IT contractor - but going PAYE under a family members company?

[qwertyuiop725]

I am about to start a new IT contract. Normally I am the director of my own limited company and have contracts done up as per usual with the agency.

However - instead, I want my sister to set up a new limited company where she is sole shareholder. I would be just a regular PAYE employee of that company.
I believe legally this is all fine.

HOWEVER- in practice, do recruitment agencies have any issues in signing a contract with this kind of structure?

Everything else would be as normal.
i.e. I did the interview for the role. I would be performing the service for the end-client. The only thing slightly different would be the contract signed with the company structure as outlined above.

IS this kind of thing acceptable to agencies when signing contracts?

[BrilloPad]

Yes.

IANAA

[pr1]

I am about to start a new IT contract. Normally I am the director of my own limited company and have contracts done up as per usual with the agency.

However - instead, I want my sister to set up a new limited company where she is sole shareholder. I would be just a regular PAYE employee of that company.
I believe legally this is all fine.

HOWEVER- in practice, do recruitment agencies have any issues in signing a contract with this kind of structure?

Everything else would be as normal.
i.e. I did the interview for the role. I would be performing the service for the end-client. The only thing slightly different would be the contract signed with the company structure as outlined above.

IS this kind of thing acceptable to agencies when signing contracts?

You probably need to be a director of the company (she could still be 100% shareholder though)

IANAL

[VectraMan]

I can't see why it isn't legal, unless the tax man wants to see it as avoidance. But that doesn't mean an agent won't have a problem with it. You're asking them to go into business with an unknown third party, and there's no reason why they should do that.

[b0redom]

Why are you doing this? Sounds very suss to me, and I'm not even an HMRC inspector. I'd stock up on the lube. Smacks of trying to avoid the CSA or similar.

[TheFaQQer]

Some agencies insist on you being a director of the company (which you could still be, even if you aren't a shareholder). I've also heard of some who insist that you are the majority shareholder as well. There is no logical reason for either of these.

The only reason to ask that you are a director would be that it is then very clear that you have the legal authority to enter into a contract with the agency - but that's fairly easy to do anyway. Essentially your sister's company is acting as an umbrella for you, and agencies are willing to work with them.

[qwertyuiop725]

Some agencies insist on you being a director of the company (which you could still be, even if you aren't a shareholder). I've also heard of some who insist that you are the majority shareholder as well. There is no logical reason for either of these.

The only reason to ask that you are a director would be that it is then very clear that you have the legal authority to enter into a contract with the agency - but that's fairly easy to do anyway. Essentially your sister's company is acting as an umbrella for you, and agencies are willing to work with them.

Well that's a good point. Theydo already deal with umbrella companies - which is a 3rd party - so why wouldn't they in my situation.

Although you do mention that they sometimes insist on me being a director of a company?

If that does occur, I wonder could I get the family member to set up an umbrella company - and I be employed from there?
Does anyone have any idea if this is doable?

[pr1]

Well that's a good point. Theydo already deal with umbrella companies - which is a 3rd party - so why wouldn't they in my situation.

Although you do mention that they sometimes insist on me being a director of a company?

If that does occur, I wonder could I get the family member to set up an umbrella company - and I be employed from there?
Does anyone have any idea if this is doable?

are you banned from being a director?

[VectraMan]

Some agencies insist on you being a director of the company (which you could still be, even if you aren't a shareholder). I've also heard of some who insist that you are the majority shareholder as well. There is no logical reason for either of these.

The agent's agreement is with the company. As a director you can sign for the company, but if you're not also the major shareholder it's possible the other shareholder(s) could get rid of you as a director before the contract is up. The agent then has a contract with somebody they know nothing about, who's different from the one doing the work. Easy to see why they might take issue.

An umbrella is different as there's only a few of them and they're well established and easy to check out.

Depends how diligent they are to an extent. Maybe they won't notice or find out. Either way it's a bit dumb.

[qwertyuiop725]

are you banned from being a director?

I'm not banned from being a director yet. But I plan on entering bankruptcy soon - when I will be banned.

I could go down the umbrella route - but any earnings above reasonable expenses are taken for the year and for 2 further years after bankruptcy which I obviously don't want.

Ideally - get family member set up a new limited company. Post-bankruptcy I can then buy the company from family member for a nominal token amount. That's the strategy - which is all legal by the way.

The only issue is will agencies sign a contract with company where I am the PAYE employee and family member is owner/director.

Alternatively could I get family member to set up a new umbrella company? Not sure how easy that is.