Know your managed limited company

by The Editor at 07:36 03/10/06 (News from Partners)

Specialist accountants Danbro is advising contractors to be aware of recent confusion that seems to be in the market place regarding Managed Limited Company service.

Damian Broughton, partner at Danbro, said: “While there has always been a certain degree of confusion regarding the status of companies this has been made worse following the last budget when the chancellor mentioned ‘Managed Service Company Scheme’. This certainly does not relate to Managed Limited Companies.” Advertisement The Managed Limited Company offers the same solution as a Composite Company, but with some enhancements. It is a limited company, that is created for a single contractor, but which is operated by a solution provider. The best solution provider would be an established firm of accountants, preferably specialising in the contracting market. It is usually run along the same lines as an umbrella company, where the contractor just sends in details of amounts to be invoiced and expenses. Damian said: “Once the contractor has submitted details, the solution provider will essentially then handle three key elements, those being the issuing of sales invoices, collection of debts and paying of a salary and dividend to the contractor. Each contractor is treated individually to asses the most tax efficient trading structure. “There are a number of benefits to this structure, such as your income, as an employee and shareholder of the Managed Ltd Company, will be made up of salary, subject to PAYE, and dividends. Dividends attract a lower tax rate and are not subject to employees or employers National Insurance Contributions, and so you will be saving on three fronts compared to traditional PAYE employment. “This option can not only resolve tax issues, but it also takes away all the responsibility of having your own limited company. At the same time, you can rest assured that every opportunity is taken to maximise your income.” IR35 Adopting managed company status is one of the easiest and most cost effective ways of doing this for single limited companies. A surprising number of people mistakenly assume they have no option but to join a PAYE Umbrella Company however most people will still be significantly better off using a Managed Limited Company. The managed limited company is ideal if your contract is outside IR35, but can also be used for contracts that are caught by IR35. All payroll, accounting functions and statutory obligations for the Managed Limited Company are handled by fully qualified professionals. Under the scheme the contractor simply becomes an employee and only shareholder of the managed limited company, as they submit authorised timesheets and expenses. Article provided by Danbro - as 'News from Partners' -- The Editor

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