Navigating Independence: A Comprehensive Guide to Establishing Yourself as a Limited Company Locum

Why choose Limited Company (LTD)?

  • LTD Locums were quite popular up until 2020 when IR35 regulations changed and the client was responsible for assessing the locum’s IR35 status. (IR35 Information later on in this guide)
  • Operating via an Ltd is generally seen as more efficient in reducing bills for tax and national insurance contributions (NICs) for the self-employed. Operating an Ltd requires more in terms of admin, set-up and accountancy fees.
  • The decision is highly individual as to whether operating via an Ltd is worth it for you. The best thing is to get an accountant to do the figures for you.
  • Operating via an Ltd allows you to claim for a wider range of expenses.
  • Directors of Ltds can choose how much to draw from the company in a tax year. This can be more tax efficient if you expect your income to fluctuate eg if taking maternity leave.
  • A Ltd also protects your personal assets from any debts or liability incurred by your business.
  • Ultimately anyone considering working via an Ltd should ask an accountant to go look at their figures and ask if it is more tax efficient and worthwhile for you.

Before you begin the process…

You need to come up with a name for your company. This can be anything you would like but it can’t be a name already in use. Check on the Company House register to see if your name is already registered before completing the form.

Your business name can simply be your name or another one of your choosing.

There is also a few rules which need to be abide by when choosing your business name;

  • You must put your business name and your own name on all important documents such as invoices, letters etc
  • You are not allowed to include ‘limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’.
  • It cannot be offensive.
  • It can’t be the same as an existing trade mark.
  • Your name also cannot contain a ‘sensitive’ word or expression, or suggest a connection with government or local authorities, unless you get permission. For example: using VET in your company name requires permission from RCVS.
  • To use ‘Accredited’ in your company’s name, you need permission from the Department for Business, Energy and Industrial Strategy (BEIS).

To register your company you need to register for corporation tax.

https://www.gov.uk/limited-company-formation/set-up-your-company-for-corporation-tax?step-by-step-nav=37e4c035-b25c-4289-b85c-c6d36d11a763

It’s a fairly simple online process, below find some examples of the questions you will need to answer on the HMRC online form and what they mean.

If you decide you would prefer an accountant to help you check out the recommendations section within the MFL Facebook group!

Once you have your certificate of incorporation and 2 forms of ID you can register online or in store for a business bank account.

This process can take up to 2 weeks for everything to be filed through so be careful when you book in work to ensure you have a bank account ready for your invoice to be paid into. The bank should be made aware if after 2 weeks you still haven’t received correspondence.

IMPORTANT DATES TO REMEMBER

  • Date of Incorporation
  • 9 months and 1 day after year end to pay corporation tax.
  • 12 months after incorporation to submit a confirmation statement (check company details and pay for company house register renewal)

Accounting records

You must keep accounting records that include:

  • All money received by the company, for example Invoices or anything deemed as INCOME.
  • All money spent by the company, for example receipts or anything deemed as an EXPENSE.
  • Any other relevant documents, for example bank statements and correspondence, work placement contracts.

How long to keep records

You must keep records for 6 years from the end of the last company financial year they relate to.

Corporation Tax, VAT and Employer National Insurance Contributions are the three biggest taxes owed by limited companies. Directors of limited companies will also need to settle their personal tax obligations on top of this via a self assessment tax return submitted to HMRC each year.

Corporation tax

Limited company owners must submit an online CT600 form to HMRC annually.

This form provides a breakdown of the company’s income minus any tax allowances and expenses in order for HMRC to calculate how much corporation tax is owed.

The total corporation tax that you owe must be paid no later than nine months and one day after the end of your company’s accounting period ends.

The corporate tax owed can be paid online via your HMRC account using a company credit card, business bank account or direct debit.

VAT

You have to be VAT registered if your company’s taxable turnover exceeds £85,000 within a 12 month period or that you know it will. However, you can also register voluntarily.

If you register then you will need to put VAT on all your invoices and complete quarterly VAT returns. You can also claim VAT back on any expenses too. Recently, the VAT rules have changed and you will need to use an approved software to submit your returns. This rule only applies to businesses who earn over 85K.

Extra paperwork and administration is an unavoidable consequence of VAT registration and often you will find, if you don’t qualify for VAT registration then the common option is don’t do it, but like I have previously said – It’s up to you.

In conclusion, setting up as a Limited Company can offer numerous advantages for veterinary locums. From potential tax savings to increased financial privacy and flexibility, it provides a more structured and business-like approach to your locum career. While the process may seem daunting at first, the benefits can be substantial in the long run. However, it’s crucial to seek professional advice to ensure that forming a Limited Company aligns with your specific circumstances and goals.

By taking this step, you not only enhance your financial efficiency but also position yourself for a more secure and prosperous future in your locum journey.