IR35 without being Director?

[Nathan SJD Accountancy]

At the moment I'm precisely nothing in the company - not a shareholder, haven't set up my own Plc, I've just spoken to the guy about whether if I can do it through his company, since I'll avoid the faffing of setting up my own, it might avoid me some hassle, essentially, if the end result is the same. He said that's fine and got his accountant to work out how much would be taken off for NI and tax etc so I had a picture of what my income will be - I assume just directly paid from the company to me minus tax/NI etc. I've got a couple of weeks until I need to be paid by my client for the first time to actually 'set in stone' anything that I need to. So I suppose I'm effectively self-employed at this moment? As stated; still woefully ignorant of processes involved here.

Lisa - I imagine my view is incredibly simplified at the moment!

Edit: Thank you for that HMRC link too.

I see, you are just assessing your options. In my opinion, the only options I believe you should be considering are:

Whether you operate through an umbrella company

Whether you operate through a limited company

I wouldn’t even consider using your friends company. As no doubt there are many factors that need to be taken into account, as Clare said e.g. insurance.

Umbrella companies will have process etc already in place to make it easy for you. Why make an easier situation harder by using your friends company instead of an Umbrella company, that has been tried and tested and do these activities / situations on a day to day basis?

As Clare states, if the contract role is not short term, possibly high value, a limited company is possibly the best option to go down currently if you care about the amount of tax that is paid to HMRC and the amount of money left in your pocket.

I get the feeling from your first post that you do mind how much tax is deducted, since you are considering IR35 factors and what is included in the contract. Therefore a Limited company may be the best route for you at the moment.

You also mentioned you wanted to avoid ‘faffing of setting up’ the company. Since this thread started, the company could've been formed.

Other registrations take a couple of days, maybe weeks, but shouldn't prevent you from beginning the role.

[Wanderer]

So, dunno - some of that may be incredibly thick and/or ignorant on my part

Yes, most of it is.

Sorry, i shouldn't laugh. I can see what you are driving at but as the accountants here have warned, going through a friend's LTD company is a Really Bad Idea. Your tax affairs get tied up with theirs and it gets really messy/complicated. Read the First Timers Guide. In particular, consider the three options available to you with regards to trading structures.

Umbrella or agency PAYE is the easiest though you will pay inside IR35 amounts of tax.
LTD is more complex but can be more tax efficient. It is easy to setup a LTD company by yourself but that is only a very small part of the process so don't go it alone. You will need an accountant sooner or later so get one engaged up front and they will guide you through all the things to do and avoid you getting fined or making dumb mistakes that cost you dearly.

Good luck!

[Reverend]

Very much appreciate everyone's advice - it's incredibly valuable (and shockingly quick-coming too).

I wouldn't consider it long-term - 8 months or so (possibly a bit more but I'll base it on what I've been formally offered). The money isn't amazing, since this is my first foray into contracting and I'm not some super experienced IT fellow on £600+ per day, but checking the ir35 calculator it would still make a more than noticeable difference to what I end up with in my pocket every month. So - if I may ask further patience - is there a ballpark I can expect for all the various accountancy fees for setting up my Ltd? Other than the basic initial set-up costs I'm unsure what these other fees are likely to total. Since as you've all advised - it's only 8 months, so if it's going to cost me £500/1000 to actually get the thing set up all legally perhaps it wouldn't be worth the effort and an umbrella company would make it easier. But if it's more like a couple hundred, then I'd be more than happy to go through the processes required since the pay-off (as it were) would certainly be worthwhile.

[Clare@InTouch]

Very much appreciate everyone's advice - it's incredibly valuable (and shockingly quick-coming too).

I wouldn't consider it long-term - 8 months or so (possibly a bit more but I'll base it on what I've been formally offered). The money isn't amazing, since this is my first foray into contracting and I'm not some super experienced IT fellow on £600+ per day, but checking the ir35 calculator it would still make a more than noticeable difference to what I end up with in my pocket every month. So - if I may ask further patience - is there a ballpark I can expect for all the various accountancy fees for setting up my Ltd? Other than the basic initial set-up costs I'm unsure what these other fees are likely to total. Since as you've all advised - it's only 8 months, so if it's going to cost me £500/1000 to actually get the thing set up all legally perhaps it wouldn't be worth the effort and an umbrella company would make it easier. But if it's more like a couple hundred, then I'd be more than happy to go through the processes required since the pay-off (as it were) would certainly be worthwhile.

You shouldn't be paying more than £100ish for incorporation, depending on how much work that covers (VAT, PAYE, flat rate VAT, bank, share structure etc).

Ongoing you'd probably be looking at £1000ish in fees for a full year, again depending on the level of service you want. Just make sure you're comparing like with like when it comes to what's included.

Then figure out if those fees are more than your tax saving!

[LisaContractorUmbrella]

There would also be costs to close down the company if contracting didn't work out for you and you still need to consider your IR35 position - if you're outside you would be better of financially with a Ltd co but if you're inside it won't make much difference to you. 3-6 months with an umbrella company would also give you a chance to see if contracting is for you without the pressure of running your own company.