Following recent changes to rules around the tax deductibility of travel expenses, the tax advantages of changing from an Umbrella Payroll scheme to a Limited Company for your Contracting work are more than they ever been. To such an extent that Umbrella companies are actively trying to transfer their clients.

The actual transition from umbrella to Limited Company is actually very simple and more or less the same as it would be if you were transferring from permanent employment to being a Limited Company contractor.

The steps are as follows:

1. Confirm with your client/s that they are happy for you to change the structure. This means that the Contract will change from being between Your Umbrella Company and your client to being between Your New Limited Company and your client.
2. Setup a Limited Company – we can do this free of charge as part of our Contractor Accounting package.
3. Have your accountant work out the best salary / dividend mix – As a Limited Company Contractor you would want to take a mixture of salary and dividends. The optimal mix depends on how much you’ve already earned from your umbrella this year. This is all part of our service.
4. Amend your contract with your client to the new company name
5. Obtain a P45 from your Umbrella, this will state how much pay you received whilst with the Umbrella and the amount of tax they deducted. This is vital for preparing your income tax return.

You need to be aware that running a Limited Company does come with additional responsibilities. A good Contractor Accountant should cover all duties for you though.

The advantages of Contracting through a Limited Company are that you can structure it so that you get full tax deductibility for your business travel, benefit from the VAT Flat Rate Scheme and avoid National Insurance by paying yourself in dividends.

Prior to HMRC’s investigation into eBay and Amazon traders they were investigating plumbers.

One such plumber who evaded £88,000 of tax has recently been sentenced to four months in jail, suespended for 12 months as detailed in this post on AccountingWeb.

I mention it just to stress the seriousness of this sort of fraud. With eBay traders it’s easy to start off trading as a tax free hobby and slowly have it morph into a professional trade over time.

If you are concerned that you might have unpaid tax please get in touch and we will help you understand the risk and how much, if any, tax is due.

e2cargo is a web based app for freight forwarders, carriers and hauliers.

The problem

I was recently talking to the director of a client working in the freight industry about how they record their sales and job data it led me to discovering a great niche bit of software.

My client showed me a HUGE spreadsheet with a row for each job over the last 3 years. Every time anyone in the five strong sales team made a sale they inputted client details, job details, departure location, arrival location, carriers used, cost, invoice date and date paid.

They knew there was a lot of risk relying on a spreadsheet like this and regularly struggled to reconcile the spreadsheet to their accounts. They’d previously enquired into getting custom software but received quotes of around £50,000 + maintenance costs. Apparently this is normal and has traditionally forced small to midsize hauliers into using spreadsheets.

The solution

As an online software obsessive I looked into whether there were any cloud solutions available and came across e2cargo. I signed up to a 30 day trial and was pretty blown away. It solves the problem 100%.

For a business of my clients size the cost is £79 per month (though check out our 10% discount below) the time saved and better control it gives over the business makes this an absolute bargain.

It works in a nice intuitive way following a job through it’s life from quotation to shipment to invoicing. The full list of functions is as follows:

• Quotations
• Shipments
• Invoicing
• VAT for all EU countries (B2B and B2C)
• Profit and loss calculation
• Master data
• Multi-currency
• Clear dashboard
• Address book
• Store transport documents
• Export data
• Invoice and revenue statements

Rather than write about it more, if you are in this industry I would really encourage you to take out a free trial and play with it for 30 minutes. I think you’ll quickly see how it transform your business processes.

I have one issue with the software, it doesn’t integrate with Xero Accounting Software. It does integrate with FreeAgent but I find this a bit of an odd choice. As much as I like FreeAgent it works best for one man bands, which isn’t the case for most of e2cargo’s target clients. You can though export invoice data and then import it into Xero manually, which doesn’t take long at all.

Discount

e2cargo have provided us with a code that provides a 10% discount, just put it in when signing up for the free trial. The code is: COA2012

Follow this link to try a free trial

If you want like it and want any help implementing e2cargo then don’t hesitate to contact us.