Contractor status question

[zackie]

I am a Director of three separate companies (one non-profit) and get paid by each of them, essentially on a project-by-project basis whenever I do work on project contracts. However, I should also mention that in the past I’ve taken dividends from two of those companies as well.

I also have about 50% ownership within each of these two companies.

On top of that, I also get paid for separate freelance (contract based) work, unrelated to my companies.

My question is - would I be able to set myself up as a contractor and create my own contractor ltd company that I channel my earnings through, given the various sources I get my earnings from?

I realize that with such an arrangement, some of the work I’d be passing onto that contractor company would be from companies I also hold directorships and shares in, so wanted to know if this would invalidate such an arrangement?

Thanks!

[northernladuk]

Do you not think with that level of complexity an accountant might be a good idea?

[TheCyclingProgrammer]

Do you not think with that level of complexity an accountant might be a good idea?

This sounds all sorts of complicated. For starters, YourCo wouldn't be able to receive the dividend income without it buying your share from you. This means valuations, dealing with CGT on your disposal etc. And then you'd have to take a dividend from YourCo to get the money back out again. Makes little sense to me. At the very least I'd stick with simply receiving your existing dividend income as-is.

It wasn't clear but if your other freelance work is completely unrelated to the other companies then choosing whether to deal with that work as self-employed or through a Ltd company is a decision that can be made with the advice of an accountant in a fairly straight-forward manner and you'll have to weigh up the usual issues - do you earn enough to make it worth the extra admin and accountancy fees, could IR35 apply etc.

But in short, WNLUKS. You need some professional advice.

[malvolio]

WHS. One complication (there are others...) is that a director of a company who takes on a role as a director of another company has to be paid by the second company as an employee through PAYE. Get professional advice.

[TheCyclingProgrammer]

WHS. One complication (there are others...) is that a director of a company who takes on a role as a director of another company has to be paid by the second company as an employee through PAYE. Get professional advice.

Just to elaborate on what mal is referring to for OP, if you receive remuneration (so this doesn't apply to the dividends you receive from the other companies) as an office holder, you can't receive that remuneration through a Ltd company as it is caught by special provisions under IR35 for office holders.

Whilst you can continue receiving dividends from these companies as you are a shareholder, its very possible that the separate remuneration you receive for the projects you work on for these companies in your capacity as a director would be caught by these IR35 provisions if you were instead paid through your own company.

So if your main motivation to form your own Ltd company is to consolidate your income into one vehicle then this is unlikely to be successful as there would be complications/issues for trying to divert both your dividend income and your existing remuneration through YourCo.

This would just leave your other freelance work which as I said in my last post needs to be evaluated on its own merits as to whether it would be worth putting through a Ltd company. Personally, unless this separate freelance income makes up a significant proportion of your income such that you would benefit from the tax planning arrangements a Ltd co. provides, I'd be inclined to carry on working on a self-employed basis.

[sal]

Do you not think with that level of complexity an accountant might be a good idea?

WHS