UK Self employed, contracts

[kate321]

An individual has a self employed contract with a company. The individual has set up a limited company and they will be paid into this company.

How is this possible when the relationship is with the company and the individual and not the limited company owned by the individual?

 

[Julia Satin]

To clarify an individual, let's name him John gains a contract with a Ltd co B on his name.
But asks to pay his income from this contract to his Ltd co, A.
Is this the scenario?
I don't see any reason why B cannot transfer the money due to John to his company A.
Where the money are paid is not really important.
But more complex question here is whether the income from this contract can be recognised in A accounts.
This depends on what Mr John actually wishes. If his intention is to work as a self employed then it is his personal income and should be included fully in his personal tax return. On the other hand, if he wants to take advantage of working through Ltd co, then he only needs to change name in the contract to A.

 

[kate321]

To clarify an individual, let's name him John gains a contract with a Ltd co B on his name.
But asks to pay his income from this contract to his Ltd co, A.
Is this the scenario?
I don't see any reason why B cannot transfer the money due to John to his company A.
Where the money are paid is not really important.
But more complex question here is whether the income from this contract can be recognised in A accounts.
This depends on what Mr John actually wishes. If his intention is to work as a self employed then it is his personal income and should be included fully in his personal tax return. On the other hand, if he wants to take advantage of working through Ltd co, then he only needs to change name in the contract to A.

Correct re your interpretation. Technically the income will be generated by the individual but essentially recognised in their company where they are a sole director. I've never seen this before with limited companies it has always been that the contract would be with the entity:

 

[Julia Satin]

Correct re your interpretation. Technically the income will be generated by the individual but essentially recognised in their company where they are a sole director. I've never seen this before with limited companies it has always been that the contract would be with the entity:

Technically this income is not Ltd company's, but I don't think HMRC will go out of way to check the contract. I can see why he is using Ltd co, but I can't understand why the contract was made on his name instead of his company. Out of ignorance?

 

[kate321]

Technically this income is not Ltd company's, but I don't think HMRC will go out of way to check the contract. I can see why he is using Ltd co, but I can't understand why the contract was made on his name instead of his company. Out of ignorance?

Just to do with type of activities being carried out

 

[Julia Satin]

Just to do with type of activities being carried out

The thing is legally he is much less protected by making contracts on his name. I hope he realises that.