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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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, I am working in construction industry and I want to

Customer Question

Hi,
I am working in construction industry and I want to open my own limited company.
Please advice me what taxes I have to pay if:
- I invoice them for labour cost and the contractor will deduct 20%.
even if it is an a limited company the payments are for labour cost, so I need this monies for my personal expenses (rent, food,shooping etc)
- If the payment is for labour(work that I done)into my business account how can I use the monies for my personal things ?!
do I have to make a bank transfer from business account to personal account - the company is paying another taxes (already was deducted 20%)
do I have to transfer to myself as wages !?
or I can use the monies from business account for my personal expenses as long as I paid the taxes
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.

Look here for information running a limited company and your responsibilities as the director/shareholder.

Take a look here for information on corporation tax. A company with profits up to £300,000 per annum pays corporation tax at 20%. In fact, from 1 April 2015, there will be a single rate of corporation tax regardless of the level of the profits it makes.

Your company will need to set up a PAYE scheme even it pays no salaries as the CIS tax is claimed through the PAYE system in priority to being offset against the corporation tax liability of the company. If there is no PAYE liability, all the CIS tax deductions your company has suffered will be repaid on request after the end of the tax year on 5 April. You can then use that to fund your corporation tax liability which will be payable nine months and one day after the end of the company's accounting period.

The company will also need to register with the CIS to avoid tax deductions at 30%. You can do that here.

You should operate a seaprate bank account for the company. You can pay yourself wages and/or take dividends to live in by transferring money from the company bank account to your personal bank account. You can refund yourself from the company bank account for business expenses paid by you personally from your own funds or on your own credit or debit card. It would be preferable to avoid paying personal expenses from the company bank account.

If you take your income from the company in the form of dividends, there will be no NIC charges on those. You can read about how dividends are taxed here.

If I were you, I'd have an accountant do all the compliance work for you as it can be onerous and there are penalties for late submissions.

I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.

Conclusion:

In one year if the company issues invoices for :

Gross amount : £ 50000.00

Less 20% CIS Tax £ 10000.00 (company is CIS registered)

Total Income £ 40000.00

Expenses around £ 3000.00

Profit = £50000.00-£3000.00=£47000.00

I already paid £ 10000.00 tax ( the contractor deducted it)

What else do I have to pay to HMRC?( NI, corporation tax?!)

Expert:  TonyTax replied 1 year ago.

The company will only pay employer NIC if salary is paid above a certain level. Take a look at 4 here for information on the Class 1 NIC thresholds. Currently, the first £2,000 of an employer's NIC liability is discounted to £0.

You will get credit for CIS tax deducted from your invoice amounts against your PAYE liability and if you have no PAYE liability or it is lower than your PAYe liability, the CIS tax will be repaid to you for you to use to pay your corporation tax liability.

Expert:  TonyTax replied 1 year ago.
If you have a £47,000 profit, your corporation tax liability will be £9,400. Assuming you get back all the CIS tax your company has suffered, you can use that to pay the corporation tax liability.

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