Friend asked to bill through my company - is it OK?

[Noedig]

I've a friend who went back to France but has now got a UK contract.

He has asked me if he can operate through my company and for my company to send the money to his company, in France through a back to back billing arrangment, with a few quid to defray the accountants costs.

Him using his French company is out because the contract must be in the UK, and setting up his own UK company is out because he would then be a UK taxpayer and lose French tax benefits (whatever those might be).

The arrangement would look like this:
The actual client's Contract would be with my company
My company would have a contract with his company in France
The French company would invoice mine and I'd pay them.

I'm not looking for profit, just do it out of friendship.

At the same time I naturally don't want to end up liable for taxes, or, well, liability.

I think the liability aspect can be taken care of - he has indemnity insurance for work in the UK & my company can have a back to back indemnity arrangement with his, if my company insurers agree. I think.

But are there tax implications?

The French VAT rate is 19.6%, the UK one is 15%. So it looks like I would have to invoice the client for say 1150 to get 1000 income, and his company would invoice mine for 961.53 plus VAT to get hold of that 1150. Which would leave me paying more VAT a month than I received - can that be right?

Is my company liable for any other tax to boot?

Also, is it OK to run what seems to be some sort of funds redirection arrangement, or is this sort of thing a standard commercial arrangement?

Wot say you?

[pmeswani]

I've a friend who went back to France but has now got a UK contract.

He has asked me if he can operate through my company and for my company to send the money to his company, in France through a back to back billing arrangment, with a few quid to defray the accountants costs.

Him using his French company is out because the contract must be in the UK, and setting up his own UK company is out because he would then be a UK taxpayer and lose French tax benefits (whatever those might be).

The arrangement would look like this:
The actual client's Contract would be with my company
My company would have a contract with his company in France
The French company would invoice mine and I'd pay them.

I'm not looking for profit, just do it out of friendship.

At the same time I naturally don't want to end up liable for taxes, or, well, liability.

I think the liability aspect can be taken care of - he has indemnity insurance for work in the UK & my company can have a back to back indemnity arrangement with his, if my company insurers agree. I think.

But are there tax implications?

The French VAT rate is 19.6%, the UK one is 15%. So it looks like I would have to invoice the client for say 1150 to get 1000 income, and his company would invoice mine for 961.53 plus VAT to get hold of that 1150. Which would leave me paying more VAT a month than I received - can that be right?

Is my company liable for any other tax to boot?

Also, is it OK to run what seems to be some sort of funds redirection arrangement, or is this sort of thing a standard commercial arrangement?

Wot say you?

Forget about Tax implications... think about legal implications. If he screws up, you will be screwed and you may end up losing some, if not all, of your business earnings trying to defend his actions. He would be better off going via an umbrella or setting up his own Ltd Company. You will be liable to pay his NI and IT taxes if he fails to declare them to the HMRC. What you are proposing is a form of money laundering / Tax evasion. (I'm sure there is a more leanient wording one could use).

Don't get involved.... your mate will abandon you when things go badly wrong.

[ratewhore]

I say speak to your accountant.

[strawberrysmoothie]

Friendship and Business are like oil and water. They don't mix.

As much as you want to help him, this is ultimately his problem, and he has to find the solution to this without involving you and your LTD company.

I wouldn't touch this proposition with a barge pole.

[Drewster]

I'm not looking for profit, just do it out of friendship.

Ooooops! 1st rule of business.. its business!!!

What you are proposing is a form of money laundering / Tax evasion. (I'm sure there is a more leanient wording one could use).

Can of Worms......

Don't get involved.... your mate will abandon you when things go badly wrong.

Quite!

[TheFaQQer]

I'd steer clear. I know he's a mate, but is that friendship worth putting everything at risk for, just so that he can make the most of the French tax system??

Tell him that your accountant has advised against it, so that you can blame someone other than yourself.

(If you goahead, bear in mind that this could put you over the threshhold for FRS if that applies).

[pmeswani]

Can of Worms......

Damn... that's the phrase I was looking for. Ta Drewster.

[pmeswani]

(If you goahead, bear in mind that this could put you over the threshhold for FRS if that applies).

Even more reason why he shouldn't do it for free.

[expat]

Him using his French company is out because the contract must be in the UK, and setting up his own UK company is out because he would then be a UK taxpayer and lose French tax benefits (whatever those might be).

Healthcare and pensions, mostly.

The tax position depends on more than you have told us, and most importantly is not usually something that the taxpayer gets to choose. For example, if HMRC treat the income gained from the work as being employment income, it will attract tax in the UK, regardless of where your friend lives. If you have your Ltd Co in the loop, and everything else in the loop is abroad, they may just stick you with the tax bill.

Suggestion: for YourCo Ltd, substitute HisCo Ltd (a new Ltd Co that he creates). OK, client contracts to HisCo Ltd, HisCo Ltd subcontracts to his French company, that pays him. If both countries accept that as the real situation, then that works as well as doing it with YourCo Ltd.

And does he actually have a company in France, or is he working as Profession Libérale and using the term company loosely? If so, more chance that HMRC will see YourCo Ltd as employing him.

[Noedig]

Surely not

You guys are certainly aware of the drawbacks.

What is the FRS limit someone mentioned? Can't find a reference to that anywhere.

Also, being a bit ignorant, I can't see how he can be liable for UK tax. Or is there some background rule that says if you deliver a service in the UK you pay UK tax? I had envisioned all the money going back to Frogland where Monsieur L'Impot Sur Le Revenue taxman could hit him for it in the approved manner under the Code Napoleon or whatever, with no reference to the company passing the money along.