LLP structure to reduce tax for contractor? - USERNAME: KeithQL
Tax Question: 
I am self employed business project manager who charges for services via a traditional limited company / accountancy structure. I have a min salary/ dividend withdrawal mechanism and pay corporation tax and pay flat rate VAT.
Because of the location of project assignments I do not incur more than £500 expenses (mainly travel/accomm) each month so don't appear to be benefiting from the Ltd company set up.
I have been recently contacted by two tax advisers advising the benefit of switching to a LLP set up in order to increase my monthly take home pay. I do not have much knowledge of the LLP process and am nervous of using companies which I have not heard of.
Could you provide some guidance of whether a switch would be advantageous to my personal circumstances and if so could be recommend the top 3 market leaders who provide LLP services for contractors. I have been approached by Aston Mae and Rousseau to date.
Answer:
You need to get further details from the companies as to how these schemes will operate.
Simply using an LLP will bring no benefit, and in most cases you'd be better off with a Ltd company. This gives you the benefit of the lower rate of corporation tax on any profits that you do retain within the company.
If you used an LLP the profits of that LLP would be apportioned to you, and taxed on you at your marginal rate of income tax irrespective of whether the profits are retained in the LLP or not.
Therefore using an LLP would not by itself bring any tax benefits. You would need to ascertain precisely how they structure the LLP.
About the Author
The Author of this article/answer is our site Editor, Lee Hadnum. Lee is a rarity among tax advisers having both legal and chartered accountant qualifications. After qualifying a prize winner in the Institute of Chartered Accountants exams, he also went on to become a chartered tax adviser (CTA).He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author.
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