limited company IR35 query

**Craig@Clarity** · 25 November 2010, 12:55

Originally posted by cinek View Post

I'll be working with a company that's abroad (in europe). They want to expand to the UK. We'll be specializing in web development. We are planning on opening a limited company in the UK. We'll share the work and split the profits etc Right now I'll be working from home, but if things pick up, we'll get an office. Does the IR35 apply to something like this? If so, how can we avoid being inside the IR35? I've read some articles about the IR35, but the more I read, the more confused I am;/

What is not clear is whether you are contracting with this overseas company or whether you are part of this overseas company looking to expand into the UK. If we assume you are part of this overseas company looking to expand in the UK and set up offices here providing web development work to customers/clients then you need to look at IR35 if you enter into contracts with your customers/clients. Is your home in the UK or overseas out of interest?

If you were complete separate to this overseas company and "you" decided to contract with it using a UK limited company, the relationship between you and your client needs to be assessed for IR35.

If the work you provide is on an adhoc, specific web development work where the contract for that work is, say, less than 1 month, then you don't need to worry about IR35. If there is more than 1 person in your company and any one of you can work on a project, IR35 doesn't apply as you will have demonstrated that it is not your specific personal service that is required.

**LisaContractorUmbrella** · 25 November 2010, 12:57

IR35 determines the way that you are paid - inside IR35, you can only be paid through PAYE and will be liable for income tax and national insurance contributions; outside IR35 and you can draw dividends from the Limited Company that you work for. The determining factor will be the control that the company you are working for has over your working practises.

**Craig@Clarity** · 25 November 2010, 13:04

Originally posted by LisaContractorUmbrella View Post

IR35 determines the way that you are paid - inside IR35, you can only be paid through PAYE and will be liable for income tax and national insurance contributions;

You can still pay dividends whilst subject to IR35 if there is a built up of reserves within the company from contracts that fall outside of IR35.

Originally posted by LisaContractorUmbrella View Post

The determining factor will be the control that the company you are working for has over your working practises.

Control is not the only determining factor for IR35. You can be totally under the control of the end client but have the right to substitution/subcontract/reassign which would place you outside of IR35.

**LisaContractorUmbrella** · 25 November 2010, 13:17

Originally posted by Craig@InTouch View Post

You can still pay dividends whilst subject to IR35 if there is a built up of reserves within the company from contracts that fall outside of IR35.

Control is not the only determining factor for IR35. You can be totally under the control of the end client but have the right to substitution/subcontract/reassign which would place you outside of IR35.

Tad hair-splitting on point 1

I am not sure I would agree Craig. If the client had total control I think it would follow that any ROS would be fettered

**Craig@Clarity** · 25 November 2010, 13:30

Sorry for splitting hairs but I would rather give a full answer. Also, dividends can be paid under IR35 in some cases from the 5% allowance from the deemed salary calculation.

WRT to control and ROS being fettered; if we took the example where I was hiring a temp from a recruitment agent for 6 months. The temp would be under full control but I wouldn't be restrictive over who the temp was that the recruitment agent sent (provided they have the necessary skills etc) so therefore IR35 wouldn't apply to the recruitment agent.

Another example would be where a contractor was working on a secured site and did not have full control over his/her methods due to the restrictive nature of the workplace, but was allowed to subcontract provided that the subcontractor had the same level of security clearance. In this example, there would not be full control and ROS would not be fettered.

**LisaContractorUmbrella** · 25 November 2010, 14:58

Originally posted by Craig@InTouch View Post

Sorry for splitting hairs but I would rather give a full answer. Also, dividends can be paid under IR35 in some cases from the 5% allowance from the deemed salary calculation.

WRT to control and ROS being fettered; if we took the example where I was hiring a temp from a recruitment agent for 6 months. The temp would be under full control but I wouldn't be restrictive over who the temp was that the recruitment agent sent (provided they have the necessary skills etc) so therefore IR35 wouldn't apply to the recruitment agent.

Another example would be where a contractor was working on a secured site and did not have full control over his/her methods due to the restrictive nature of the workplace, but was allowed to subcontract provided that the subcontractor had the same level of security clearance. In this example, there would not be full control and ROS would not be fettered.

1st example - the temp would be employed by the recruitment agency and therefore IR35 would be irrelevent.

2nd example - did you mean that there would be full control and ROS would not be fettered?

**Craig@Clarity** · 25 November 2010, 15:01

There wouldn't be full control exercised by the contractor and the ROS would not be restricted.

**LisaContractorUmbrella** · 25 November 2010, 15:15

Originally posted by Craig@InTouch View Post

There wouldn't be full control exercised by the contractor and the ROS would not be restricted.

The issue of control comes down to that excercised by the client and not by the contractor

**cinek** · 25 November 2010, 15:27

thanks. I've been looking into the limited company and I found it's also possible to set up a LLP. Right now LLP sounds better since it'll be a small company. What do you think?

limited company IR35 query