Q & A
Your Freelance Questions Answered
If you have a question you need answered on any freelancer related issue, submit them here and we will endeavor to provide you with the guidance you need from an appropriate expert in the field.
Your questions answered
Company cars and car insurance 
Q: My wife and I are company directors in our own limited company. My wife has a company car which is DVLA registered in the company name with myself as the registered keeper. My wife completes a P11D, the company pays any additional NI this demands and my wife is taxed for any benefits in kind. The car is insured in my name, with my wife as a named driver, and the insurance company has been informed that the vehicle is owned by a company and this is noted on the insurance certificate. However, our accountant is now insisting we have to insure the car in the company name under a company car policy as we have no insurable interest in the vehicle. We understand that if we have permissive use from the owner of a vehicle (our company), we do have an insurable interest. Who is right?
IS, by email
This Q & A was included in the November/December 2012 edition of Freelancing Matters
Answer supplied by Graeme Trudgill, BIBA Head of Corporate Affairs.
A: The fact that the ownership has been disclosed to insurers and has been accepted by them suggests to me that the insurer has accepted the insurable interest - as it is entitled to do (the relevant case law is Williams v Baltic Insurance Association of London 1924). I would doubt that the limited company would be noted on the insurance certificate as owner – this is more likely to be on the schedule. In which case the insurers may also have noted and accepted the financial interest of the Limited Company.
It’s difficult to provide a definite answer to the question/current insurance arrangement without being fully aware of how the insurer has addressed the issue and what disclosure has been made. However we believe that insurable interest has been established and it should be acceptable, although it would be wise to clarify this with your insurer.
Advice from PCG:
I have two separate businesses but pay for my PCG membership via one - am I covered for both?
Q: I am a freelance writer who undertakes a range of article and copywriting assignments as a sole trader. I also run a consultancy and news service on some topics as a limited company. The two businesses are quite separate but I pay my PCG Plus membership via the limited company. Am I covered for any issues or tax investigations which arise as a result of my sole trader activities?
RC, by email.
This Q & A was included in the November/December 2012 edition of Freelancing Matters
Answer supplied by Paul Mason, Manager of the Contractor Division at Abbey Tax.
A: It makes sense to protect both your businesses and you can do so through PCG, but you need to be sure you have subscribed to the membership package which most closely corresponds to your situation: for one fee earner with two businesses. PCG’s tax investigations service protects members from both income tax-specific and full enquiries into self-assessment returns and this would cover an enquiry into your sole trader business (which would essentially be an investigation into the figures on the self-employment page of your personal income tax self assessment return).
The PCG policy also covers corporation tax enquiries, which would be relevant for your consultancy and news service business. As you are trading through a limited company, you must also consider IR35 issues – IR35 enquiries now start with a letter under Schedule 36 of the Finance Act 2008 which gives HMRC its information gathering powers. These Schedule 36 or Pre-Dispute enquiries are part of PCG Plus membership only and HMRC now use the same powers to undertake any kind of compliance visit which includes all PAYE and VAT Visits.
If matters escalate into an IR35, PAYE or VAT dispute, then all members have the benefit of being able to call on an Abbey Tax or Accountax consultant to deal with the matter and these disputes will be taken all the way to a tribunal if necessary. Three PCG members won tribunal cases last year after battles that lasted between five and eight years. Being a PCG member saved each freelancer £19,500 on average – not bad for an annual membership fee of £220 plus VAT.
Abbey Tax - sales@abbeytax.co.uk / 0845 2232727
Advice from PCG:
VAT and earnings
Q: I’m relatively new to freelancing and have not registered for VAT. My earnings so far are a little unpredictable but it’s possible I may go over the registration threshold this year. What will happen then – would I be liable for VAT on all the work previously done? I’ve not charged clients VAT so that could be really expensive.
PP Peterborough
This Q & A was included in the September/October 2012 edition of Freelancing Matters
Answer supplied by Alan Pearce, VAT Partner at London-based chartered accountant Blick Rothenberg.
A: It is always difficult to predict what earnings you are going to have as a freelance, but if you are approaching the VAT threshold (currently £77,000 per annum), start closely monitoring turnover on a monthly basis. If, at the end of any month you exceed the threshold, you have 30 days to notify HM Revenue & Customs of your obligation to be VAT registered. You will then be registered from the beginning of the next month following notification.
You can also register on a voluntary basis at any time before you reach the threshold. You will only be liable to pay VAT on work done after you have become VAT registered unless you have breached the threshold already and a retrospective registration is required. Under the normal registration process most businesses pay VAT at the standard rate of 20 per cent.
However, if your turnover remains below £150,000 per annum then you can apply to use the flat rate scheme. Under this scheme, you still charge and invoice your customers VAT at 20 per cent but you only pay over to HMRC a flat rate percentage of your total turnover, including VAT. However, those taking advantage of this scheme are not entitled to claim any VAT incurred on expenditure, unless it is a capital item costing more than £2,000 - for example a computer which you use in your freelance business.
Blick Rothenberg - email@blickrothenberg.com / 0207 486011
Advice from PCG:
Corruption and business expenses
Q: I took a client to the Olympics as a thank you for a contract I was recently awarded, but it has since been suggested to me that this might land me in hot water under the Bribery Act. Should I be concerned and, if so, what should I do?
This Q & A was included in the September/October 2012 edition of Freelancing Matters
Answer supplied by Jeremy Summers, principal lawyer in the Business Crime team at Russell Jones & Walker solicitors
A: Corrupt behaviour masked as legitimate hospitality always was an offence and remains so under the Bribery Act. The issue of what constitutes acceptable hospitality for the purpose of the Bribery Act caused a great deal of concern.
In its guidance, issued in March 2011, the Government made it clear that hospitality and promotional business expenditure which seeks to improve the image of a commercial organisation, better present products and services or establish cordial relations is recognised as an important part of doing business.
As such the Act does not prohibit reasonable and proportionate hospitality. Because of the cost of Olympic hospitality the Government went further and indicated that, given that it is a once in a lifetime event, the cost of entertaining at the Olympics would not of itself be viewed as an offence.
However to answer your question one must look at the purpose for which your hospitality was offered. I see that it related to the award of a recent contract. If, looking at all the relevant facts, it could be considered that the offer of hospitality was connected to the award of that contract, rather than as a wholly separate after the event thank you, problems could arise. Was the person you took responsible for awarding the contract or a relevant Government official connected with the contract? If either scenario applies, then potentially an offence could have been triggered under the Bribery Act. Was the hospitality given to reward that person for improperly awarding the contract? Was the hospitality intended to influence the foreign official acting in that capacity in relation to the contract? If you were acting on behalf of a commercial organisation, then it too might be at risk of prosecution because of your actions unless it can show that it had adequate procedures in place to prevent bribery. If you are in any doubt as to whether or not the hospitality may have infringed the Act you should seek immediate advice from an appropriately experienced solicitor.
Russell Jones & Walker - enquiries@rjwslatergordon.co.uk / 0207 6541555
Advice from PCG:
Do I need my own website?
Q: I'm a freelancer who moves from contract to contract and rarely has trouble finding new work. Do I really need my own website, as everyone seems to think?
From JP Manchester
This Q & A was included in the July/August 2012 edition of Freelancing Matters
Answer supplied by Simon Best, Founder of BaseKit internet consultants
A: Even the smallest business needs to be online. Indeed, if you have clients and contacts under the age of 35 and you’re not online then for many you just don’t exist. Think about your website as your shop window and reputation online. A place to showcase your work, present your capabilities and, at the most basic of levels, somewhere customers, old and new, can find your contact details and get hold of you. It makes real, sound business sense to have a website.
You’re certainly not alone in having reservations, but building a website can be simple, affordable and rewarding. Here are some thoughts on what to consider:
• Can you create the site yourself? Browser-based platforms such as ours make it easy for businesses to take complete control over the design and hosting of their websites. It doesn’t require any technical skill and can cost as little as £6 a month to run.
• The design of your website matters. It’s your shop window and the first thing your potential customers will see.
• Future-proof your website. When building your website, look for solutions that allow it to be seen not just on PCs and laptops, but on mobile phones and tablets, such as the iPad.
• Ensure that your site is optimised for search engines, such as Google, and allows for integration with social media such as Facebook.
• Look for solutions that allow you to update your site regularly, so that you’re not left with static and stale content. Customers are always more impressed if the content on your site is fresh and changes frequently – either daily or weekly.
To contact BaseKit further visit: www.basekit.com
Sole trader vs limited company?
Q: I’m a freelance graphic designer and I’ve operated as a sole trader for several years perfectly happily. But several people I’ve worked with say I’d be better off if I was set up as a limited company. Are they right?
From DM Weybridge
This Q & A was included in the July/August 2012 edition of Freelancing Matters
Answer supplied by Toby Ryland, Partner, Blick Rothenberg Chartered Accountants
A: They may be, for there are a number of tax benefits to be gained from incorporating your business – not least as incorporation can be achieved without landing you with a tax liability. The basics are that limited companies pay corporation tax at a rate of 20 or 24 per cent on their profits, depending on how much they make. You are then liable for tax on any income you draw from the company. But on income taken in the form of company dividends rather than salary or bonuses, only income tax is due – there are no national insurance contributions to pay. For a basic-rate taxpayer making profits of £40,000 a year, the savings on offer come to around £1,400, assuming all those profits are paid out as a dividend. For a business generating £100,000 of profits each year, the saving is more like £5,000. There will be additional costs – for preparing statutory accounts and a corporation tax return, for example – but nowhere near enough to wipe out these savings. Also, if you don’t need to take profits out of the company at all, the only tax to pay is corporation tax. There’s no income tax or national insurance to worry about until money is taken out, which may prove a useful deferral opportunity, particularly for taxpayers currently on the 50 per cent rate. It is due to fall to 45 per cent in April 2013. If you’re able to leave profits locked up over the long-term, you may be able to liquidate the company and take the money out as a liquidation dividend – these are taxed as capital gains rather then income, which may reduce what you pay. You may even be able to use entrepreneurs’ relief to reduce your capital gains rate to 10 per cent.
Blick Rothenberg Chartered Accountants - email@blickrothenberg.com / 0207 486 0111
For further advice from PCG follow the links below:
Work in Dublin as an IT Consultant, can I still work through my UK Ltd?
Q: I am coming to work in Dublin as an IT Consultant through my uk ltd company - I will be travelling back to the uk every week. I will arrive in Dublin early Monday morning and leave on Friday afternoon for the UK. Is it ok for me to still work through my uk ltd company or do I have to register for tax in Dublin? My contract (I am self-employed) is initially for 3 months but it likely to be extended for well over a year.
Answer supplied by Mike Phillips from its international:
A: There is nothing wrong in you carrying out your assignment in Dublin using your UK limited company. However, this does open up the prospect of unwanted complexity and unplanned additional costs which you need to be aware of - especially as the assignment is expected to run for a year. For example, your company is likely to have a permanent establishment in Ireland which would require you to produce Irish accounts and pay corporation tax in Ireland. At the same time, your company will have to continue satisfying UK law by producing UK accounts reflecting corporation tax due to HMRC.
As everyone's circumstances are different, please call me and I will be happy to expand on the aforementioned and discuss a number of alternative ways you may want to consider for carrying out your assignment. There will be no fee for this consultation.
its international Consultants in tax and finance
ItsInternational Limited, Marble Arch Tower, 55 Bryanston Street, London W1H 7AA
Telephone: +44 (0)20 7477 2660 Facsimile: +44 (0)20 7477 2661 E-mail: mikep@itsinternational.ltd.uk Visit our website at www.itsinternational.ltd.uk
As a freelancer I am finding it difficult to get a mortgage. What are my options?
Answer supplied by Tony Harris, MD of Contractor financials
A: Mortgage lenders often struggle to get their heads around the way that contractors work and often resort to the traditional accounts-based method of verifying your income. Thankfully, there is a solution. Over the past 10 years, we have been able to negotiate special mortgage underwriting with many of the big lenders based purely on a multiple of up to 4.25 times your annualised contract rate alone. This enables you to secure exactly the same interest rates and probably a larger loan size than a permanent employee.Post credit crunch, we have been working to ensure these special underwriting schemes are still available and can still be accessed by contractor-orientated mortgage brokers. You shouldn’t have to pay any mortgage broker fees for advice and a good contractor specialist will have the necessary contacts within the lending institutions to help make the whole application process hassle free.
Tony Harris - tonyh@contractorfinancials.com / 0208 0900702
For further advice from PCG follow the links below:
Mortgages for freelancers explained