Contractors Banding Together in One Company

[iamintoit]

MY ANSWER

Apologies if this is referenced elsewhere.

I work with 6 other individuals, some of us Ltd companies, some are straight PAYE, some are through an Umbrella but there is one single intermediary in this - Capita Resourcing. We all work in a team doing BI for government as contractors via an agency and all of our contracts end on March 31st 2013 but we expect renewals to be forthcoming. We have been warned that as public sector contractors we will be heavily scrutinised for having the correct 'taxation' in place and each of us have to declare ourselves on some kind of new register thingy!

Basically it sounds like we are sitting ducks for IR35 and we are all going to be proverbially bent over and you know the rest.

I am trying to think of a way around our problem. The way I see it is there is no expertise in the civil service which our team has - we do actually offer a unique service. We look after a live system for 20,000 active users, so not insignificant.

We all get on well, so is there a possibility of another kind of corporate entity that might work? What if we formed our own Ltd co or a holding co and went direct as a supplier to our relevant govt dept? Even if we could get the govt to buy into our suggestion of going direct without an agency (cost savings), forget the fact that they might not go for it, logically, legally etc is there a way of doing this banding together to avoid IR35? We would rent premises and our contract would be completely different as we are a 'supplier', not individuals????

Interesting question, first of all..

Maybe forming a LLP (Limited Liability Partnership) would be ideal in this scenario.

LLPs are intended for professionals who wanted to group their companies into large associations of partners. Firms still use this form of business so that they can share profits, but keep expenses and problems seperate.

The advantage of LLPs is that the partners can split all income between them as dividends. You can also do this in a limited company, but the recordkeeping obligations for LLPs are far less complex.

Not sure if this is ideal, refer an accountant please.

Cheers

[Jessica@WhiteFieldTax]

No, you can't take dividends from a LLP! LLPs are taxed the same as conventional partnerships, in turn a collection of sole traders, which means profit taxed in full and subject to Class 4 NI.

A LLP may be a possibility for a scenario like this, but it would be a higher tax charge per individual on each slice of income cf. a outside IR35 PSC.

LLPs do come in to their own for use as special purpose vehicles.

[iamintoit]

No, you can't take dividends from a LLP! LLPs are taxed the same as conventional partnerships, in turn a collection of sole traders, which means profit taxed in full and subject to Class 4 NI.

A LLP may be a possibility for a scenario like this, but it would be a higher tax charge per individual on each slice of income cf. a outside IR35 PSC.

LLPs do come in to their own for use as special purpose vehicles.

Thanks for sharing the info and updating me Jessica.

[iamintoit]

Forgot to ADD

No, you can't take dividends from a LLP! LLPs are taxed the same as conventional partnerships, in turn a collection of sole traders, which means profit taxed in full and subject to Class 4 NI.

A LLP may be a possibility for a scenario like this, but it would be a higher tax charge per individual on each slice of income cf. a outside IR35 PSC.

LLPs do come in to their own for use as special purpose vehicles.

In Dave Chaplin's Contractors Handbook - Second Edition, it says they can split income as dividends. Is this not correct?

[BolshieBastard]

You won't when it comes to arguing about money and everyone sees themselves as an individual and want's the cut they see as fair.....

This.

I know someone who went into a similar 'co operative' or whatever anyone wants to call it.

Things got awkward and one person got marginalised very much financially.

Be careful out there!

[Jessica@WhiteFieldTax]

In Dave Chaplin's Contractors Handbook - Second Edition, it says they can split income as dividends. Is this not correct?

Nope - differing tax regime. Unless you have corporate partners in LLP...

[iamintoit]

Thanks jessica

Nope - differing tax regime. Unless you have corporate partners in LLP...

OKIES