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  1. #61
    b r
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    I guess that would be somewhere in Wales would it?
    Scotland?

    The T&E is a big problem IMO for those of us that don't live within commute of the large urban conurbations.

  2. #62
    eek
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    Quote Originally Posted by b r View Post
    Scotland?

    The T&E is a big problem IMO for those of us that don't live within commute of the large urban conurbations.
    Travel and Expenses is going to be a killer virtually everywhere except for those who both live and work in London....
    merely at clientco for the entertainment

  3. #63

    Contractor Among Contractors


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    Quote Originally Posted by breaktwister View Post
    Here is my idea: Something similar to an umbrella company where contractors team together to form a consultancy/services firm. No individual is allowed to own more than 5% of the firm. The firm handles invoicing etc and everyone is paid a basic minimal salary. Each contractors daily rate determines his percentage of ownership so that dividends can be paid proportionally. IR35 cannot be applied to these individuals regardless of "end-client SDC" as they do not meet the criteria of s51 ITEPA 2003. The firm can rightly bill out to the end-client or agency and expect to receive the full amount without the "deemed employee" deductions. Operating under this structure can be sold to end-clients as an "IR35 free" solution where they are not required to determine SDC.

    The advantages of this structure over a typical umbrella company are obvious; the full range of business expenses can be deducted before tax. This structure would be particularly useful for contractors who need to stay away from home.

    Disadvantages are likely to be a larger administrative burden, dealing with contractors who want to leave the group as an immediate replacement would need to be found to transfer the share ownership; potential legal complications or disputes if a contractor refuses to give up ownership or dies (meaning his shares will pass to his estate). This would need to all be accounted for in the legal contract between the share owners of the firm. I guess there will be other challenges that need to be ironed out.

    I expect to be abused for this idea but I'll put it out for discussion anyway.
    I've only skimmed your proposal, but I I think I've understood the gist of it. I feel qualified to comment as I joined a company set up on a (in some but not all respects) similar basis when IR35 was first introduced. (Hence my user-name, which is no longer apt.)

    I think what you are missing is that it is not enough for each contractor to own less than 5% of the company. In order to satisfy a criterion that dividends can not reasonably be taken to be remuneration for individual contracts, you cannot have a direct mechanical link between what contractors bring in, and what they take out. Instead they would effectively have to hand over "their" contract income to the consultancy and trust it to see them right, on average over time. And the consultancy would have to actively avoid "seeing them right" in a transparent and straight-forward way, as if HMRC could prove there was a direct link between money brought in and benefits taken out, the contracts that generated that money would become caught.

    The "consultancy" I joined abandoned this approach after about six months, because it was impossible to find sufficient contractors willing to place that level of trust in it. (As the idea was abandoned, no dividends were ever paid.)

    Had they continued, the general idea was to remunerate people in a variety of ways, including via a company share ownership scheme where shares were awarded as performance-related bonuses. The shares would have paid a consistent dividend related to overall profits. The dividends received by an individual would not have been directly related to fees they generated for the company.

    It's possible that an idea like this could be made to fly in the near future. If contractors do turn out to be "cornered" by new rules then more of them might be willing to resort to something that wasn't sufficiently attractive back in 2000. Also, IPSE exists, and could lend credibility by creating such a company themselves.
    Last edited by IR35 Avoider; 20th March 2017 at 13:59.

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