I've been helping a friend who has been working as a sports therapist for the last couple of years. An accountant would make up accounts up to the 31 July each year and submit a self assessment on her behalf. She has never earned enough to pay tax before. On the 1st July this year she registered as a limited company so she has 11 months when she was self employed and the 12th month registered as a limited company.
So I have two questions:
1. Can she submit a self assessment for 11 months? From 1 August 2013 - 30 June, so that all income for the 11 months prior to launching the limited company.
2. Is it possible that all money earned from 1 July can go through the limited company?
3. Does she need to continue to do a self assessment each year.
Your client is not the limited company, she works for the limited company that she owns all of the shares for.
For her self assessment you have the self employed pages to fill in for the 11 months. You also have an employment to fill in on the self employment for one month.
There is distinct seperation between the limited company and the self employment. (the limited company being a seperate legal entity).
Yes she needs to continue to do a self assessment every year.
You really need to involve an accountant (preferably the existing accountant) during this transition as what about transfer of assets, sorting out closing down the self employment including any issue over basis periods from the start of the business, starting a PAYE scheme, etc. etc.
Its worth pointing out to your client now that she has a fiduciary duty of care for the limited company not dissimilar to the duty of a parent for a child.
You will probably find that it is difficult to get the client out of the habbit of thinking that the companies money is hers... Which ity is but she cannot think of it as an extension of herself the way that one does with self employment.
Remember that you will also be moving from Class 2 and 4 NI to Class 1 (employee and employer) NI.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
1. Yes, if been sole trader for a number of years the final sole trader period will be the 11 months to 30 June 2014 which will be assessed in tax year 2014/15.
2. Yes, if the money earned has been invoiced and received by the limited company.
3. Maybe. HMRC like directors to do a tax return (assume she is a director of the ltd company). But legally only need to do a return as a director if she is either requested to do a return by HMRC or if she has untaxed income to be declared.
