New Outside IR35 role advice

[Coz]

I have been contacted by an old colleague about a potential outside IR35 role based at a financial company which is not based in the UK. The suggested set up is that I will set up a Ltd company, but will be billing his Ltd company as an intermediary. I guess his Ltd company will be equivalent of a consultancy/agency in this set up.

I have been contracting inside IR35 for last 2 years so a little rusty on current IR35 requirements. My understanding is because either the end client is a foreign company or because my colleagues company turnover is under 1m then the IR35 determination will be my responsibility.

I am wondering if this set up makes sense and what insurances I should get and also if I need additional scrutiny on the contract (e.g. get the contract looked at by an IR35 specialist) to make so I am not leaving myself open to any risks.

I am at the early stages of discussions and I am starting to do the research now. Any recommendations would be really useful.

[northernladuk]

Old colleague? Via his LTD? Walk away.

I've seen a similar scenario twice and the end person got shafted both times. Lets call the person with the gig the Boss and the person that is you in this case the Worker. Both times the Boss was taking a hefty chunk of the rate which cause problems with the end worker found out. Someone else told the worker what the gig was paying on the second time and he wasn't happy. Also in the second the worker had to do dance about with what he did and who he worked for because the Boss had just spotted a gig and nicked the opportunity but wasn't acting properly as an intermediatry, just put a bum on seat and didn't want to know after that.

Another risk is that the people above you pay on time as well. No idea what the score was in those cases.

To add more problems this was before the new legislation so as you can see from this article you need to be extremely careful about who the fee payer is. It mentions Client, consultancy, Ltd situation about halfway down.
https://www.streetsweb.co.uk/about/n...nother-entity/

Are you delivering work to the Boss or delivering work to the client and the boss is just acting as the agent.

Either way, unless this is an absolutle belter of a gig and I would be happy if it fell in a heap after the second week (which I am not) I'd be leaving this one well alone.

[Protagoras]

Old colleague? Via his LTD? Walk away.

+1. While the advantages for the 'old colleague' are apparent, I'm struggling to spot the advantage to the OP.

If OP is keen to pursue this, then review of the contract is certainly advisable, and not only from an IR35 perspective.

OP may wish to insure against non-payment by the old colleague's LtdCo in addition to IR35 risks.

Either way, unless this is an absolutle belter of a gig and I would be happy if it fell in a heap after the second week (which I am not) I'd be leaving this one well alone.

+1.

Would it be possible to pay the 'old colleague' a finder's fee and contract directly with the overseas firm?

[Lance]

I disagree with the other 2.
This is perfectly workable. I have done it, and taken over half a million quid over a few years.
And I have used other people to help with my delivery, and am still doing.

But be under no illusion, there are no (well very few) friends in business. Be professional. And only do it if it makes sense for your business.

Having said all of that, I would be wary of setting up a LTD just for this. It needs to be part of a wider business strategy. Not just a LTD company to avoid a bit of tax as you think you are being offered an outside gig.

[Snooky]

Old colleague? Via his LTD? Walk away.
....etc

To put a different light on it, a friend and ex-colleague asked me to come and work for his company a few years ago. I was contracting at a decent rate, the gig was not under the Off Payroll rules due to Small Companies exemption and I had the contract/working arrangements professionally assessed as outside of IR35. The work was interesting, people great, it was a really good contract and saw me through the whole of the pandemic, which was convenient. There were no complications, no payment delays etc.

No regrets, he's still my friend, 100% would do it again.

[ladymuck]

I receive lots of work via ex-colleagues

This sounds like a sub-contracting gig, which is fine in of itself but does need extra due diligence. Get the contract reviewed for commercials as well as IR35 - a few hundred quid spent now could save you thousands if it all goes TU. Make sure you know what the payment terms are and how you will be expected to engage with the end client. If your ex-colleague is subbing out but hasn't told the client then it could unravel very quickly but if it's a proper commercial arrangement then all should be fine.

I agree with Lance that you don't necessarily need a Ltd Co for this, or are you guaranteed at least a year's worth of work? If it's a short-term, one off, gig then you could continue to use your/an umbrella or register as self-employed and put the income on your SATR. If you previously had a Ltd Co, then you need to consider if enough time has passed (depending on how you closed it down) or whether you will incur a tax bill for starting up again in the same line of business.

[Coz]

I agree it certainly does come with some additional risk. I once used an agency that went into liquidation taking with it 6 weeks worth of invoices after months of late payments. That wasn't pleasant!

The role itself sounds really good using the technologies I want to work with and could be a great way to kick start setting up a new business and taking outside IR35 gigs again as there are more available in this sector. The day rate is also higher than my current inside IR35 rate.

Although my previous LTD has only been fully liquidated recently via MVL (after massive HMRC backlog), it has been over 2 years since I distributed the funds so I think I am ok there, but would need to check with an accountant. As mentioned, I could always use the umbrella company if it was an issue.

Sounds like I would need to obtain more information around the structure (e.g. who the fee payer is, etc), but I think it does sound like a standard sub-contracting gig. If it does look feasible, I will make sure I get contract reviewed for IR35, as well as getting the commercial agreement looked at. I understand there are pitfalls though so it is good to have some of them pointed out so if I do end up going for it, at least I am aware of the risks.

[Lance]

I agree it certainly does come with some additional risk. I once used an agency that went into liquidation taking with it 6 weeks worth of invoices after months of late payments. That wasn't pleasant!

The role itself sounds really good using the technologies I want to work with and could be a great way to kick start setting up a new business and taking outside IR35 gigs again as there are more available in this sector. The day rate is also higher than my current inside IR35 rate.

Although my previous LTD has only been fully liquidated recently via MVL (after massive HMRC backlog), it has been over 2 years since I distributed the funds so I think I am ok there, but would need to check with an accountant. As mentioned, I could always use the umbrella company if it was an issue.

Sounds like I would need to obtain more information around the structure (e.g. who the fee payer is, etc), but I think it does sound like a standard sub-contracting gig. If it does look feasible, I will make sure I get contract reviewed for IR35, as well as getting the commercial agreement looked at. I understand there are pitfalls though so it is good to have some of them pointed out so if I do end up going for it, at least I am aware of the risks.

If it's someone you know why not just do self-employed?

Umbrella is the answer when agency compliance requires them to use a LTD company that's not a PSC. Without an agency, or at the very least the agency isn't paying you or your PSC, their compliance is no longer a limitation.

[northernladuk]

but I think it does sound like a standard sub-contracting gig.

Really depends on the detail as to how your ex colleague has come about this role and what the structure is before you can come to that conclusion. You said yourself you guess he was acting as an agency in the first post so isn't subcontracting.

[Coz]

Really depends on the detail as to how your ex colleague has come about this role and what the structure is before you can come to that conclusion. You said yourself you guess he was acting as an agency in the first post so isn't subcontracting.

Yes agree. I need to find out the details as I simply don't know what the proposed structure is right now. I do know that he currently contracts at the client and stated that I would invoice his LTD company, so assumed he would take a margin like an agency. Should the job offer materialise, I will need to get this all fully clarified and if it does not make sense then I can walk away.

If it's someone you know why not just do self-employed?

Umbrella is the answer when agency compliance requires them to use a LTD company that's not a PSC. Without an agency, or at the very least the agency isn't paying you or your PSC, their compliance is no longer a limitation.

Sounds like this is an option I need to consider as well.