ASK & DISCUSS INDEX

9 years, 1 month ago - Paddy Robinson-Griffin

These are questions you need to ask your accountant - they are the only people able to 'advise' based on your own circumstances (rather, if they give bad advice you can sue them, if I give you bad advice, silly you for trusting me).

I can comment on a couple of things though. VAT - you ABSOLUTELY CANNOT charge VAT. Don't even mention it on invoices. You just tell them you are not VAT registered, it's all they need to know.

Don't register a limited company when we're talking 4-figure income, it'll cost you a grand a year in accounting fees (Ltd company accounts are FAR more complex than personal accounting).

Sole Trader - register straight away, no benefit in not doing so and making your life more complicated down the road. Keep your books absolutely straight, ideally use a separate bank account, as come January you'll be wishing you had when you do a personal tax return. And you WILL have to do one, so start on the right foot or overpay tax.

Also - your bonus for 10 - is to follow up your self-employed/sole trader registration by contacting the HMRC Film Unit in Cardiff. Ask them about a 'Lorimer Letter' - it's a special status of sole trader that is allowed to invoice their fee instead of go on payroll on feature films. No other department even knows about it, but get one and keep it current and you'll be ahead of the game if you get any features jobs.

9 years, 1 month ago - Marlom Tander

Sole Trader, most everything else Paddy said EXCEPT on the matter of VAT.

If your clients are VAT registered then they don't care whether or not you charge VAT, BUT you might benefit from doing so, even if you don't have to.

The magic words are Flat Rate Scheme. These allow you to charge VAT at say 20%, but only remit VAT at (varies by industry) but say 10%.

So, if you - no VAT - turnover 100K, on which you make 20K profit, you make 20K.

But if you FRS you bill 100K plus VAT, 120K. You only give the Gvt 10% of your VAT inc gross, ie. 12K.

So now you made 28K (note under FRS you don't get to offset the VAT on inputs against outputs)

I do this in my main niche Ltd co biz, almost all my costs are to non Vat sole traders, and all my clients are Vat registered.

HOWEVER if your clients DO NOT pay VAT, then you are at a price disadvantage on quotes if your competitors are not vat registered·

Another VAT point - if you register then ALL the income from that legal entity is vattable. Common mistake is that people register as sole traders under a FRS for their consulting/professional/freelance income and then discover that they have to charge VAT on their buy to let properties. Which either means charging a lower rent and, if leveraged, can be an "oh shit" sized negative return.

9 years, 1 month ago - Mark Wiggins

What Paddy said. I would stay away from VAT.

Also, since you are working as a Director. This is a Self-Employed grade according to the HMRC and so you don't need a Lorimer Letter.

Lorimer letters are for people who work in grades that are not considered Self-Employed grades by the HMRC but would like to be treated as such for tax purposes.

For example, when I work as a DOP, I am a Self Employed grade. When I work as a Camera Operator and I am providing a lot of equipment (camera etc) then I am a Self Employed Grade. However, if I work on an engagement as a Camera Operator and I don't provide equipment, then I am not Self Employed and have to go PAYE or provide a Lorimer Letter.

Also, if your engagement is less than seven days, it falls within the Seven Day Rule and you don't pay PAYE. Its a Daily.

9 years, 1 month ago - S v

If your annual turnover is less than £83k, you don't have to register for VAT.

More info here: https://www.gov.uk/vat-registration/overview

Hope it helps!

9 years, 1 month ago - Parvez Zabier

Try and keep away from vat..... Simona is right

9 years, 1 month ago - Marlom Tander

Don't be scared of VAT IF you qualify for the Flat Rate Scheme (13% for film production, for example) AND it makes financial sense to do so*. The whole point is that it makes the maths easy.

For me it is literally 5 mins work every three months.

Payroll though, don't get me started on payroll....

*If you won't gain, and don't have to, don't.

9 years, 1 month ago - John Lubran

It's usually a good idea to avoid being VAT registered as an individual person unless one is dealing with a great deal of VAT reclaims. Some folk here suggest that setting up a Ltd company is too much of a palaver and a burden. It has only been hugely beneficial for me since 1992. A certain amount of business nouse is essential, one has to be creative in structuring business, just like the moguls and tycoons do; one need not be one of those to beneficially deploy the same techniques though. Whenever I need to save 16.666 percent on expenditures the VAT registered company does the business. As an individual however, I'm a free man. I have more than one legal business entity and more than one accountant as suited to a specific entity. For a small company the annual fee is less than £500 if one does ones own quarterly VAT return, which is piss easy and good for being in cognacent control of ones affairs. For a small start up project I'd imagine a one off project worth less than five figures might just be added to your self assessment income; just keep a meticulous record of every expense and keep every receipt.

9 years ago - Matt Dede

Hi Jordan, more than happy for you to pop in for a casual chat to give you some advice for free :)

9 years ago - Jimi carruthers

Hi Jordan

The Citizens Advice Bureau would be a good place to get advice on the issues you raise and they are free.

All the best

Jimi

9 years ago - Glyn Carter

I've worked at a CAB, and I wouldn't recommend them for this, except maybe to ask for the contact details of your local Chamber of Commerce, Federation of Small Business, enterprise agency, or Council business/economic development team (most urban boroughs and County Councils have one, and they'll know where to go for local advice.)

Given the technical depth on offer above, I'd suggest getting as much info as you can, then keeping it as simple as you can. G'luck!

8 years, 11 months ago - Jordan Simpson

I completely forgot to respond to this discussion, but a big thank you to everybody who contributed! It was quite an overwhelming amount of information to take in, but it all helped. Thanks!

8 years, 11 months ago - Tony Oldham

You do not need to register for VAT as you are way below the threshold.

If you are self employed, you need to register by 5th October following the tax year you started to trade.
i.e. if you receive income between now and 5th April 2017 (Tax year starting 6th April 2016 and Ending 5th April 2017), you need to register by 5th October 2017. This ensures you get a tax reference which sometimes Employers will ask for, and crucially you can file your tax return in time for the filing deadlines.

It doesn't hurt to register sooner rather than later. Simply fill in a form CWF1 and send off.

https://online.hmrc.gov.uk/shortforms/form/CWF1ST?dept-name=CWF1&sub-dep

Just bear in mind it might impact on any student award/ grant if they hear about it.

Also, you might prefer to be treated as an employee, far simpler, no accountancy costs, and you can reclaim any tax not due. Or treat the income as casual income in your return for the year ended 5th April 2017.

8 years, 11 months ago - Matt Dede

Well it depends on how much the income is to treat it as 'casual income'... maybe seek advice just to be sure, otherwise as Tony mentioned, stay as an employee :-)