Contracting for a Canadian company... self-employed vs Ltd vs Umbrella

[Gandalf2074]

Hello everyone,
I will be contracting for a Canadian company providing them business development services. The contract says I am expected to work for 1840 hours (i.e. 255 work days - 25 days leave) but this will not be strictly enforced. On top of the contract value there is a discretionary bonus and there is ane exclusivity clause as well.
The company will pay for expenses (transportation, hotel, lunch) but not office set-up (computer, telephone, internet).

Given the above I believe this would fall under IR35 if I set up a LTD. Am I right in saying that being self-employed/sole trader would likely be the more efficient option?
Or would the LTD option still viable? Could you see any advantage in using an umbrella company?

The contract value will be £77,000 - does this mean I will have to register for VAT?

Thanks and Regards,
Stefano

[Sally@InTouch]

Hello everyone,
I will be contracting for a Canadian company providing them business development services. The contract says I am expected to work for 1840 hours (i.e. 255 work days - 25 days leave) but this will not be strictly enforced. On top of the contract value there is a discretionary bonus and there is ane exclusivity clause as well.
The company will pay for expenses (transportation, hotel, lunch) but not office set-up (computer, telephone, internet).

Given the above I believe this would fall under IR35 if I set up a LTD. Am I right in saying that being self-employed/sole trader would likely be the more efficient option?
Or would the LTD option still viable? Could you see any advantage in using an umbrella company?

The contract value will be £77,000 - does this mean I will have to register for VAT?

Thanks and Regards,
Stefano

Firstly, congratulations!
If you're caught by IR35 (get a review, don't assume) then you can still trade through a limited company paying yourself a deemed payment after 5% of the contract rate is allowable as a tax deduction. You can also have pension contribution to deduct against tax whilst inside IR35, and some profit by being on the VAT flat rate scheme, although you may need to look at the place of supply.

Self-employed maybe an option if there is no agency involved, the national insurance is lower than that of PAYE (9%), the tax rates are the same but you would have no expenses or the VAT flat rate profit.

[BlasterBates]

Hello everyone,
I will be contracting for a Canadian company providing them business development services. The contract says I am expected to work for 1840 hours (i.e. 255 work days - 25 days leave) but this will not be strictly enforced. On top of the contract value there is a discretionary bonus and there is ane exclusivity clause as well.
The company will pay for expenses (transportation, hotel, lunch) but not office set-up (computer, telephone, internet).

Given the above I believe this would fall under IR35 if I set up a LTD. Am I right in saying that being self-employed/sole trader would likely be the more efficient option?
Or would the LTD option still viable? Could you see any advantage in using an umbrella company?

The contract value will be £77,000 - does this mean I will have to register for VAT?

Thanks and Regards,
Stefano

When you say you're working for a Canadian company, do you mean in Canada, i.e. not through a UK subsiduary?. If it is then you will not be within IR35. You can't be an employee of a Canadian company. I presume most of this would be at home. If you spend a lot of time in Canada your biggest concern should be the Canadian tax authorities.

[Sally@InTouch]

When you say you're working for a Canadian company, do you mean in Canada, i.e. not through a UK subsiduary?.

I didn't read it this way! If it is in Canada, ignore my post please as this is only relevant if you are UK tax resident.

[Gandalf2074]

@BlasterBates and @Sally@InTouch: company is based in Canada and does not have local presence. I will work from home in UK (and travel a lot across Europe, limited time will be spent in Canada). I am UK tax resident and I have been made redundant by my previous employer (with whom I was permanent).

@Sally@InTouch: I thought you could deduct expenses when self-employed, isn't that the case? Same for pension... isn't it the same between LTD and Sole Trader? There won't be any agency, the contract will be between me and the Canadian company.

Thanks both for all your help!

Kind Regards,
Stefano

[northernladuk]

You need to find yourself an accountant either way and ask them all these questions IMO. You don't want to be chancing a whole years income on advice based on very basic details on a free forum...

Are you sure they will take you on as a sole trader? Not many (if any) clients will here.

[Sally@InTouch]

@BlasterBates and @Sally@InTouch: company is based in Canada and does not have local presence. I will work from home in UK (and travel a lot across Europe, limited time will be spent in Canada). I am UK tax resident and I have been made redundant by my previous employer (with whom I was permanent).

@Sally@InTouch: I thought you could deduct expenses when self-employed, isn't that the case? Same for pension... isn't it the same between LTD and Sole Trader? There won't be any agency, the contract will be between me and the Canadian company.

Thanks both for all your help!

Kind Regards,
Stefano

You are right in regard to your office set up expenses and pension for both for limited and sole trader. These will be minimal though, your main expenses in regard to travel etc overseas are paid by the client and therefor you cannot claim them, again.

At the end of the day, the limited company inside IR35 will pay you slightly more than sole trader.

[BlasterBates]

@BlasterBates and @Sally@InTouch: company is based in Canada and does not have local presence. I will work from home in UK (and travel a lot across Europe, limited time will be spent in Canada). I am UK tax resident and I have been made redundant by my previous employer (with whom I was permanent).

@Sally@InTouch: I thought you could deduct expenses when self-employed, isn't that the case? Same for pension... isn't it the same between LTD and Sole Trader? There won't be any agency, the contract will be between me and the Canadian company.

Thanks both for all your help!

Kind Regards,
Stefano

I'm not an accountant but sounds to me pretty clearly outside IR35. You're working independently from your own office.

Get the contract checked though and take some advice from a qualified accountant.

[jamesbrown]

In terms of expenses, are you required to claim these separately through whatever expense system your client has in place? Ordinarily, if going the Ltd route, there would simply be a line on the sales invoice and any claims are then between you and YourCo (and HMRC ).

[FWDiane]

You shpuld talk to Qdos or similar re the IR35 review, and whilst on that get some quotes for insurance. In my experience premiums are very high when working in or for North American companies.