Guide to Freelancing - PCG

THINGS TO BE AWARE OF
Penalties
Many statutory forms (Self Assessment, P35 Employers Annual Return, etc.) carry a deadline. If
you miss the deadline, you will receive an automatic fine. You may also void any possible claim
that could be made under any Professional Expenses Insurance that you hold.
Tax investigations
The tax authorities may perform various forms of investigation into both the tax affairs of
companies and individuals. These include PAYE and VAT reviews; the former has been seen to be
used as a „cover‟ for IR35 investigations. It is important to keep paper records and an audit trail of
every single transaction, such as purchasing equipment or declaring dividends. Whenever you take
on a contract, get it reviewed and come to a rational decision on its IR35 status. Make sure you
have good professional representation in dealings with the authorities.
PCG‟s website includes a document explaining how to take reasonable steps to determine
your IR35 status. For further comprehensive information please visit the PCG website tax
advice section
IN A NUTSHELL: TAXATION OF LIMITED COMPANIES
Companies have to pay corporation tax, employer‟s NICs if they pay salary, and
VAT if they are VAT registered
The Corporation tax rate for small companies with taxable profits of up to
£300,000 per annum is 20%
Directors who receive salary from their company must pay employee‟s NICs and
income tax – this is deducted from the salary and submitted to HMRC, usually by
the 19th of each month unless your average monthly payments are likely to be
less than £1,500 in which case you may be able to pay them quarterly
Directors also need to submit an annual self assessment tax return by 31 October
for paper returns and 31 January for online returns
Automatic fines are imposed if you miss the deadline for the submission of
statutory forms.
Copyright PCG September 2011 Guide to Freelancing Version 7.0 52