obviously I want to minimise my exposure to PAYE and N.I. etc and so pay myself as small an amount as possible. What is the minimum I can get away with paying myself? Can I claim nights out?
The usual procedure to minimise your tax liability is to employ yourself and pay yourself a salary that is about level with your personal tax free allowance (currently just over £8000/year), then claim as many legitimate tax free expenses as you possibly can (including nights out, mid day meal allowances, use of home as an office, washing your uniform, any mileage in your own car that you can justify as business related, etc.), and then take whatever you want/need to draw from the company on top of that lot as a dividend.
If your other half isn’t currently using her £8k/year tax free allowance then you’ll save more tax by paying her £8k/year to help out with the administrative side of the business too. Doing that would save you the 20% small companies rate corporation tax on that £8k which is £1.6k/year.
Paul
wilbur:
At the bare minimum, you will have to pay yourself NMW
Not true - as a director of the company you are exempt from the NMW and you can pay yourself as little as you like.
Source: direct.gov.uk/en/Employment/ … /DG_175114
Paul
LTD is by far the right idea. if you become ill, or make a success, and decide to sell up. you will have a company with an o’licence, fuel accounts etc to sell.
as a sole trader you will have a lorry for sale, and that’s about it.
you can pay yourself a wage of say £7500 per year, and pay her indoors the same. so that’s £15000 tax free.
on top of that you can claim nights out, and it dosn’t have to be the rha/hmrc agreed rate. you can agree an alternative rate with the tax office.
ask your accountant how you stand with paying yourself dividends. it was £10000 tax free, but the government have closed, or at least spoke about closing this loophole.
work out how much you have put into the business, you can pay this back to yourself as a directors loan every month.
Cheers Phil, that’s led me on to another question.
In CM a few months ago I saw an advert saying “Newly formed transport company for sale”, with just a phone number and I wondered what was actually being sold? As I understand it, anyone buying that company would need to apply for a major change, have their own CPC, inform companies house of the buy out etc etc etc?
What kind of value or price would something like that command?
repton:
wilbur:
At the bare minimum, you will have to pay yourself NMW
Not true - as a director of the company you are exempt from the NMW and you can pay yourself as little as you like.
Source: direct.gov.uk/en/Employment/ … /DG_175114
I think that only applies to your work as the company director, and that driving a lorry isn’t part of being a company director, it’s part of being an employee of the company (i.e. a ‘worker’ under the NMW rules).
But all legal advice on the Internet is worth exactly what people pay for it, and mine is no better than normal.
Harry Monk:
Cheers Phil, that’s led me on to another question.
In CM a few months ago I saw an advert saying “Newly formed transport company for sale”, with just a phone number and I wondered what was actually being sold? As I understand it, anyone buying that company would need to apply for a major change, have their own CPC, inform companies house of the buy out etc etc etc?
What kind of value or price would something like that command?
people have been at it for a long time.
mr legitimate forms a haulage company, all above board. then sells it for about £30k+. although its never traded.
it’s usually bought by someone that would struggle to get it sorted through the front door approach.
quite often the directors that take over don’t exist, but they use a scapegoat transport manager (usually freelance).
you know how long it takes for your paperwork to be checked for a new o’licence. it takes a long time for the new directors to be checked out, but they trade it in the mean time.
harry im pretty sure as a basic rate tax payer when you pay yourself a dividend on your yearly profit you will only pay the basic rate tax and no national insurance contribution.
Thanks to all for the replies, very helpful. I will go with the idea of paying myself a minimal amount.
Assuming there is money left over, as I see it I can either pay myself a dividend or use it to fund further purchases for the company. If I did the latter, and theoretically speaking built up the company to half a dozen trucks and trailers, and then sold the lot, what tax would I have to pay on the money I obtained from these sales?
you would have corporation tax to pay on any profit. and any sales of vehicles, plant and equipment may be subject capital gains tax. however there are time limits for capital gains tax. for example if you buy a truck, then sell it in the same tax year for a profit, then you will be liable for capital gains tax, and corporation tax, however if you make a profit on it in the next tax year, then only corporation tax will be payable.
but remember they shift the goal posts quite often, and its been a long time since i was in business for myself.
don’t be afraid to try it on. put everything you can think of through the books, they can only say no.
wilbur:
I think that only applies to your work as the company director, and that driving a lorry isn’t part of being a company director, it’s part of being an employee of the company (i.e. a ‘worker’ under the NMW rules).
But all legal advice on the Internet is worth exactly what people pay for it, and mine is no better than normal.
Reading the link I put it says “If you also have an employment contract or worker’s contract you will be entitled to the National Minimum Wage for the work you do under that contract.” Well, I don’t have either of those contracts with myself so I consider myself exempt.
My accountant assures me that this interpretation is correct and as I am a director I am completely exempt from the NMW, and that’s good enough for me.
Paul
repton:
Reading the link I put it says “If you also have an employment contract or worker’s contract you will be entitled to the National Minimum Wage for the work you do under that contract.” Well, I don’t have either of those contracts with myself so I consider myself exempt.
My accountant assures me that this interpretation is correct and as I am a director I am completely exempt from the NMW, and that’s good enough for me.
Yes, he’s right and I’m wrong - there was confusion about this at the beginning of the NMW (why I was given over-cautious advice years ago) but apparently it’s been explicitly clarified now: icaew.com/en/technical/tax/t … -Wage.ashx. The NMW act talks about ‘implied’ contracts as well as explicit ones, but apparently directors don’t even have them.
Good news all around…
wilbur:
but apparently it’s been explicitly clarified now: icaew.com/en/technical/tax/t … -Wage.ashx.
I had not seen that document, thanks for linking it. For those who can’t be bothered to read it here is the relevant paragraph:
If a person is a director and he does not have an explicit employment contract, then
he is highly unlikely to be subject to the NMW legislation even when he carries out a
wide variety of activities. These might include, for example, working in the
company’s shop. Such activities can be done in his capacity as an office holder
(director), rather than as a worker. If a director has an explicit employment contract
he will be within NMW in respect of earnings under that contract as he and the
company will then have chosen to create a worker/employer relationship alongside
the director/company one.
Paul
The best advice is to get a good accountant, a bad one will cost you money and present your company in a bad light, I’ve seen some shocking accounts recently that make the company look a bad risk when in fact they aren’t.
ltd the way forward especially if csa on your back
can only take your salary as a diveidend not a guarantee income
stops greedy ex wives screwing you over