Frequently Asked Questions
- How much will it cost?
- Would Competex be prepared to take over the administration of a company that I have already incorporated?
- Why do my clients or the interim provider insist that I have my own limited company?
- What is different about a company?
- Why does Competex act as Company Secretary and provide the registered office?
- Does the Company Secretary have any say in the way I run my business?
- How long does it take to set up a company?
- What if there is an interval before starting my first assignment?
- How long can the company remain dormant?
- Should I set up my company now or wait until I get my first assignment?
- Can I start work before the company is incorporated?
- Can I sign a contract before the company is incorporated?
- Can my partner/spouse use my company?
- Can my children be shareholders?
- What can I do if I have already issued invoices in my own name?
- Do I need to be registered for VAT?
- Are there any reasons why I should not register for VAT?
- When can I be registered for VAT?
- Should I use the VAT standard scheme or the VAT flat rate scheme (FRS)?
- When can I set up the company bank account?
- How does the payroll operate?
- Will I be affected by IR35?
- How do I calculate my daily rate?
- What happens if I later take up permanent employment?
- Does Competex carry out an audit?
- Can my company own a car?
- Can I take just part of the package?
- How long do I have to stay with Competex?
- Can I use my company for trading/investment?
How much will it cost?
We charge £150 (+VAT) for setting up a company and for arranging all the necessary documentation.
Thereafter, we charge a basic annual fee of £1,500 (+VAT). This is payable in quarterly instalments of £300 (+VAT) with the balance of £300 (+VAT) payable on preparation of draft annual accounts. The first instalment is pro-rated from the date you begin your first assignment.
The basic annual fee covers the provision of quarterly management accounts and annual accounts, preparation of corporation tax returns, full paperwork for two dividends, full payroll administration, preparation of form P11D and company secretarial services. For the majority of our clients this is the only fee that they need pay.
There are special arrangements if you are not working.
Would Competex be prepared to take over the administration of a company that I have already incorporated?
We have a routine for bringing existing companies into our system, including giving you the opportunity to change the company name, as well as the directors and shareholders. We only charge £150 + VAT for doing this, unless the original company has traded and you need us to prepare accounts, in which case we will give you an estimate of costs.
Why do my clients or the interim provider insist that I have my own limited company?
There are five very sound reasons:
- To avoid employment agency regulations including possible PAYE complications.
- Your clients avoid the legal burden of employing a permanent member of staff (minimum wage, redundancy, SSP, maternity leave etc).
- Your clients have no hidden employment costs (pensions, holiday pay and other long-term overheads).
- Your clients have no responsibility to operate PAYE on your consultancy fees. This is extremely important since, if you are a sole trader, the HMRC could dispute your status and, in certain circumstances, look to your client for income tax and national insurance on your fees long after employment has ceased.
- Being employed by your own company is indisputable proof that you are not employed by your client.
What is different about a company?
A company is a separate legal entity, and when you set up your own company you become both the owner of the company and an employee of the company. This is why you have to pay for the shares. Your company charges fees to your clients for your services, and remunerates you by paying you a salary and/or dividends. PAYE must be operated on salaries, and the company may pay any other expenses that relate to the operation of the company. The company must have its own bank account and in this way company expenditure is kept separate from personal expenditure.
Why does Competex act as Company Secretary and provide the registered office?
In the early days the company must register for PAYE, corporation tax and VAT, and during each year various routine documents have to be signed, such as the annual return to Companies House and corporation tax returns. This is achieved most efficiently by the Company Secretary corresponding from the registered office. The location of your registered office also determines which HMRC office handles your corporation tax affairs, and we therefore deal with the same tax office for all our clients.
Does the Company Secretary have any say in the way I run my business?
No. The Company Secretary is not involved in the day-to-day running of the company and is not a cheque signatory. Directors are responsible for compliance with the Companies Act 1985 and for ensuring that the company maintains proper accounting records. Our handbook gives information on all these matters.
How long does it take to set up a company?
Because we incorporate online at Companies House, your company is usually set up on the day that we receive your instructions.
What if there is an interval before starting my first assignment?
This is not a problem. We do not charge you for administration until you start using the company or require dormant accounts for the first period.
How long can the company remain dormant?
The company can remain dormant for as long as you like. However, if the company is still dormant at its year end and you wish to keep the company alive, we will charge a fee of £250 (+VAT) to produce dormant accounts, file the tax return and file the annual return to Companies House. Alternatively, at this stage the company could be struck off the register at Companies House for a fee of £60 and no further charges would arise.
Should I set up my company now or wait until I get my first assignment?
The choice is entirely yours. Setting it up early will mean you to have everything ready for when you start your first assignment. It will allow you to have your business cards and headed paper printed, knowing that the business name is yours and no-one can take it away. Also, it will enable you to book a domain name to match as closely as possible your chosen company name, even if you do not intend to use it immediately.
Having your own company in place before you approach interim providers or potential clients looks professional and may help to secure a contract.
Can I start work before the company is incorporated?
Yes, provided any invoices for the work you have done are dated after the date of incorporation.
Can I sign a contract before the company is incorporated?
No. You cannot enter into contracts in the name of a company before the company has been incorporated. However, you could check with Companies House that the company name is available and draw up a contract in the proposed name of the company, leaving the date to be inserted when the certificate of incorporation is received.
Can my partner/spouse use my company?
Yes. It is perfectly feasible for another person to use your company, provided they are working to the same pattern, i.e. selling their knowledge and skills and not using it for trading/investment. Under certain circumstances, there may be a tax advantage if a partner/spouse is made a shareholder, but this depends upon individual arrangements and you should ask us for advice.
Can my children be shareholders?
We strongly recommend that children under the age of 16 are not shareholders. Remember that children over the age of 16 in higher education may suffer cuts in funding as a result of income from dividends.
What can I do if I have already issued invoices in my own name?
HM Revenue & Customs is reasonably flexible in this matter and will allow you to cancel any invoices issued in your own name, provided you re-issue them in the company name and pay all amounts received in payment of your personal invoices into the company bank account. Any invoices issued by your company in this way should be sent to your client together with a credit note against the original invoices in your own name.
Do I need to be registered for VAT?
You are obliged to register for VAT only if your income exceeds a certain limit in a full year. However, if your income is below this limit you may still register on a voluntary basis and there are advantages in doing so. You will be able to reclaim a certain amount of VAT, and it looks professional. Accounting for VAT is not complicated and we would recommend registering.
Are there any reasons why I should not register for VAT?
If your company has clients who are not registered for VAT, or for some reason are not able to reclaim VAT, and your company income does not exceed the annual limit, you might choose not to register the company for VAT.
When can I be registered for VAT?
When you have been issued with the details of your company bank account, and are about to start your first assignment, we will register you for VAT. This can take up to five weeks.
Should I use the VAT standard scheme or the VAT flat rate scheme (FRS)?
The VAT flat rate scheme is appropriate for most interims and consultants, but we will give advice if the scheme is inappropriate for your circumstances.
When can I set up the company bank account?
You will be able to open the company bank account as soon as you receive the certificate of incorporation, but it is a good idea to contact the bank prior to that to complete all the documentation at the earliest possible time. You are also strongly advised to choose an account which provides internet and/or telephone banking since this will speed up payment times. Your chosen bank may require that the mandate to open a company bank account is countersigned by the Company Secretary and it may also require identification for the Company Secretary, which we can easily provide.
How does the payroll operate?
Each month you decide what funds should be allocated to pay salaries, inclusive of employer's national insurance, and you transfer the total amount into our Client Salaries Trust Account according to a pre-specified timetable. We then calculate how much of this represents the employer's NI contribution, deduct tax and employee's NI, and pay your net salary into your personal bank account. We pay the tax and National Insurance directly to HMRC and liaise with HMRC on all other PAYE matters. You may alter your salary up or down whenever you require.
Will I be affected by IR35?
The very nature of their work means that some of our clients are affected by IR35. As specialists, Competex have systems that enable clients to comply with IR35 on a month by month basis if required, preventing year-end financial shocks. We offer practical advice to help you decide whether or not you are affected. IR35 is based on legislation and in some cases you may need to take legal advice.
How do I calculate my daily rate?
It is extremely important that you calculate a suitable daily rate to charge your clients taking your new status into account.
As a salaried employee, you worked for approximately 220 days in the year, excluding weekends, holidays and bank holidays. However, as an interim manager you will probably work and be paid for fewer days than this and you need to take this into account when computing your daily rate.
You need to start with the amount of money that you require to live on (possibly, but not necessarily, your old gross salary). To that you should add all the extra costs and divide the total by the number of days in the year that you anticipate working in order to arrive at a daily rate. You could refine this by producing one rate for short assignments and another for longer assignments where the number of days is more or less guaranteed. In your own mind, always remember that your daily rate includes an amount for employer's NI contribution, which has to be paid to HMRC (along with the tax and employee's NI contribution that you have always paid).
Do be realistic about the number of days in the year that you are likely to work but, having done the calculation, also be realistic about the fee you propose to charge, particularly if this is your first assignment and you have yet to prove yourself.
What happens if I later take up permanent employment?
In the accounting year in which you resume permanent employment, everything operates as normal up to the time your assignment terminates but we charge you quarterly administration fees only for those quarters in which there are transactions through the company, as well as the annual accounts fee at the time of producing the accounts. After the year end, you will have the option of keeping the company and paying a reduced annual administration fee, or having it struck off the register at Companies House, in which case there is a fee of £60 (+VAT).
Does Competex carry out an audit?
No. It is no longer necessary for small companies to be audited. However we do check that all the figures are reasonable.
Can my company own a car?
Because of the income tax, national insurance, VAT and corporation tax implications, our package does not allow for company cars. It is advisable for you to own your car, but to charge your company for business miles at the agreed HMRC mileage rates.
Can I take just part of the package?
Our package includes company formation, company secretarial, accounts and payroll, and can only be taken in its entirety.
How long do I have to stay with Competex?
You are not tied to us for any particular period of time and are free to make other arrangements whenever you wish.
Can I use my company for trading/investment?
Our package is designed for interim managers and consultants and is not suitable for clients who buy and sell goods and hold stock or investments. Because the vast majority of our clients fit a particular profile and keep their records in exactly the same way, as detailed in our client handbook, we are able to standardise our work and keep our fees to a minimum, whilst still offering a personal service.