FAQs

Find quick answers to common questions about our contractor services, agency partnerships, and compliance support

Once bank transactions are validated and uploaded, you will be able to see an instant update of your bank statement date. This allows you to promptly allocate any transactions that require allocation. The available funds position updates each hour, ensuring you receive your initial available funds position within an hour of uploading transactions. We aim to provide you with timely and accurate information for a seamless experience.

Please note: Allocated transactions will be re-validated further, before being reflected in your accounting records, and so may take 24 hours before allocated transactions are reflected in your available funds. If you have any further queries regarding timing differences then please feel free to contact us.

This is a question that can only be answered by your end hirer. It is their responsibility to undertake an assessment that clearly tells you and HMRC whether your working relationship with them falls inside or outside of IR35.

Whether you are inside or outside IR35 is an important thing to understand. It impacts the way you earn and pay tax, so there are legal implications for both you and your end hirer. The assessment process is designed to safeguard HMRC from contractors essentially getting the tax benefits of being a limited company whilst undertaking a full-time role with little or no risk.

By completing an SDS, your end hirer will generally look at how much supervision you need, how much direction you take and how much control you have whilst doing the work – amongst other indicators of employment or self-employment.

Generally, the less freedom you have and the more instructions you are given in your work, the more likely it is that you fall inside IR35 and will need to be paid and taxed as an employee with PAYE and NIC.

No. There is a set list of certain benefits or expenses, which are not considered benefits in kind.

Not all benefits and expenses are considered a benefit in kind by HMRC. They therefore don’t need to be reported on a P11d form, and consequently there is no personal tax to pay on these benefits. Some of the key examples of this include contributions your employer makes into your pension, receiving a company mobile phone, trivial benefits and office car parking.

You read the full list here.

You do not have to register for the CIS scheme if you only do certain jobs, including: architecture and surveying, scaffolding hire (with no labour), carpet fitting, making materials used in construction including plant and machinery, delivering materials, work on construction sites that’s clearly not construction ( running a canteen or site facilities).

If you aren’t sure whether your trading activity falls within the CIS scheme, further guidance is provided by HMRC.

From a Companies House perspective, if your company is truly dormant, then it only incurs Companies House fees annually. In these circumstances, then you can submit  dormant accounts which comprise a simpler Statement of Financial Position (formerly a Balance Sheet) and notes. 

However, one of the main benefits of being dormant from a HMRC perspective, is that you are no longer required to submit a company tax return if your current accounting period does not have any taxable income. You do have to advise HMRC of this -and if you return to trading after a period of time, it is your responsibility to notify HMRC. If you don’t, then there are penalties for failure to notify HMRC that your company is now liable for corporation tax.

For clients or suppliers, you may send cards, but any gifts should be also under the value of £50 and mainly sent for promotional reasons. This doesn’t include food, drink, cigarettes, or gifts vouchers though.

Not filing your confirmation statements, annual returns or accounts is a criminal offence – and directors could be personally fined in the criminal courts.

Failing to pay your late filing penalty can result in enforcement proceedings. Any criminal proceedings for not filing confirmation statements, annual returns or accounts is separate from (and in addition to) any late filing penalties issued by Companies House against the company.

There’s no penalty for filing your confirmation statements or annual returns late – but the registrar could take steps to strike off your company. If your company is struck off as a result of non-compliance then any assets are passed to the Crown and are legally known as “bona vacantia” (ownerless property).

Yes, a director must be 16 or over and not previously been disqualified from being a director. Your company must always have at least one director. Directors are legally responsible for running the company and making sure company accounts and reports are properly prepared. All directors need to verify their identity before filing their company’s next confirmation statement, otherwise the filing will be rejected.

Other Considerations

Directors do not have to live in the UK but companies must have a UK registered office address.

Directors’ names and personal information are publicly available from Companies House.

A Director cannot be an ‘undischarged bankrupt’ – unless they have permission from the court. The restrictions placed on a person when they’re made bankrupt usually end when they’re free from their debts (known as ‘discharged’). You can check if someone has been discharged using the Insolvency Register.

Directors must provide a service address (or ‘correspondence’ address), which will also be publicly available. If you use their home address, they can ask Companies House to remove it from the register.

There are several other considerations to be mindful of when disposing of or looking to improve an asset.

In terms of proceeds, if you give away an asset HMRC will treat you as having sold it for what it is worth (that is, the market value), even though you have not received any proceeds.

If you are selling an asset you owned at 31 March 1982, you use the market value as it was on 31 March 1982 for the cost value.

When you improve or add to your asset, you can deduct this cost in the calculation (this will reduce the gain), but you can only include improvements, for example, an extension to a house, and not general repairs and maintenance.

Similarly, you can deduct the incidental costs of buying and selling in the calculation. Typical costs include legal expenses and estate agents’ fees for property, and broker’s commission on the purchase and sale of shares.

There are also more rules to consider if you sell part of a piece of land you own and if you sell blocks of shares in the same company acquired at different times. 

Yes, if the sponsorship is considered capital expenditure e.g., buying  a racehorse or car) or if it falls under specific disallowed expenses like entertainment expenses.

Example: You purchase a racehorse as part of a sponsorship deal this expense would be classed as capital expenditure and not tax deductible.

Yes. By joining Flex, you will be an employee of Brookson’s umbrella solution whilst remaining a Director of your Limited Company

Unfortunately, not. Visas can only be sponsored by the company who you will actually be performing the work for. Because an umbrella company is an intermediary, they are not permitted to sponsor visas.

Yes, as long as they are eligible and have paid the correct level of National Insurance.

Because contractors are employees of their limited company, they have to pay National Insurance on any salary income they take between certain thresholds. This is one of the ways that contractors can make the National Insurance payments required to claim a state pension when they reach retirement age. 

Dividends are not subject to National Insurance. So while it is more tax efficient to pay yourself with dividends, a small salary is still advisable to ensure you are making the contributions you need for a basic and additional state pension, when the time comes. 

No. Even with the latest changes to IR35 assessments in the private sector, HMRC have said that decisions about contractor status will not be made retrospectively- however, it is unclear if this is a HMRC policy.

Whilst HMRC have said they won’t be reviewing past decisions after the latest 2021 legislation change, and back dating tax payments, they have confirmed certain exceptions. Rules may be made retrospectively if they suspect fraud or criminal behaviour has occurred.

Adding a second shareholder is straightforward, but may create issues you should be aware of. If the procedure is not carried out correctly, HMRC may deem the appointment of a second shareholder as ‘income shifting’. This means transferring some of the taxable profits you have made to another individual with less tax liability, thereby reducing your own tax liability.

Yes – the issue of income shifting was formally clarified in respect of shareholders who are married or in civil partnerships.

Specifically, following a HMRC court case against a company called Arctic Systems Limited, the House of Lords agreed with HMRC that the shareholdings in the company had been set up to minimise the tax paid by Mr. and Mrs. Jones (Directors).

Because the gift by Mr. Jones had been made to his wife and the gift was of an ordinary share, an exemption applied.

This exemption only applies to married couples and civil partnerships, and says that if you make a gift to your spouse/civil partner of a share (which comprises more than just income) and it is an outright gift, you should not be taxed on the income arising from that gift (i.e.dividends).

For the gift to be seen as an outright gift the dividend should be paid into the bank account of each shareholder not into a joint bank account.

From April 2021, if you are providing services through a Limited Company, you can’t avoid your end hirer assessing your IR35 status and providing you with an SDS.

However, if your working practices and contract are clearly that of self-employment then your status will be reflected clearly in your SDS. You can then continue to withdraw income from your company in a tax efficient manner. If you need advice on how to make your contract robust from an IR35 perspective, simply get in touch with the Brookson Legal team.

Yes. All contractors are entitled to challenge an end hirers IR35 Status determination. To do this, they need to undertake an independent review and put forward additional supporting evidence.

As part of the IR35 assessment process all end hirers are obliged to offer contractors a clear process for challenging end determinations. This challenge process can be initiated either by the Fee Payer or the contractor themselves. Once started, the end hirer has 45 days to inform the worker or Fee Payer whether the decision can be overturned or not. If it can they need to provide a new SDS with supporting information in that timeframe.

If the end hirer fails to provide a response to either the fee payer or worker within 45 days, they will become legally liable for calculating and making the deductions for employment taxes from the fee payer to the end hirer. It is therefore important that this process is managed effectively by the end hirer.

On the whole, no. If you work under an umbrella company, HMRC will deem you to be a permanent employee and therefore can’t claim back costs such as travel and subsistence which are part of your regular commute to a permanent place of work.

However, in certain instances, you may be able to claim the following expenses:

Reimbursement of offsite expenses
Occasionally, your client can reimburse you for expenses you incur to attend a worksite which isn’t your normal worksite for a specific purpose.  These costs will benefit from tax relief via your payroll and cover all associated travel and subsistence costs.

Reimbursement of mobile workers expenses
If travelling is an integral part of your role, and you are reimbursed your travel costs by your client, then these costs will benefit from tax relief via your payroll and cover all relevant travel and subsistence costs, for instance, if you are a community care nurse or a plumber.

Yes, but there’s a condition: sponsorship costs must be exclusively for business purposes to be tax-free.

Example: If you sponsor a local charity run and your logo is featured on the event’s t-shirt, this expense can be claimed as it promotes your business within the community.

Yes, though it may require you to give up certain guarantees. 

If you have multiple pension schemes, it can be hard to keep track of them all – especially old ones – and some can be expensive. It can therefore be appealing to consolidate them all into scheme, and it’s certainly possible, but it can come at a price. Consolidating can mean giving up guarantees or protected rights that you have on specific plans, so always seek advice before making any significant changes.

Brookson Advice: 
We offer a pension switch and transfer service, and can review your existing policies at any time. If we believe a change would be in your best interest, we can provide you with a formal transfer / switch recommendation. 

No – since April 2020, you’re no longer able to deduct any of your mortgage expenses from your rental income to reduce your tax bill.

Instead, you now receive a tax-credit, based on 20% of your mortgage interest payments.

This is less generous than the old system for higher-rate taxpayers, who formerly received 40% tax relief on mortgage payments.

The new system has been phased in gradually since 2017.

From 15th March 2023, the definitions of a charity for tax purposes have been changed so that only UK charities are eligible for charitable tax reliefs. This impacts EU and EEA charities particularly. If an individual makes a donation to a non-UK charity after 15 March 2023, UK tax reliefs (such as Gift Aid) are only available if the charity has ‘asserted their UK charitable status’ previously with HMRC under transitional provisions which last until 5 April 2024 for individuals. After April 2024, taxpayers will not be eligible for UK tax relief on donations to EU or EEA charities.

Yes, having a private pension doesn’t stop you receiving any state pension you are eligible for.

It doesn’t matter how many other pensions you have paid into over your career, as long as you have made the relevant National Insurance contributions for 30 years you will be eligible for the full state pension. If you have 10 years or more of relevant contributions, you will receive a partial state pension.

Brookson Advice:  
You can check your state pension status including how much it is currently worth and when you can begin taking it at gov.uk/check-state-pension

Yes, you can invite other guests, but here is the key: to be eligible to reclaim VAT and for corporation tax relief, the costs must solely be to entertain employees.

Former and previous employees don’t qualify, nor do subcontractors and nor do shareholders who don’t work in the business. An employee has to be someone who is on your business’s payroll and being paid a salary so this would also exclude clients or friends of employees. If you want to entertain a mix of employees and non-employees at the same event you can, however you will only be able to claim tax relief on the costs of the employees’ entertainment. 

Yes, in fact it is one of the most tax efficient options available, if you are not IR35 captured.

Paying into a private pension through your limited company can be an excellent way to save for the future. As long as you meet certain eligibility criteria, you can make pension contributions directly from your company bank account, and these will then be treated as a business expense like any other. This means you can save whilst also reducing your corporation tax bill in the process.

Brookson Advice:  
Speaking to your Brookson Accountant and Financial Adviser about your plans will help ensure you are being as tax efficient as possible, whilst building up a good retirement pot for the future.  

Yes. If you are auto-enrolled into your umbrella employer’s workplace pension scheme, you can opt out at any time.

If you choose to opt out of the scheme within one month of being automatically enrolled, you will be treated as if you had never joined the scheme. Any money that you have paid into the scheme will be refunded in full. You’ll only receive back the payments that you are deemed to have made, so you’re not entitled to receive the contributions your umbrella company may have made or any tax relief the Government has paid.

Yes, but exactly when you can re-join depends on your employer.

Your umbrella employer is required to automatically enrol you into the scheme as soon as you join, and then again every three years – provided that you are still an eligible jobholder.

You can also ask to re-join the scheme at any time, but your employer is only obliged to action a request to re-join once every twelve months.

Yes. You can work through your limited company (PSC) or under an umbrella company. You may wish to seek guidance as to which will be the best solution for you. 

Contractors captured by IR35 can invoice end hirers and withdraw funds either as a limited company or umbrella company, but many contractors work on a mix of assignments that fall inside and outside of IR35 at the same time. This means that there are a number of solutions available. You could work exclusively through your limited company or umbrella company, or split them – delivering work only through your umbrella company within IR35 captured assignments.

There’s no obligation either way and depends on your personal circumstances. To work out the best solution for you we recommend seeking advice from the Brookson team.

Yes – you can stop the cessation process  if you change your mind – but if you have submitted your striking off form (DS01) to Companies House, then you have advised Companies House of your intention to dissolve your company.

If you change your mind at this point, then you have approximately two months to stop your company being dissolved if you still wish to retain it. 

In these circumstances, you can submit a DS02, withdrawal of a striking off application by the company. However, if you are approaching the two month period following the submission of your DS01 to Companies House, then the striking off process cannot be stopped (Companies House will generally advise you of this). If these circumstances apply to you, then you should contact Companies House to advise you wish to keep your company. 

From a practical point of view, if  you have changed your mind with regards closing your company, then you do have to return it to its former status – so any HMRC schemes such as PAYE and VAT will require setting up again to allow you to continue as before. 

Absolutely! A limited company can pay for an annual event, and there are no personal tax implications if the total does not exceed £150 per head and is open to all members of staff.

This doesn’t need to be one event either, just “annual”. So, you could have a Christmas Party and a Summer BBQ, and both would be allowable for Corporation Tax purposes provided the total of both doesn’t exceed the £150 per head limit (if it goes even £1 over then the whole amount, becomes a benefit in kind, so tread carefully).  The costs can include food, drink, tickets to events, accommodation and a taxi fare home.

 If you are VAT registered, under the standard rated scheme, then you can claim the VAT on staff entertaining (as long as VAT is charged on invoices presented) and the entertaining is solely for staff.

If you need to update the bank statement date for a period where no transactions occurred. Select the bank you wish to update, and instead of selecting a file to upload, select “Update statement date”. This will allow you to declare no bank transactions were occurred during the period you wish to update to.

The only file types that can be uploaded to Connect are CSV or QIF files. These are industry standard files, which are supported download file types from Online bank accounts. CSV or QIF files minimise the risk of data integrity issues in your company accounts.

Currently, the bank statement upload functionality works with standard bank accounts. Credit cards are not currently supported by the bank statement upload functionality.

As long as your transactions are displayed in their native currency and the relevant currency has been configured in your company bank accounts, you can seamlessly upload bank statements in any currency. If you have any questions or encounter any issues, please feel free to reach out to us. We’re here to assist and discuss any queries you may have.

As a director of your limited company, you can get your company to cover some of the business-related entertaining expenses. Entertaining expenses cover things like treating clients or buying business-related gifts.

HMRC classes entertainment as “business entertainment” when it is provided free of charge to people who are not employees of your business. But as a general rule of thumb, business entertaining is not an allowable tax-deductible expense. This means that although the business can pay for it, it is not deducted from the company profit before corporation tax is calculated. Also, you cannot claim VAT on this expenditure.

When entertaining employees, this might be allowable for tax relief, but it could also end up being considered a benefit that your employees will be required to pay some tax on.

Remember: There can be exceptions and more complex rules, so it is always a good idea to talk to your accountant here at Brookson to keep you on track.

No they can not Blanket Ban. The IR35 changes introduced in April 2021 oblige end hirers to take ‘reasonable care’ when assessing IR35 status. If reasonable care has not been taken when determining a contractors IR35 status, then the end hirer may incur fines with HMRC.

When announcing that changes would be made to IR35 assessments from April 2021, HMRC gave clear guidance on how private sector end hirers should undertake their new responsibilities. In order to remain compliant, end hirers must assess each individual contract on its own merit – meaning any kind of blanket ban approach is now illegal.

Every individual contractor is entitled to an SDS which outlines the reasons for the decision for both the contractor and their agency. End hirers are also required to keep detailed records, and put processes in place to deal with any disagreements that arise. Introducing a blanket ban, or failing to comply with the legislation in any other way, makes the end hirer liable for unpaid taxes and fines.

Yes, your limited company can start its own pension scheme at any time.

Normally company pension schemes are set up for any companies who have a specific number of employees. Being over a certain size requires companies to arrange a pension scheme, then take contributions from salary and complete regular contribution uploads to the provider. 

Brookson Advice:  
If you are a director of a limited company and do not have any employees, we recommend that you set up the Aegon SIPP in your own name then make employer contributions  directly from your limited company. If you are IR 35 captured, then you should consider contributions via any employment ( PAYE or  Umbrella you may have).

You can claim for the cost of one business mobile phone, telephone or broadband, subject to HMRC guidelines. 

These costs include:

  • Mobile phone contracts, which must be held in the company name – one phone is allowable. If the contract is in your personal name, you can only claim for specified business calls (not the line rental)
  • Home telephone costs can be claimed, if you have a separate business phone line. If you are using a personal line, you can only claim for specified business calls (not the line rental)
  • Broadband costs can be claimed if wholly and exclusively used for business use

You may be able to claim for work related training subject to HMRC guidelines as long as it meets the criteria.

This criteria is as follows:

  • Should relate to the current trading activity of the company and not to develop a personal interest;
  • Can include first aid and health and safety in the workplace;
  • Can include leadership development as long as beneficial to the company.

The cost of food and accommodation provided for directors arranging training courses for the purpose of the trade is an allowable expense. If food and accommodation provided as part of training are given to any other person free of charge, the cost is classed as entertainment and is therefore disallowable.

Statutory payments are made to employees to cover specific periods when they can’t earn, for instance when they are ill or have a baby.

All employers are entitled to claim money to cover an employee’s absence under certain circumstances. Being an employee of an umbrella company means can claim these benefits – such as statutory sick pay and statutory maternity pay – as long as you meet certain criteria.

It is possible to claim for the costs of computer software, consumables and website costs subject to HMRC guidelines.

These costs include:

  • Software for annual licences for permission to use certain software (these can usually be expensed against profit).
  • Software purchased outright to improve computer services – if a lump sum is made, you should consider whether the software will have enduring benefit to the business – if more than two years, then the software should be classed as an asset.
  • Consumables which are generally small in nature and are regularly replaced/consumed can be expensed against profit.
  • Website costs- generally design and content development costs should normally be treated as capital expenditure to the extent that an enduring asset is created.

Where a website directly generates sales, subscriptions, advertising or other income this will normally be considered to be an enduring asset. It is, however, also necessary to confirm that the website will have the lifetime normally expected of a capital asset (as noted above, anything under two years is likely to be accepted as revenue expenditure). HMRC’s position is that the following should normally be treated as capital expenditure:

  • Application and infrastructure costs.
  • Domain names.
  • Hardware.
  • Operating software that relates to the functionality of a website.

However, not all website related costs will be capital in nature.  In particular, HMRC will normally accept that the following are revenue costs:

  • Initial research and planning costs prior to deciding to proceed with development.
  • Costs associated with maintaining or updating a website (for these purposes the website can be thought of as similar to a shop window – the cost of constructing the window is capital, but the costs of changing the display from time to time is revenue).

You may claim for annual subscriptions for approved professional bodies or societies provided it is in relation to the type of work undertaken by you and is either on HMRC’s approved list and or is a pre-condition to be able to undertake your work.   

Costs of certain types of clothing are allowable as a business expense, subject to HMRC guidelines, where your duties require them to be worn. 

These types of clothing include:

  • Uniforms
  • Safety clothing and equipment including safety helmets, gloves, eye protection, high-visibility clothing and safety footwear

The cost of the upkeep, repair and replacement of protective clothing and uniforms is allowable where your duties require such items to be worn.

Stationery and postage costs may be claimed if in the performance of your duties. This can  cover printer consumables, general stationery used and necessary postage, courier and carriage costs.

We recommend you claim for the actual costs incurred when working overseas, however it is possible to claim the approved HMRC worldwide subsistence rates if the rates are favourable. Temporary workplace rules (24-month rule) apply to the worldwide subsistence rate expenses. 

It is important that any company changes are updated when they happen to ensure your company details are accurately presented on public record. You must tell the Companies House when there is: appointment of a director (AP01), change of director’s details (CH01) and termination of an appointment director (TM01).

No – Brookson offers a non-trade solution but not a dormancy service.

Brookson are able to offer assistance with every aspect of your company accounts, including cessation if you want to close your company down. However, if you are no longer trading but wish to retain your company, as a minimum, you are required to: 

  • Submit annual “simple” statutory accounts to Companies House (comprising a Statement of Financial Position (formerly a Balance Sheet) and notes. 
  • Annual confirmation statement to Companies House. 
  • Corporation tax return to HMRC. 
  • Vat/PAYE returns during your non- trading period (if required). 

No. You don’t have to be paid through an umbrella PAYE solution, but if you are permanently IR35 captured it may be your best solution.

Following the IR35 changes in the private sector from April 2021, the responsibility for determining whether contractors are IR35 captured or not sits with end hirer.

If you receive a status determination statement advising you that you are captured, you may need to revise the way you operate in order to remain PAYE compliant for HMRC. If you are permanently captured by IR35, and the agency or end hirer closest to you in the chain does not operate a payroll function, becoming an employee of an umbrella company will allow you to get paid via PAYE whilst remaining as independent as possible.

Yes – but this should be one of the last things you do as part of the cessation process.

You  should keep your company bank account open until you have completed and agreed your cessation accounts,  settled all your company liabilities and withdrawn any final amounts you are entitled to do so either as dividends or as a capital distribution based on your circumstances. Once this has been done, you can then close your company bank account.

Whilst undertaking the cessation process for your limited company, there are a number of processes which necessitate you having a functioning bank account. For instance, you may be waiting for a refund from HMRC. In these circumstances, we would not advise that you to close your company bank account until you receive all funds due to your company and completed all aspects of the cessation process.

Yes – when you have rental income from properties in the UK or abroad remember that you need to declare the income on your self-assessment, if you are a UK resident. If you are not a UK resident then you must include your UK sourced rental income in a UK self-assessment return.

This includes:

  • Rental property
  • Second property
  • Portfolio of properties

If you are a landlord receiving rental property income, HMRC may amend your tax code. HMRC do this as a way of collecting the tax due on the rental property through your PAYE earnings i.e., earnings in a staff role. This does not remove your requirement to complete a Self-Assessment, however.

If you do not wish for the tax to be deducted in this way, you are able to call HMRC on 0300 200 33 00 and advise them that you would prefer to pay the tax annually following the preparation of your Self-Assessment.

What records do I need to keep?

It is important to keep a record of the following relating to the properties:

  • All rents received in the relevant tax-year
  • Any outgoings or expenses incurred in the letting of the property/properties.

NOTE: If your property is jointly owned, then the income you receive will be split equally between each of the owners.

If you gift an asset to someone, there is no physical receipt of cash but the asset still has an intrinsic value.

The rules depend partly on who you make the gift to and also includes if you sell something for less than its market value. There are reliefs available if you gift business assets though. 

No, you do not pay Capital Gains Tax when you make a gift to your husband, wife or civil partner – as long as you lived together  for at least part of the tax year in which you made the gift.

However, if your spouse later sells the asset, the recipient spouse or civil partner is treated as having owned the asset from the date the transferring spouse acquired it (or the 31st March 1982, if later).

The transactions you upload via Connect will be processed directly into your company bank accounts. You do not have to send in additional copies to support the uploaded transactions.

No – a director’s fee isn’t needed as you can potentially utilise your personal allowance to offset against income taxed at source when paid by your agency into your company.

The main reasons to process a director’s fee is to utilise your personal tax allowance efficiently (if you have no other employment income or pension income), benefit from corporation tax relief on your director’s fee  and ensure that you making adequate credits towards your state pension.

If you are working through your company when captured by IR35 then funds paid into your company are received net of income tax and National Insurance. As a result, it is generally more tax efficient to utilise your personal allowance against this income taxed at source by the feepayer (usually the agency paying your company). In addition, NI credits are still being maintained to your state pension. If you are captured by IR35 for the full year, then your income has already been taxed so there is no further corporation tax liability. Therefore, the provision of a director’s fee as an additional company expense would not provide any further tax relief in the accounting period.

No – you don’t need a director’s fee as you can potentially utilise your personal allowance to offset against income taxed at source by the umbrella company paying you.

The main reasons to process a director’s fee is to utilise your personal tax allowance efficiently( if you have no other employment income or pension income), benefit from corporation tax relief on this payment and ensure that you making adequate credits towards your state pension.

If you are working through an umbrella company for the full tax year, then no funds are paid to your limited company and it is generally more tax efficient to utilise your personal allowance against umbrella income which is taxed at source.

If there are no profits in your PSC, then the provision of a director’s fee as an additional company expense would not provide any further tax relief in the accounting period. In addition, NI credits are still being maintained to your state pension via NI deductions from your umbrella employment income.

No. Generally your umbrella provider will set up professional liability, employer’s liability and public liability cover on your behalf.

No, you do not need a company secretary for a private limited company. Some companies use them to take on some of the director’s responsibilities. Even if you have a company secretary, the directors are legally responsible for the company.

No. There are many different options available to contractors captured by IR35 for their current contract. Depending on your circumstances, closing your limited company down may be a preferable option, but it is not essential.

If you are captured by IR35 on a current contract, then you can still continue working through your PSC. You simply submit invoices as normal then withdraw a revised amount, allowing for the PAYE and NIC that has been applied out at source.

This is not necessarily the most tax efficient way of working, but is an option available to you under the new regulations. However, many contractors opt for an umbrella solution instead, or a mix of the two. If you are thinking of blending these two different approaches – limited company for non-IR35 assignments and umbrella for IR35 assignments – then Brookson offer a dedicated service to cater for your needs. Our Flex solutions allow you to either temporarily work via an Umbrella Company, keeping your Limited Company ticking over until you start a new assignment, or if you are working on multiple assignments, you can maintain both in a cost-efficient way.

As a director, there are legal and business requirements which still must be carried out whether you are working through the company or not. Our team can help you work out the best approach and set everything up as you need.

Possibly. Some agencies will require you to sign an opt-out form to enable you to work more than 48-hours per week and deliver on certain assignments.

Because of the nature of many contracting assignments, the work required to finish a project will run over the 48-hour week. In order to deliver on this, you legally need to sign a ‘Working Time Regulations 1998’ Opt-out form. Often this obligation will be inserted into the contract between your umbrella company and the agency, and will appear on your contract of employment.

The original legislation was created to prevent exploitation of workers, and while you won’t be forced to sign it – and can choose to withdraw your opt-out at any time – you won’t be allowed to work over 48 hours per week if the paperwork is not in place.

Possibly. You should complete the statutory residency test questions to check your residency status and make sure.

If you are UK resident, then you pay tax on your worldwide income. If you are abroad for less than one complete tax year or on a casual basis, you would generally expect to be UK resident. However, to be 100% sure you should complete the SRT questions to make sure. Your self-assessment should record your foreign employment income and you will be given credit for any foreign tax you’ve had to pay.

Yes, you need to provide them with a P60.

Once you’ve completed your year end payroll process, you need to provide all your employees with a P60. This needs to happen by 31st May. The P60 summarises the employee’s total pay and deductions for that year. Some of your employees may also require a Plld form, which outlines any employee benefits and expenses. If so, this should be provided by 6th July.

No – you do not include those expenses which are wholly business expenses that you incur personally.

You only need to tell HMRC about living/working abroad if you expect to break your UK tax residence.

The key things to consider when working abroad is whether or not you complete a self-assessment return and whether or not you need to file a form P85. You should normally complete a self-assessment return if you are UK tax resident. This should be done in the year you work abroad and/or if you have any UK sourced income that will be taxable while you are overseas. If you work abroad, cease to be UK resident and you don’t expect to have any source of income which is taxable in the UK, you should consider completing a form P85 as you might receive a refund.

You do not pay Capital Gains Tax when you inherit an asset, but you may have to pay Capital Gains Tax if you sell, give away or exchange an asset you inherited and it has increased in value since the date of death.

If the asset you inherited increases in value between the date of the deceased’s death and the date you dispose of it, the increase is a capital gain.

If you are UK non-resident you may still be able to get a personal allowance in certain situations.

Your personal allowance is the amount of income you can earn before you pay tax. The current level of personal allowance is £12,570 for 2025/26 and also for 2026/27. If you are tax resident in the UK you will normally get a personal allowance. If not, you might still be able to get a personal allowance in some circumstances, namely:

– you’re a citizen of a European Economic Area (EEA) country - including British passport-holders.

– you’ve worked for the UK government at any time during that tax year.

You might also get it if it’s included in the double-taxation agreement between the UK and the country you live in.

HMRC’s international manual INTM334580 clarifies this further.

Flex does not change your IR35 status, it is a solution aimed at providing contractors with an easy way of moving between Umbrella employment and Limited company working depending on your IR35 status. Learn more about Flex here: https://www.brooksonone.co.uk/services/flex/

You are required to report your Plld information as benefits of employment on your self-assessment return, therefore there may be additional tax to pay.

If you believe that additional tax may be due relating to a particular expense, we suggest that you discuss with your accountant whether or not you still wish to claim the expense through the company.

By making sure that the expenses you put through your company are wholly, necessarily and exclusively for the purposes of your trade, these can be paid to you tax free.

If your client is based overseas with no presence in the UK, then the IR35 rules don’t apply. If they are based overseas but do have a connection to the UK, then they have to assess your IR35 status.

If your client is a medium sized/large sized non-public sector company based overseas and they have no UK connection (i.e. no branch, office or subsidiary here) then the IR35 rules don’t apply. If you are working for them through your PSC, you can continue to self-assess your IR35 status.

However, if your client is based overseas and does have a connection here, then they need to assess you for IR35 and provide you and your agency with a status determination statement.

Your client must do this if you are subject to UK tax – if you are UK resident and/or you perform your duties in the UK. If you are UK resident and perform your duties overseas, then you are still subject to UK tax, and the engagement is still within IR35 rules for you and your agency. If you are UK non-resident and perform your services overseas, then the IR35 legislation won’t apply because you are outside the scope of UK tax.

No. IR35 legislation applies to individuals who provide their services via a limited company.

IR35 exists to prevent individuals operating as disguised employees, whilst getting the tax advantages of trading as a limited company. As an employee of an umbrella company, you will be always be taxed on a PAYE basis which means you as an individual will always be IR35 compliant.

Yes. Working through your Limited Company (PSC) when captured by IR35 prevents you from claiming travel and related subsistence costs.

Once you have been captured by IR35, HMRC consider your worksite to be permanent in nature. You are a commuter, which means that you are no longer entitled to claim tax relief on travel and subsistence. In effect you will be treated just like any permanent worker whilst working under that contract. However, you can still claim costs related to running your business such as accountancy fees.

If you are IR35 captured then you can continue to make pension contributions. However, the rules are different depending on whether you make the contribution through your company when captured or as an employee via an umbrella company.

Pension contributions working through an Umbrella Company 

Currently, government rules dictate that all employees who meet certain criteria must be auto-enrolled under a pension scheme. If you work through an umbrella company, this will probably apply to you, and if you wish to contribute more you usually can via a pension salary sacrifice arrangement.

Therefore, giving up part of your salary enables you to pay funds into a pension pot. Because you will be earning a lower wage, there will also be some tax and National Insurance savings.

Pension contributions working through your Limited Company when captured by IR35

If you choose to continue to work through your PSC when captured you’ll receive funds into your company with the income tax and National Insurance already deducted. 

Working whilst captured in this way through a whole accounting period will allow you to deduct company running costs and company pension costs-but since all your income has been taxed already then your profits will not be subject to corporation tax. This means there are no real tax benefits to making a company pension contribution, since you won’t get any tax relief on them. However, if you have a mix of captured and non-captured income, you may find that making company contributions is still tax efficient.

Yes. All employers have to provide a workplace pension scheme for eligible employees.

If you are an eligible job holder then it is compulsory for your umbrella company to enrol you automatically into a pension scheme. This is known as auto-enrolment, and as well as taking some of your salary towards the pension the umbrella must also pay into the scheme.

In working out your tax liability, residency applies to both you personally and your company.

Because the UK taxes its residents on their worldwide income and gains, your personal tax residency helps determine the scope of your personal tax liability. Your company has separate legal status, so if your company is registered in the UK – either in England and Wales, Scotland and Northern Ireland – it will be taxed on its worldwide income. However, if you control and manage your company outside the UK, then your company will have tax residence in the UK and another country – meaning it would be subject to double taxation.

Yes – if you are UK resident you may be liable to Capital Gains Tax on disposals of assets located anywhere in the world, (not just in the UK).

Non residency:

If you are non-resident, you may also be liable to Capital Gains Tax on the disposal of UK land and property:

Disposals of other UK land and property from 6 April 2019

If you owned the non-residential land or property before 6 April 2019, then broadly you will only be liable to the part of the gain which has accrued from 6 April 2019.

If you purchased the property after 6 April 2019, then the whole gain will be chargeable.

You must report the disposal within 60 days of completion using HMRC’s Report and pay CGT on UK property service on GOV.UK. 

No, the way IR35 legislation is assessed isn’t changing, it is just the person responsible for making the assessment that is. This change came into effect from April 2021.

IR35 assessments are designed to establish whether a contractor is engaged under a contract of service (an employment contract) or a contract for services (a self-employed contract).

In other words, the assessment seeks to understand if the relationship is genuinely independent or essentially employment in disguise. Historically, this assessment has been the responsibility of the contractor when working for the private sector. But the legislative changes now in place make it the responsibility of the end hirer.

In assessing a contractor’s IR35 status, the end hirer will continue to use the following key criteria:

  • Control – Does the engagement between the end hirer and contractor look and feel like employment?
  • Personal service – Is the contractor required to carry out the work themselves? Can they send a substitute?
  • Mutuality of obligation – Is the end hirer obliged to offer work beyond the agreed project and is the contractor obliged to accept it?

The tax data card detailed below lists changes to tax rates and bands in 2024/25 – and compares them to the previous year.

Key changes are:

  • Decrease in the dividend allowance from £1,000 to £500.
  • Decrease in the capital gains annual exemption rate from £6,000 to £3,000.

You can find out more about the detailed changes in the attached document

Tax Data

Pension contributions can be calculated in different ways, but there are minimum total contributions levels that must be paid under automatic enrolment.

If you are auto-enrolled onto a pension scheme by your umbrella employer, how much you pay could be based on your ‘qualifying earnings’ (earnings from employment, before PAYE and National Insurance). However, your umbrella employer could base it on a different definition of pensionable pay. In addition, the government adds tax relief to the contributions you have paid.

The government has set minimum levels of contributions that must be paid to the workplace pension scheme by you and your umbrella employer. From April 2021 onwards, your employer must pay at least 3% of qualifying earnings, and you will have to pay 4% of qualifying earnings. The government then adds tax relief at 1% of qualifying earnings.

It is up to the end hirer that you are working for to assess your IR35 status. Their HR department should provide you with a SDS explaining your status. If you think their assessment is wrong, Brookson legal can help.

IR35 can be confusing and it’s important that assessments are undertaken accurately. However, if you’ve been assessed for IR35 by your end hirer and you feel that their IR35 SDS does not fully reflect your working arrangements, all is not lost.

Brookson Legal can assist by providing an IR35 review. The outcome of this review is an independent assessment of your employment status. It can be provided to your end hirer to help them reassess your employment status if you dispute their decision.  

As part of your end hirers legal obligation to assess you, they need to take reasonable care in making a decision and provide the reasons. Formally disputing an SDS decision is not uncommon, and Brookson Legal will guide you through the process to make sure the evaluation is fair and your challenge is grounded in the best possible evidence.

Many end hirers will simply use the HMRC CEST tool. This can be done on the HMRC website at no extra cost to the user, but independent reviews are often preferable. CEST has acknowledged flaws and was historically weighted towards IR35 capture. Recent updates have been made, but it is still unclear whether questions have been included to rectify this imbalance.

If you pay Higher Rate Tax (40%), you can claim back the difference between the higher and basic rate of tax on all gross Gift Aid donations. For instance, if you gift £10, you effectively make a gross gift of £12.50 and can claim £2.50.

If you strongly disagree with your end hirers assessment of your IR35 status, one of our Business Advisory Team will request an IR35 review from the Brookson Legal team to help you challenge the decision.

Brookson Legal are on hand to help with any disagreements you may have with your SDS. Brookson Legal provides a range of advice on IR35 tax legislation to all levels of the flexible working supply chain – from contractors to agencies and hirers. If you are a contractor then Brookson Legal can provide an independent employment status assessment to support any concerns you may have about your SDS.

It’s worth remembering that the team may agree with your end hirers decision, but if they agree with you then their review will provide you with a strong case to challenge and hopefully reverse the assessment.

The tax point of supplies covered by self-billed invoices follows the normal rules, except that a self-billed invoice is only effective to create a tax point when issued within 14 days of the basic tax point.

The time of supply is normally determined by the date of despatch of goods or performance of services (basic tax point), unless this is overridden by the date of payment. In any event, the client must show the tax point on the invoice.

Joining an umbrella company is easy. Once you have found an organisation offering umbrella solutions – such as Brookson – you just need to gather the appropriate documents and complete a simple onboarding process.

Joining an umbrella company is essentially the same as joining a company as a member of staff. All the same processes are required, since you are becoming an employee of the umbrella company.

In order to begin, you will need to get your P45 or complete a starter checklist (this establishes a temporary tax code). The umbrella company will also require administrative details such as your National Insurance number, bank account and personal details.

As part of the onboarding process you will need to provide documents confirming your identity, such as a passport or visa. Once you find a contracting role, your chosen umbrella provider will sign a contract with your agency and they in turn will issue you with a contract of employment setting out all the related terms and conditions.

If you are a Brookson customer, you can join Flex through our online Connect portal, if you are new to Brookson, our Specialist Advisors are on hand to support you.

The process is very straightforward and takes approximately 24-48 hours.

To get in touch with an Advisor, visit: https://www.brooksonone.co.uk/services/flex/

Existing Customer

If you are an existing Limited Company customer, you can register for Flex through Connect. We will need the following information:

  • Personal bank details (this allows Brookson to make payments to you for the services provided through the Umbrella solution)
  • Assignment details (to ensure we liaise with your agency and guarantee payment is made to you on time)
  • Future company expectations (this will allow us to understand what Flex solution is best for you, to make sure we offer a cost efficient alternative to maintain the business during this period)
  • Student loan confirmation (if applicable)

New Customers

If you are completely new to Brookson, speak to one of our Specialist Advisors who are on hand to support you. You will need the following information to get you setup for Flex:

Limited Company Details

  • Company name
  • Company Registration number
  • VAT registration number (if applicable)

Umbrella

  • Personal bank details (this allows Brookson to make a payment to you for the services provided through the Umbrella solution)
  • Assignment details (to ensure we liaise with your agency and guarantee payment is made to you on time)
  • Future company expectations (this will allow us to understand what Flex Service is best for you, to make sure we offer a cost efficient alternative to maintain the business during this period)
  • Student loan confirmation (if applicable)

When you select a bank account you wish to upload transactions, the date of the latest transactions for that specific bank will be visible. This is the date you need to download further transactions from your online bank account.

At some point, you may consider making charitable donations, either personally or through your company. Charitable giving has benefits both for the individual and businesses in the UK. To make a gift aid donation, follow these steps.

To qualify for Gift Aid, follow these steps:

  1. Declare that you want your gift treated as a Gift Aid donation.
  2. Ensure you’ve paid sufficient UK tax for the year to cover the Basic Rate Tax the charity will reclaim.
  3. Include your full name and address (or at least your house number and postcode) in the declaration.

Notifying HMRC of Gift Aid:

If you complete a self-assessment tax return:

  • Include the gross total of all Gift Aid donations in the year or ask your accountant to do so.
  • Offset Higher Rate Tax relief against your tax due for the current tax year or carry it back to the previous year.

If you pay Higher Rate Tax but don’t complete a self-assessment return:

  • You can claim the additional relief by writing to the tax office with details of your total Gift Aid donation.

Gift to Charities Made by Companies:

  • Companies can make donations to charities before tax is deducted from their gross profit.
  • If the donation is an allowable expense, it reduces the company corporation tax due.
  • From 15TH March 2023, the definitions of a charity for tax purposes have been changed so that only UK charities are eligible for charitable tax reliefs. This impacts EU and EEA charities particularly. If a company makes a donation to a non-UK charity after 15 March 2023, UK tax reliefs are only available if the charity has ‘asserted their UK charitable status’ previously with HMRC under transitional provisions which last until 1st April 2024. After April 2024, companies will not be eligible for UK tax relief on donations to EU or EEA charities.
  • Keep documentation from the charity to support the payment made.
  • Donations can’t be used to create a loss for Corporation Tax purposes.

Contractors can make pension contributions in a range of ways, the most tax efficient being employer pension contributions made through their limited company (if they are not IR 35 captured).

Contractors can make pension contributions in a range of ways, the most tax efficient being employer pension contributions made through their limited company. 

If you are a contractor with your own limited company, you are an employee of that company. This means you can make employer contributions to a private pension in an extremely tax efficient way. Any payments you make from your limited company will be classed as an allowable business expense, reducing your annual corporation tax bill. However, if you are IR 35 captured, then making a company pension contribution may not be as tax efficient as making a personal pension contribution.

Log in to your online business bank account, find the transaction download section (which may be within the bank statement section). You should be able to set the period you would like to download and save locally to the device you are accessing Connect from.

Many subcontractors find themselves overpaying tax and National Insurance contributions (NIC). If you are in this position then HMRC should automatically process your refund after you have completed and submitted your tax return. It is also important to remember to put the amount of CIS tax deducted in the correct box on the tax return.

The bank statement date will atomically be defaulted to the last transaction being uploaded. If no transactions occurred during a period, or your bank statement date is different to the latest transaction date being uploaded, you will have the option of changing the bank statement date, after the transactions have been validated.

If you need to update the bank statement date for a period where no transactions occurred: Select the bank you wish to update, and choose “Update statement date”. This will allow you to declare no bank transactions were occurred during the period you wish to update to.

Click “Upload Bank File” and follow the steps to upload your transactions. You will need to download the transactions for the relevant period from your online bank account either as a CSV or QIF file. During upload, Connect will validate the transactions being uploaded and the closing balance against your company records and you will be asked to review the transactions so you can verify the information to be uploaded to your accounts.

Your agency must raise self-billed invoices for all transactions with your PSC named on the document for a period of up to twelve months (or the duration of the contract).

The agency will need to complete self-billed documents showing the PSC name, address and VAT registration number, together with all the other details that make up a full VAT invoice. The PSC should retain all these details and be able to produce them for inspection to HMRC VAT if required.

There are two forms that should be considered when reporting benefits in kind with HMRC: Form Plld and Form Plld(b).

From 6th April 2027, benefits in kind and taxable employment expenses are to be reported through payroll software.

Form Plld

As your accountant we will take care of this for you by reporting any expenses and benefits paid to directors and employees that have not been subject to PAYE tax on a form P11D (return of benefits and expenses) after 5th April each year and file this with HMRC. You should retain a copy of your Plld as you will need to add these amounts onto the employment section of your self-assessment return.

Form Plld(b)

A P11D (b) will also be sent in along with the P11D, this will show the amount of additional Class 1A National Insurance due on the benefits. If there are no benefits or additional tax to report, then you are still obliged to confirm this with HMRC, if you are asked to complete a form P11D.  The value of any taxable benefit is also reported on your personal tax return to ensure you pay the correct amount.

Umbrella companies pay employees using the standard PAYE system, calculated the same way for all employees in the UK. This is applied to your salary after their margin and employer costs have been retained from your gross contract rate.

When working out how much take home pay you will get under an umbrella company, it’s important to understand the difference between your contract rate and your taxable salary.

Your contract rate is usually the figure that you have been provided by the agency or end hirer. This is the amount invoiced and paid to your umbrella company. The umbrella company then removes certain amounts from the gross figure:

o    Employer costs (Employers NI and apprenticeship Levy)

o    Umbrella company margin

This gives you your salary. Just as with standard employment this is then subject to PAYE tax, so the umbrella company will retain:

o    Income tax – calculated at the rate for your earnings bracket

o    Employees National Insurance

Whatever is left is your take home pay – the amount transferred into your bank account. When negotiating your contract rate, you must take these deductions into account before agreeing on a figure, so you know exactly how much you will earn.

An umbrella company employs contractors, giving them the freedom to work on different contract assignments, whilst paying them under PAYE. In this way it offers a simple solution that is fully compliant with IR35.

How an umbrella company works

An umbrella company is a business often used by recruitment agencies to pay temporary workers.

The umbrella company employs you and pays your wages through PAYE. It does not find temporary work for you. The recruitment agency (also known as an employment business) does this.

The umbrella company is your employer and will pay you. The work you carry out will be for one of the recruitment agency’s clients.

After signing up, you are able to deliver on contract assignments and get paid like an employee via the umbrella company payroll.

Signing Up

Because you become an ’employee’ of the umbrella company, you need to provide your P45 or complete a starter checklist to sign up. You also need to provide general admin information such as your National Insurance number, bank account and personal details, and confirm your identity with your passport or visa.

Contracts

Once you find a contract role, your PAYE umbrella company will sign a contract with your agency. You will also sign a contract of employment with the umbrella company.

Timesheets and Invoicing

Each week or month you submit your timesheet details to the end hirer and your umbrella company. The umbrella will then submit an invoice to your agency on your behalf. This covers the hours worked during the previous period. The agency will then pay the umbrella for the invoiced sum. (It’s worth noting, that you should always check with your umbrella how often they make payments. Some make payments the same day they receive funds, others may only pay once per month.)

Payment

The umbrella will pay you directly into your bank account on the pre-agreed date. Employment costs’ (Employers’ NICs and the Apprenticeship Levy) and the umbrella company margin are retained by the company to arrive at your gross pay. The net amount you receive will already have the income tax (PAYE) and Employees’ National Insurance Contributions (NICs) deducted from your gross pay.  

Individuals in the UK can make Gift Aid donations, which allow charities to reclaim Basic Rate Tax on their contribution directly from HMRC. This means your gift is worth more to the charity at no extra cost to you. These rules also apply if you operate as a sole trader or a partnership. And if you’re a higher or additional rate taxpayer, you can claim back the difference through your Self Assessment, adding an extra charitable donation tax deduction to your return.