Contractor FAQs

Q1 Do I still need to register as 'self-employed'? Or do I need a contract with my own company?
A1 No and no. You are not self-employed. You are employed by your company, but should not have a contract, otherwise you will have to pay yourself minimum wage through the company.

Q2 Do I have to withhold money for NICs?
A2 Assuming you are not caught by IR35, the only NIC that will be payable is the class 1a NIC on any benefits-in-kind the company pays for.

Q3 How can I put some 'opening cash' into the company to pay for things before I get my first receipts?
A3 Pay this in any way you like (cheque, BACS, etc). This can then be treated as a loan to the company and withdrawn whenever you like with no tax implications.

Q4 What expenses do I need to explicitly keep track of?
A4 In general, anything that you think is a genuine business expense.

The most common expenses are as follows:

  • Travel - inc train fares, parking
  • Mileage - a record of the number of business miles travelled in your own car - I don't need petrol receipts.
  • Subsistence - lunch, coffee, etc when working away from home.
  • Printing, postage and stationery - self-explanatory.
  • IT equipment - Computers, laptops, printers, scanners, etc.
  • Office equipment - chairs, desks, etc.
  • Entertainment - When you take clients out for dinner. NB this is not allowable for corporation tax purposes, but there is no personal benefit on this expense.
  • Use of home - £10 per week.
  • Other - Books, subscriptions, etc.
  • Telephone – HMRC incorporate specific rules with regards the amounts you can claim. If the phone (mobile or landline) is in the company name you can claim the whole cost, if the phone is in your personal name you can only claim the cost of clearly identifiable business calls.

Not the following:

  • Clothes!
  • Holidays!!

Q5 When I personally make a payment for company business do I have to submit an expense claim to the company and then reclaim that as a business expense?
A5 Yes

Q6 If I need to produce an invoice before I get a VAT number do I not charge VAT and submit a separate invoice letter or add VAT in (not show it separately) and say it's inclusive of VAT?
A6 You issue an invoice and where you would normally put your VAT registration number put 'VAT registration applied for'. Show VAT separately as normal on the invoice. Once you have received your VAT number, reissue the VAT invoice correctly.

Q7 On my £672/month salary can you recap why it is that number, confirm it's gross and that it's OK to pay it monthly.
A7 It is that number because above that amount, both employee's and employer's NIC are payable (ie an additional 25.8% tax). It is worth paying up to £672 per month firstly because the company receives corporation tax relief on salary payments and secondly because at that level, you are receiving credit towards your state pension.

Q8 Do I have to issue an official payslip? If so, what format should it take?
A8 No you do not. We will produce a payslip which will be available for you online to access. The details of how to access this will be emailed to you once we have processed your first month’s payroll.

Q9 How often can I pay dividends?
A9 You can pay dividends as often as you like. Most of our clients pay them monthly, with a possible final annual dividend in March for tax planning purposes.

Q10 Can you explain the 10% tax credit on dividends. The voucher states 'no tax credits have been paid to the revenue' then goes on to say 'the dividend has an associated 10% tax credit'.
A10 The dividend has a NOTIONAL tax credit of 10% associated with it. This is not payable to the Revenue. This means that no tax is due on dividends unless you are a higher rate taxpayer. The reasoning behind this is that most companies pay corporation tax on their profits before dividends are paid.

Q11 On your tax calculations under IR35 spreadsheet there are two columns EE's and ER's. What are they?
A11 Employee's and Employer's national insurance contributions.

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Hillier Hopkins is a trading name of Hillier Hopkins LLP, which is registered as a Limited Liability Partnership in England & Wales, No. OC303707. Registered Office: Radius House, 51 Clarendon Road, Watford, Herts WD17 1HP. Registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England & Wales. A list of members of the LLP is available at the above address. HH and Hi logos are trade marks belonging to Hillier Hopkins LLP. © Hillier Hopkins LLP.