Ok im just starting up how do i go legal

[A1DL]

Keep these invoices as they count towards your company spending. You need to invoice those people you are charging for the disco, and keep a copy of the invoice yourself, with paid dates and methods written down too. You will also need to note down (possibly in an excel spreadsheet or a book) all your expendeture on the disco company, ie new gear, work clothes, cds, music etc.

When the end of the year comes up, you can find out how much your turnover was by adding up the invoices you sent out to your clients (your turn over is basically the money that goes through the company, or rather comes into the company). Once you have done that, you then need to add up how much money you have spent on subcontractors, (which may or may not be half of your turnover.), then add up how much you have have spent on gear/music etc (ie spending) add the two (sub contractor spent and items spent) together and take it away from your turnover.

If like me then chances are that you have spent most of your disco money on new gear/CDs etc at your age. (I'm currently using other forms of income to support the rest of me!!) You may even find that you are into minus figures, ie you spent more on gear/cds in the year than you actually made after sub contractors have been paid.

Your tax is then based around your profit, your profit is the amount left. All of the above is shown below:

INCOME:

5x Disco @ £200 each = £1000
Total Income: £1000
-------------------------------
OUTGOINGS:

New CD Player @ £100
Now 65 @ £15
Black Shirt @ £25
Sub Contractor (Mate @ 50% of Booking Cost) x5 = £500
Total Outgoings: £640
--------------------
Income - Outgoings = £360 PROFIT

Another reason to use your mate or whoever as a sub contractor is because you are not expected to provide things like "a uniform" or black shirt or whatever you wear to discos. It also means there are less complications if you both share the gear ie he does lights you do sound etc.

So remember the TAX MAN will only charge you tax bassed on what PROFIT you make, if its nothing you wont get charged! I'm pretty sure the first TAX bracket is £5,000 anyway, which I'm sure wont be a problem, as you wont be making that in profit in a year.

Hope this helps.

Sorry, Will, but this is incorrect.

Purchases of new equipment such as a CD player are capital (on the balance sheet) as opposed to revenue (on the P&L) and CANNOT be written off in year one.

Capital purchases are placed on the asset register and a depreciation charge applied to the P&L each year (typically 25% reducing)

[A1DL]

Bear in mind that you can't just call someone a 'subcontractor' and make it so: it depends on the situation in which they are being employed. The taxman can decide that they are an employee, even if you call someone a subcontractor, and in that case, you, as the employer would be liable for all their back-tax and NI!!!!!!!!

I am not saying this to scare you Ben - but it really is dangerous for any of us to say 'do this' or 'do that' without knowing all the ins and outs of the way you are operating.

eg - you couldn't call yourself a sub-contractor of the company, could you? However, you do have the choice as a director as to whether to become an employee, or to just take dividends, or both: each have their own tax implications

Some very valid points Angela, which HMRC are now quite rightly, very hot on. The construction industry was the main culprit for abusing the sub contractor vs employee position.

We had a situation a few years back where we paid an office cleaner some small amount like £15 a week out of petty cash, as a "sub contractor", however our accountant advised us to cease this, since all the cleaner provided was her labour. We provided the cleaning equipment and materials and because of this HMRC would see her as an employee hence she must be on the PAYE

Conversely Ben, if you/your DJ /mate/ is using equipment and music owned by the company and only providing labour, this person is NOT a subcontractor, and as Angela has indicated, if you treat yourself/them as such, your company is likely to end up with a sizeable retrospective PAYE & NI liability, with interest and penalties.

[benlewis13]

Thanks for all the advice.

[Corabar Steve]

Ben

I think your best bet would be to (temporarily) cease trading & do a LOT of research

[Corabar Entertainment]

...just another point to add to the confusion: if you go down the 'sub-contractor' route, you could end up being classed as an 'Agent' and so be subject to all the rules and regs applicable to agencies.

Ben - did you not research all of this BEFORE you decided to incorporate?

[benlewis13]

What has been said is not entirely true. I have today spoken with an accountant, inland revenue and the companies house. As we are classified as a small business we only have to send unaudited abbreviated accounts. We are also exempt from company tax as we currently earn less than £10,000 per year.

My friends dad does tax, and has shown me a loophole in the law, allowing me to class my DJs as sub-contractors, and so we do not have to pay any tax. Just send in unaudited abbreviated accounts.

[Corabar Entertainment]

Ben - I can assure you that the corporation tax rates have just changed, and that it IS payable on ALL profit. Up until the 2005-2006, it was only payable on profit over £10,000, but not any longer. If you don't believe me, have a look at HM Revenue & Customs website here: http://www.hmrc.gov.uk/rates/corp.htm

...and take a note of the 'note' placed beneath the table:-

"*The 2005 Pre- Budget Report announced that the starting rate and non-corporate distribution rate would be replaced with a single banding for small companies set at the existing small companies' rate."

[benlewis13]

interesting that the guy on the phone failed to mention that. thanks

[Corabar Entertainment]

My friends dad does tax, and has shown me a loophole in the law, allowing me to class my DJs as sub-contractors, and so we do not have to pay any tax. Just send in unaudited abbreviated accounts.

Out of curiousity, what is this 'loophole'?

Also, how do you intend to pay yourself? How many Directors of the company are there? If more than just you, are they DJs as well? Don't forget that you will have your own tax liabilities as well as those of the company! How many other DJs are there going to be working for you? Are they going to be on term contracts or individual job contracts? Do you intend to just 'find' a DJ for a job once you have it, or will you have a few DJs that will be working regularly for you? Are they going to be using all of their own gear and music or will you be supplying anything?

[A1DL]

Ben

Digressing slightly, have you bought a PLI policy which covers your company for multiple concurrent functions? If not, you need to, as a matter of urgency.

Tony