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Client refuses to sign contract to ltd company only to me personally

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    Client refuses to sign contract to ltd company only to me personally

    My potential client will only sign a contract for set hours per week of personal services to me as an individual rather than to "me as director on behalf of my ltd company", how does that affect the contract? and taxation?

    If I sign the contract to me personally but receive the payments to my Ltd company business account will I automatically count as Self Employed / sole trader rather than Ltd company? or will I still be able to use salary/dividend for more efficient tax payment? albeit possibly with a greater risk of being caught by IR35?

    By refusing to offer it to my ltd company and only offering it to me personally, does my client open themselves up for any liability? - From what I understand that if I sign it personally it would be me and not my company would be liable for any issues my end but what about them?

    Would it automatically make me a disguised employee?

    #2
    Are they offering to engage with you as a sole trader - probably not.

    Sounds like they want to have their cake and eat it. They force you to use a Ltd to shield them from disguised employment claims, but don't want you to have the protection of LtdCo

    I would stand firm and tell them they can't have it both ways.

    Or offer to sign personally - as long as there is a director on the Agency/ClientCo side that also offers a personal guarantee.

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      #3
      A contract for personal service put you firmly within IR35. It is not a problem, just tell the company the two different rates for a contract for services versus a contract for personal service. They will back down if they are serious, I reckon.
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        #4
        Actually It feels to me like they only want to engage with a sole trader! or atleast maybe they are restricted to not offering work to ltd companies (maybe they would have to put the contract up for bidding?), but also don't want the tax / administrative burden of an employee and just want to pay me a flat fee per month- very much a have your cake and eat it type scenario..

        If they change the contract just for services and I go ahead and sign it personally what kind of position does that leave me in? (other than a bad one haha!) and also them re: disguised employment?

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          #5
          If they start paying you to work for them then prima facie you are an employee and need to pay PAYE.

          The wording of the contract will indicate what other relationship they are trying to set up. Therefore it seems odd you are arguing over who signs the contract rather than what it says.

          (I'm just wondering: often contracts require signature in a personal capacity - as well as on behalf of the ltd company. This is because small companies cannot be relied upon to comply with contractual obligations)
          Last edited by Cirrus; 18 May 2017, 07:31.
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            #6
            I'm not sure how they can make any payments to your Ltd in this scenario, as they have no legal agreement with them? If they contract you personally, they need to make payment to you, no one else?

            But I'm no expert, I'd be asking my accountant!

            In any case, it sounds like they don't actually understand what they are asking for, it might be worth just explaining the whole thing to them first?

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              #7
              Originally posted by Cirrus View Post
              If they start paying you to work for them then prima facie you are an employee and need to pay PAYE.
              Not necessarily - you may be defined as a worker for employment status rather than an employee.
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                #8
                Originally posted by le3ky View Post
                I'm not sure how they can make any payments to your Ltd in this scenario, as they have no legal agreement with them? If they contract you personally, they need to make payment to you, no one else?
                That would be my understanding - if the contract is with the individual then the individual is the person who needs to be paid.

                If the client wants to take you on as an employee, or a worker, or self employed then that would impact the rate that I would charge. I'd ask them what their paid holiday and sick pay policy is as a starter if they want to engage you personally. Ask them to ensure that their insurances cover you now that you are going to be working this way.

                And then explain how what they really want / need is a business to business relationship where your company supplies professional services to meet the agreed contract.
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                  #9
                  Originally posted by le3ky View Post
                  I'm not sure how they can make any payments to your Ltd in this scenario, as they have no legal agreement with them? If they contract you personally, they need to make payment to you, no one else?
                  Well they can, but it would be a bit strange, and in theory you could sue them for non-payment if they paid a different entity.

                  All very strange. Maybe you should tell them fine, but you'll need holiday pay, pension contributions and protection from redundancy. Do they know that you're 100% shareholder and sole director (assuming that you are?). Often that's what people want to hear.
                  Will work inside IR35. Or for food.

                  Comment


                    #10
                    Sorry, but I have to disagree with much of what others have said.

                    This does not make you an employee, and it does not put IR35 in view. It puts IR35 completely out of the focus. There is no intermediary in such a situation, they are paying you directly. No IR35.

                    It's a question of whether it is employment or self-employment. If it is self-employment, you have self-employment NICs and personal income tax on the income. Depending on the levels and how much it drags you into higher rate band and/or additional rate tax, that's not a lot worse than paying corporation tax and the dividend tax.

                    The big risk for you here is personal liability. If they don't like your work or something you do, they can sue you.

                    But this is workable, you can do this by adding 5-10% to your rate. That will let you buy really good PII and cover any extra tax.

                    The real liability is theirs. If HMRC decides you were an employee, they get to pay employer NICs on everything they paid you. And if you are despicable, you could come back and say this was false self-employment, they forced you into it but really you were treated like an employee all along, and you should have had employment rights, holiday pay, etc. By going the self-employment route they leave themselves vulnerable to that kind of thing. If you would really rather do it through your Ltd, you could tell them I'll never do that but most clients work with Ltd Co contractors to protect themselves from that kind of thing and from the NIC liability.

                    I personally think you are getting a break here. You can do this as a sole trader and for this contract you don't even have to worry about IR35. The only real drawbacks are the liability (easy to fix with insurance) and the fact that all income will be attributed to you in the year it is earned. That's really only a problem if you need to do income smoothing or if you are income splitting by paying your spouse dividends.

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