Setting up limited company and be VAT registered while on ESA

[Jamie2014]

Hello everyone,

 

I am currently on Employment and Support Allowance (awaiting major surgery) and I am wondering what would happen to my benefits if I register a Private Limited Company and register for tax, I'll explain why and try to keep it short, but also give a brief description on how I got to needing them.

 

So I was signed off work as I have a rare condition and I am speaking with my hospital re my surgery and as everyone knows this is a long process so I started looking into buying a product I have interest in and whilst looking I came across a page saying about becoming a Value Adding Reseller so I emailed the company for more info....they replied with an email address for the UK Sales Manager for their company.

 

I emailed him with what I wanted to do as well as asked some questions. He sent me a promising reply including training, support as well as a link to their marketing documents and a list of their distributors....once I have my website online they will add me to their Where To Buy page and if I organise any events he will bring some of the companies products to the event and be on hand to offer advice to customers as well as to myself.

 

So here I am with the support of a great company and brand, I register with the distributor and they reply saying they need my company registration number and VAT No. As I am on ESA I don't want my benefits to stop instantly because I don't even know if I will make money yet and at company start up I'll not have earned a penny.

 

I very much doubt there is anything I can do though....as usual the government wants people off benefits but do not help in any way other than give you jobs to apply for or put you on courses that nobody needs.

 

Anyway I apologise for the long post and for the rant at the end and I would really appreciate any advice or contact numbers for any company or organisation that can give further advise.

 

Many thanks in advance

Jamie

[topcat1802]

It costs a few pounds to set up a limited company - £120-180 - just talk to an accountant and they will generally help with the paperwork required. a limited company also needs a bank account which you can easily set up by visiting a bank once the company is set up. Its not necessary to register for VAT unless you are earning over the VAT threshold (I think its about £79,000 per year) but you only need to register in the quarter when you are likely to go over the VAT threshold so there is not much point in registering for VAT just yet - its more of an annoyance anyway until you are earning vast sums of money from the company. Since Companies House is a separate entity from DWP there is no reason why you need to tell DWP anything anyway you are just setting up a limited company, at the moment. Eventually you will need to register as Self Employed with HRMC .

[ericsbrother]

If the company is based in the US they always assume that you will be VAT registered because any seller in the US has to be registered as a company in a similar manner (theoretically even if you only flog stuff at a car boot sale) and obviously in the EU a VAT number shows you are legit. The bad news about registering for VAT is that you will get a load of headaches when it comes to doing your accounts and also have to pay the VAT man 20% of your turnover(less VAT paid) regardless of how low that turnover is. You can apply for a Pseudo TURN or EORI for import purposes if you intend doing all of your own import paperwork, another pain best avoided if possible.

[adridude]

It costs a few pounds to set up a limited company - £120-180 - just talk to an accountant and they will generally help with the paperwork required. a limited company also needs a bank account which you can easily set up by visiting a bank once the company is set up. Its not necessary to register for VAT unless you are earning over the VAT threshold (I think its about £79,000 per year) but you only need to register in the quarter when you are likely to go over the VAT threshold so there is not much point in registering for VAT just yet - its more of an annoyance anyway until you are earning vast sums of money from the company. Since Companies House is a separate entity from DWP there is no reason why you need to tell DWP anything anyway you are just setting up a limited company, at the moment. Eventually you will need to register as Self Employed with HRMC .

 

You can register the company yourself with Companies House for £14. On top of this, you don't have to have an accountant on full-time, but they are usually handy for a premises address. In terms of the address, you can, if your Landlord permits, use your home address, or you can find companies which offer "virtual addresses" which is perfectly legal. These can cost as little as £50 / year and they email scanned copies of mail which they receive, or they redirect mail to you. The ones which redirect mail often ask for a "stamp deposit" which we cover stamps etc.... for postage (usually about £20-30 / year).

 

In terms of accountants, at first I used them for the first year on important dates i.e. returns, self assessments, corporate tax etc... and only hired them ad-hoc as and when I needed help with an invoice or scenario. Just make sure you have the same accountancy software (and version if possible) as your accountant. DOn't be scared to ask them for help on using that too! Several years down the line, now I do all of my own books, let them look at them for a once-over to give the OK, then file whatever needs filing. The first year is SCARY but exciting when doing your first important dates! When you get it right for the first time without help, you get a sense of achievement! years down the line you loathe the sight of the forms haha

 

@the OP, just a warning about VAT. There will be ALOT of paper to keep and chase. If you do go down this route, I'd advise, if starting a small company, to go Cash Accounting (so you get VAT back quarterly), and set your period as quarterly. Believe me, doing VAT id a lot easier 4 times a year in small doses than one massive gulp at the end of the year.

 

@The OP: If you own a limited company and work 30+ hours, you are no longer eligible for any benefits other than Working Tax Credit and DLA. ESA, JSA etc... will no longer apple so make sure you have some cash saved up before you take this leap.

 

@The OP: To start of with, if you've been in ESA / JSA for x amount of time (more than 6 months I think), you're entitled to New Enterprise Allowance. This will help immensely with the basics for the first few steps.

 

@TheOP: Something I did personally to keep ALL of y affairs easy to maintain is invest in a decent paper scanner (with sheet feeder) and I literally scan EVERY document which I personally receive and which the company receives, then file them away marked as "scanned". Sounds like "Extra work", but it's not when people want documents, you can easily find them What I personally do is for example:

 

Document from ABC Holdings, dated 19 January 2015 regarding "Monthly Statement"

 

I would scan in:

 

Documents\MyBusiness Limited\Scans\2015\ABC Holdings\20150119 - Monthly Statement.pdf

 

or

 

Document from ABC Borough COUncil, dated, 21st March 2015, regarding "Council Tax Demand Notice 2014-2015":

 

I would scan in:

 

Documents\Personal\Scans\2015\ABC Borough Council\2015\20140321 - Council Tax Demand Notice.pdf

 

This way you can get zippy access to documents without having to sift through wads of paper...

 

Anyway, hope this tidbit helps