Self employed and coming up to 2 years...

[Andy H]

Hi all

I've had a dig through the forums, FAQ and the badly designed .GOV stuff and I think I have the answer but wanted to check.

I'm a permie consultant but my wife is contracting part time for a local company. As she is part time and doesn't earn much the costs of a limited co were far more than the benefits (she is way way below the VAT threshold for example), and she would definitely have been caught by IR35. In fact she would rather be a permie at the company but they have no headcount, so stupidly continue to pay contractor rates for what is in effect a permie position.

Just to confirm, she is self employed and not going through an agency, ltd co or umbrella. The client seem happy with this arrangement - unusual I know! She pays tax through self assessment ( full income tax and NI), and only claims for travel outside of her commute to their head office where she normally works (say to another office or a meeting).

She has just been offered a 6 month extension which will take her over 2 years there. I assume that this would start to bring her client some employment liability in the same way as if she were employed (redundancy, unfair dismissal etc)? Is there anything I haven't picked up on that she will need to do differently in paying tax? Or any other watch outs I should tell her about?

She's very happy to keep working there as long as they pay her. If they let her go at any point she'll probably look around for a part time permie position locally, and only contract again if that is the only option.

I work with loads of contractors day in day out but they are go through Ltd co route so when I asked them they couldn't help as none of them knew much about it, although they had plenty of thoughts on 'allowances' and tax saving approaches if she were to go through a ltd co like they do

Thanks in advance - the forums seem full of useful advice, and a few snarky comments which keep things interesting

[cojak]

Hi Andy,

Welcome to CUK. I think that most of this will require one (or two, they are a competitive lot!) of our accountants to help with this one.

I'm not even sure about the the AWR aspect of this, but I'm pretty sure that your wife is going to be disappointed if she thinks that being there 2 years means that she has rights. That's only if you're a permanent employee of the company.

Anyway, someone will give you more detailed advice.

[ContrataxLtd]

Hi all

I've had a dig through the forums, FAQ and the badly designed .GOV stuff and I think I have the answer but wanted to check.

I'm a permie consultant but my wife is contracting part time for a local company. As she is part time and doesn't earn much the costs of a limited co were far more than the benefits (she is way way below the VAT threshold for example), and she would definitely have been caught by IR35. In fact she would rather be a permie at the company but they have no headcount, so stupidly continue to pay contractor rates for what is in effect a permie position.

Just to confirm, she is self employed and not going through an agency, ltd co or umbrella. The client seem happy with this arrangement - unusual I know! She pays tax through self assessment ( full income tax and NI), and only claims for travel outside of her commute to their head office where she normally works (say to another office or a meeting).

She has just been offered a 6 month extension which will take her over 2 years there. I assume that this would start to bring her client some employment liability in the same way as if she were employed (redundancy, unfair dismissal etc)? Is there anything I haven't picked up on that she will need to do differently in paying tax? Or any other watch outs I should tell her about?

She's very happy to keep working there as long as they pay her. If they let her go at any point she'll probably look around for a part time permie position locally, and only contract again if that is the only option.

I work with loads of contractors day in day out but they are go through Ltd co route so when I asked them they couldn't help as none of them knew much about it, although they had plenty of thoughts on 'allowances' and tax saving approaches if she were to go through a ltd co like they do

Thanks in advance - the forums seem full of useful advice, and a few snarky comments which keep things interesting

Hi Andy

Friendly accountant here, welcome to the forum

From the sounds of it your wife is very happy as things are and isn't looking for any permie benefits or such like so just continue as things are. All the risk is in the clients hands and not your wife's as working direct as self employed is almost like IR35 in reverse, if you were deemed to be an employee it's the client that normally faces the fall out (and the additional taxes if due) rather than the self employed worker. They also run the risk of your wife not paying her taxes which in theory they could end up liable for too.

If she would be IR35 caught through a Ltd she might actually be better off tax wise being self employed so that's a bonus for her too, along with more flexibility on what can be claimed for some expenses (cars is the big one here).

Even if she is way below the VAT threshold it would probably still be worth her registering, if only so that some input VAT could be reclaimed, or to make use of the flat rate scheme.

Hope this helps.

Martin
Contratax Ltd

[Andy H]

Thanks for the fast reply guys. Sounds like she can continue past 2 years as is without any additional risk to her. Was surprised that the company (a household name retailer) was happy with the self employed approach but wasn't going to complain as it was to her benefit.

See you're in St Annes Martin - bet the DWP contractor market up there keeps you busy! Spent many a night in the Dalmeny hotel working up there.

[TykeMerc]

The 2 year rule (which I think is what's worrying you) is only really a factor if she was to be claiming daily travelling expenses against her tax bill.

Since you state that she only expenses occasional travel to other sites (you don't say if the client is charged that cost, not that it matters) and those are clearly not her usual place of work that's a non issue too. That type of expense can be done indefinitely, no 24 month rule.

IR35 doesn't enter into the equation at all as she's not paying herself via dividends, it's all salary as a self employed sole trader with an annual return. I can't immediately see any reason for you to be worried in any way over her working arrangement, other than the obvious factor that her client has dodged any responsibility for the usual employee rights including redundancy, but you imply the rate she's paid compensates for that.

I am not an Accountant or Lawyer so my opinion is worth the paper it's not written on

[ContrataxLtd]

Thanks for the fast reply guys. Sounds like she can continue past 2 years as is without any additional risk to her. Was surprised that the company (a household name retailer) was happy with the self employed approach but wasn't going to complain as it was to her benefit.

See you're in St Annes Martin - bet the DWP contractor market up there keeps you busy! Spent many a night in the Dalmeny hotel working up there.

Good old sunny St Annes indeed! Surprisingly though we don't have many DWP contractors as clients.

I can almost see the Dalmeny from my office, literally 2 mins round the corner from here.

[Andy H]

The 2 year rule (which I think is what's worrying you) is only really a factor if she was to be claiming daily travelling expenses against her tax bill.

Since you state that she only expenses occasional travel to other sites (you don't say if the client is charged that cost, not that it matters) and those are clearly not her usual place of work that's a non issue too. That type of expense can be done indefinitely, no 24 month rule.

That was one of the things I had read about, thanks for clarifying.