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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15708
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am physically disabled (cerebral palsy) due to medical

Customer Question

Hello, I am physically disabled (cerebral palsy) due to medical negligence at birth. My award came through in 1993 after 17 years. That year I was asked to fill out a tax return and did so. Since then I have never received a return from the HMRC. I have spent most of my life unemployed or in education and / or living from home. From 2005-2011 I worked for Accenture as a consultant and paid tax through PAYE. Since then I have been unemployed but there is the prospect of some contract work. My research tells me that working as contractor means complex tax issues. What should my next steps be?
Submitted: 9 months ago.
Category: Tax
Expert:  TonyTax replied 9 months ago.
Hi. Is it clear yet whether you would be working as a contract employee or on a self-employed basis or through your own limited company?
Customer: replied 9 months ago.
Not yet
Customer: replied 9 months ago.
Prefer limited company for simplicity
Expert:  TonyTax replied 9 months ago.
Thanks. Leave this with me while I draft my answer. It will take a while so please bear with me.
Customer: replied 9 months ago.
No worries
Expert:  TonyTax replied 9 months ago.
If you work as a contract employee, then your tax and NIC situation will be straightforward. You'll pay tax and NIC and won't necessarily need to complete tax returns. Your tax position can be assessed at the end of the tax year via a P800 tax calculation to show whether you owe tax or are overpaid. If you work on a self-employed basis, then you will need to keep a record of your earnings and expenses and to complete an annual tax return. The "employing company" would be at risk of being told by HMRC that you are for all intents and purposes an employee so this will probably not be an option in any event. If you work through your own limited company, it would give you the flexibility of deciding how to pay yourself, through salary or dividends or a combination of the two, to minimise your personal tax exposure. The company would pay corporation tax at 20%. Dividends aren't subject to NIC which is why the government has effectively increased the tax charge on dividends from 6 April 2016. In order to avoid the imposition of IR35 on your company which would mean that most of the company's income would be taxable on you as salary, your company's contract with the end user client would need to be IR35 compliant. You've probably read a little about IR35 but it is a minefield. If you are offered a draft contract, you would be well advised to have a firm of accountants or tax advisers who specialise in contractor clients and IR35 off which there are many review it with a view to recommending changes to ensure that HMRC cannot use IR35 to tax all your income as employed income. This is a fairly straightforward process but not something I would tackle on my own if I were you. Once you are up and running, however, things should be fairly simple. I'd advise you to employ an accountant to handle the company tax and Companies House compliance work in any event. You should do a little more internet research and to shop around for an accountant once you have more information about the potential contract work. I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 9 months ago.
I should mention that as a director of your own company you will need to be registered within the self-assessment system but an accountant would do this for you as part of the process of getting you set up with a company which would itself need to be registered with HMRC for corporation tax purposes, as an employer and possible for VAT purposes.
Customer: replied 9 months ago.
Thanks you have confirmed what I suspected, mostly. I will see how the work pans out and take it from there. It looks as if HMRC ill send me a tax return if they deem in necessary or an accountant will do it form me. Is that correct? If I submit one then, hat are the chances of HMRC asking for the rest of my history? I don't want to be hit with any surprises if that can be avoided.
Expert:  TonyTax replied 9 months ago.
You said that you completed a tax return around 1993 which was before the self-assessment system started. It's possible that HMRC may ask about your work history but they won't suddenly send you 20 years tax returns to complete. I doubt you would have any problems convincing HMRC of your situation in the past. I certainly wouldn't lose sleep over it if I were you. As I said in my answer, an accountant will do all the registration compliance for you.
Expert:  TonyTax replied 9 months ago.
Hi.I'm just following up to find out if my answer helped or if you have any further questions.

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