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Flying Solo – Is a One-Man Limited Company Right For You?

Shona Duncan3
8 May 2019

Flying Solo – Is a One-Man Limited Company Right For You?

By Shona Duncan, senior tax manager

When working in a specialised sector – such as the oil and gas industry here in Aberdeen - opportunities for work and the nature of employment contracts are diverse. For instance, although many specialists in the energy sector are company employees, others might prefer to opt for the freedom and benefits that a one-man limited company can offer.

Working on a contractor basis comes with more flexibility; as a contractor, you can choose which hours and days you work as well as when to take holidays and leave.

Understandably, the perceived enhanced work-life balance makes this type of employment attractive. However it’s an option that some may dismiss out of hand because they fear the tax implications of being a one-man company could be too complex.

If your employer has always been responsible for your tax, National Insurance Contributions (NICs) and so on, moving to a situation where you are responsible to HMRC can be daunting. But it may not be as complicated as you think.

What do you need to know about tax as a one-man limited company?

As an independent contractor, your employment status is different from that of someone who is employed. What will determine your employment status depends on your individual working arrangements, such as whether you can hire someone else to do your work, whether your client has full control on when and what to work on, how and when you’re paid, your place of work and so on.

The IR35 tax regulation helps HMRC determine which tax you need to pay, depending on the type of work you do, thereby helping HMRC distinguish your employment status. HMRC has been consulting on the offpayrolling of the private sector and draft legislation which will expand the IR35 remit is currently awaited.

Advice offered on one-man limited company employment

Although the tax on dividends has been increasing, the employment status of a one-man limited company can still prove to be more advantageous over the tax to be paid as an employee. The possibilities of deducting more expenses, paying less income tax and sharing dividends with a spouse make this a viable option.

Whether you’re still determining your employment status or you’ve already set up your one-man limited company employment but need further advice, our team of experts can guide you through the process to ensure you’re on the right track.

Contractors often run into tax-related issues, such as timing problems when missing deadlines and ambiguities and discrepancies between employment contracts – all of which are avoidable and unprofitable. We can also advise on tax liabilities as a one-man limited company, which mainly cover corporation tax, VAT, NICs and other tax, such as that paid personally and capital gains.

Being based in Aberdeen - one of the world’s largest oil and gas hubs – we have a wealth of experience in assisting clients with setting up a one-man limited company. Our team can provide advice for both onshore and offshore workers at every stage of this process.

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