JP,
Your post reminded me that I never replied to your query on another thread regarding sole trader v ltd. co. status. I do not have an accountant but am pretty sure your one is correct, although the gap has narrowed considerably, recently, and there are, at least for me, other factors to consider.
Up until recently small businesses were able to make annual tax savings of up to 4k by operating as a company rather than a sole trader.
Up to Apr 2004 you could pay less tax as a company because (since Apr 2002) small companies paid no corporation tax on the first 10k of profits. Profits between 50k and 300k were taxed at 19% and a system of marginal tax relief smoothed the transition between the 0% and 19% levels for companies with profits between 10k and 50k. As a director/shareholder of your own company you were able to reduce your income tax bill and avoid NI altogether by paying yourself a salary limited to the personal allowance. You then paid yourself the rest of the money in dividends. This was pretty sweet.
But, from Apr 2004, in an attempt to level the field between directors of small companies and the sole traders, any money paid out to an individual as dividends is now taxed at a minimum average corp tax rate of 19%. The change has only affected companies with profits of less than 50k - those with larger profits have always paid tax at an average rate of 19% anyway. If you have a smaller company and want to pay yourself a dividend, but pay an average rate of less than 19%, you now have to find money to pay extra corp tax to the taxman, thus cutting the amount of the dividend.
Business with the least profits have to pay the most extra in corp tax, but even so, they still pay less tax overall than they would as sole traders.
However against the tax saving advantages of incorporating, people who are thinking of operating as a company need to consider the drawbacks, which include:
More formal and costly accounting and reporting requirements.
More formal procedures for drawing money from the business
Tougher rules for expenses and fringe benefits
In short, though I might save a little tax by being self-employed (considerably less than before) I am a great fan of simplicity, doing my own accounts and understanding them etc., and the gap has narrowed sufficiently since Apr 2004 to make me unwilling to change tack.
That said when I encounter the box marked "turnover" and "cost of sales" on the dreaded SA103 it's down to me alone to explain in the all too tiny box for additional notes that futures trading does not involve these traditional terms and convince the Revenue as to exactly why, which can be depressing!
I dread the day when I have to print out 250+ pages of incomprehensible transactions for Hector ... perhaps I need an accountant after all, which would mean that (s)he would cope with all the extra hassle involved with filing company accounts anyway, so it wouldn't be my problem.
PS I am also director of another company and am worried that the Revenue might become suspicious if I added another to the quiver. The last thing I need is an investigation, despite my obvious propriety
It was enough of a hassle getting them to admit I am self-employed at all so I'd just like to let the dust settle for a while, but I will consider the possibility of trading as a company in the future.
To sum up, you're probably still approaching it in the most tax efficient manner. And then there's the CGT allowance to use as well (as long as you keep your investments miles away from your trading, as it were, or Hector might like to lump them all together as income.
