Oil and Gas workers in the UK and especially in Aberdeen (the Oil and Gas capital of the UK) know through various sources (friends, fellow workers, online) that to take on an Oil and Gas contract via Incorporating a Limited Company can be very successful for them. It means that they will no longer be a staff member or employee, and therefore must appear as a truly self employed individual to adhere to the IR35 Legislation which came into play in 1999.

Oil and Gas Recruitment Agencies often have a number of Contract positions available as well as staff positions, and therefore dedicated to advising candidates of this. Oil and Gas Recruitment Agencies will then often recommend that a Contract worker incorporates a Limited Company to operate through, for two reasons.

Firstly, many of the oil and gas corporations will not accept a Contract worker unless they have their own Limited Company to ensure that the liability is reduced for the end client.

Secondly, through this structure, Contractors have to set up their own payroll as they are both the Employee and the Employer of this Limited Company. The contractor can then increase their tax home pay and save many on taxes by taking a tax efficient divide of Salary and Dividends.

With this positive structure of taking a tax efficient divide of salary and dividends, the Oil and Gas contractor then has the responsibility to ensure that they are displaying themselves as being a truly self employed individual, and not what HMRC has started calling some non compliant Contractors; 'Disguised Employees'.

A 'disguised employee' is seen as someone who acts just as they would if they were working in a staff position and benefitting from staff perks, such as car parking, work nights out, lunch in the staff canteen, and generally acting as though they are a staff member but are reaping the tax efficient benefits of operating through a Limited Company. This not only frustrates the real staff/employees who work in these surroundings (who are working in staff positions and not making the tax efficient benefits of a Contractor) but it is a major focus of HMRC who are willing to invest in teams and staff to investigate Limited Company Contractors working in the Oil and Gas industry to make sure they are not violating the rules of the IR35 Legislation, put in place in 1999.

The penalties of failing to adhere to IR35 regulations, and being found to truly be a 'disguised employee' can be extremely costly, not only including the requirement to pay back all money made through tax efficiencies, but also the legal bills involved with defending the IR35 status of the Contractor. It's for this reason then, that so many Contractors are keen to avoid being caught as non compliant in the eyes of HMRC in IR35 stakes.

A specialist Contractor IR35 Accountant will ensure that you understand how you can be IR35 compliant whilst operating through a Limited Company for your Oil and Gas contract. You can take this quick test here to find out if you are Low, Medium or High risk of IR35. They will also ensure that all of the administrative tasks involved with running a limited company are taken care of for you. This means they will do the day-to-day business expense processing, the invoicing of a Contractor's client, and all VAT and PAYE returns, as well as running a payroll through your Limited Company for you to pay yourself monthly. They should also offer you advice on how you can take a mix of salary and dividends to ensure that you are operating in the most tax efficient manner.

All Limited Company requirements are your responsibility to submit as Limited Company Director also, though it's worth noting that a good Contractor Specialist Accountant will take care of all of this for you, and should only need your approval and authorisation to make submissions to HMRC (the tax man) and Companies House on your behalf.

It's a great idea to go with an Accountant who can ensure that you are keeping aside enough taxes each month, to pay for any future HMRC bills. Many Oil and Gas Contractors can get themselves in a bit of bother if these taxes are not put aside from the outset, as they forget that a bill is down the line, and use the money for a car, a holiday or business expenses and there's nothing left in the pot when the bill comes. However, if you are keeping funds aside every month, with the help of your Accountant, there should be no nasty surprises around the corner.