Business Doctor: Can personal fees go through my business?
GM writes: I’m a director of a company and am regularly invited to give business lectures and appear as a guest speaker. I am paid a fee each time, which I have previously been declaring as a separate source of income on my personal tax return. Can I start charging these through my limited company in future?
It is possible to charge other sources of income through your company, but there are a number of points to consider first, writes Jon Dawson, partner at Kingston Smith LLP.
Putting everything through the company will allow you to reduce your own record-keeping and use the company’s financial systems to invoice and collect any fees. The main disadvantage could be VAT.
Assuming you do not personally exceed the £83,000 VAT registration threshold, any speaking or lecturing fees you currently invoice do not include it. If invoiced through your VAT-registered company, you would need to add the tax on top. This could be an issue for some clients if they cannot recover the VAT charged.
The company’s trade will also be relevant. If the speaking and lecture topics are related to the business’s activity, it can all be combined in the same income and expenditure totals. If unrelated, the taxman could argue that the trade should be separated and reported individually on the corporation tax return. While this will not be a significant issue, there are restrictions on how you can offset carried forward losses against a different trade in future years.
Finally, everything you currently invoice is taxed and paid directly to you. It is not clear whether you have shareholders. If so, they would earn a proportion of your speaking and lecturing fees unless you came to an arrangement to equalise the remuneration through a bonus or additional pension contributions.
A bonus wouldn’t be as tax efficient because the company would incur employers’ national insurance contributions on the payment.