I really have looked for answers here but my situation is weird enough that it doesn't really seem to have been addressed.
I've worked for years as an employee of a foreign (non-EU) company while living here in the UK. We operated PAYE voluntarily for me and a relative who was also employed. At the company's suggestion, to address a domestic regulatory concern, I am now contracting rather than employed, and employing my relative. We are very niche. We may find it hard to find other contracts, and they will certainly find it very hard to replace us and aren't looking.
So, one client, our former employer. We left on a Friday (3/4) and started consulting on a Monday (6/4), were under PAYE, etc, all the red flags that HMRC doesn't like. But we're on a fixed project, no control, a very IR35 friendly contract, the company is highly motivated to protect our independence, etc. I think we'd escape IR35 but there is some real risk.
I read that you can't get clients as a sole trader, but in this case, the company doesn't care because, as a foreign company, HMRC would have a hard time sticking them for employment taxes. So I've signed our first contract as a sole trader.
My thinking was that if I form a limited company, I'm vulnerable to IR35, which costs the company nothing and costs me plenty. And if I stay a sole trader, the company is vulnerable to being ruled my employer, which costs me virtually nothing and also, in this case, costs them nothing. And I save annual reports, etc, of the limited company.
Further to this, I have dual citizenship (America) so have to file US taxes, and the US taxation treatment of dividends is NOT as favorable as here (what the Brits give the Americans take, and vice versa ), and the reporting requirement for owners of foreign corporations is very onerous. So some of the tax benefit of a limited company would be lost in American taxes, I think. So then I start to wonder, between the IR35 risk and the American tax situation, if it is worth it.
Am I missing something?
I've worked for years as an employee of a foreign (non-EU) company while living here in the UK. We operated PAYE voluntarily for me and a relative who was also employed. At the company's suggestion, to address a domestic regulatory concern, I am now contracting rather than employed, and employing my relative. We are very niche. We may find it hard to find other contracts, and they will certainly find it very hard to replace us and aren't looking.
So, one client, our former employer. We left on a Friday (3/4) and started consulting on a Monday (6/4), were under PAYE, etc, all the red flags that HMRC doesn't like. But we're on a fixed project, no control, a very IR35 friendly contract, the company is highly motivated to protect our independence, etc. I think we'd escape IR35 but there is some real risk.
I read that you can't get clients as a sole trader, but in this case, the company doesn't care because, as a foreign company, HMRC would have a hard time sticking them for employment taxes. So I've signed our first contract as a sole trader.
My thinking was that if I form a limited company, I'm vulnerable to IR35, which costs the company nothing and costs me plenty. And if I stay a sole trader, the company is vulnerable to being ruled my employer, which costs me virtually nothing and also, in this case, costs them nothing. And I save annual reports, etc, of the limited company.
Further to this, I have dual citizenship (America) so have to file US taxes, and the US taxation treatment of dividends is NOT as favorable as here (what the Brits give the Americans take, and vice versa ), and the reporting requirement for owners of foreign corporations is very onerous. So some of the tax benefit of a limited company would be lost in American taxes, I think. So then I start to wonder, between the IR35 risk and the American tax situation, if it is worth it.
Am I missing something?
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