Can I use my limited company to process other contractors who are not shareholders

[DirtyDog]

Yes, but consider insurances, accounting, whether he will be an employee and/or director, in other words, a world of pain.

Plus the chance of increasing turnover to such an extent that you have to leave the VAT FRS.

[Wanderer]

Though if he doesn't yourco could end up liable for his taxes.

^^^ This.

It sounds to me like the worker is looking to pay a 5% bung to the company so they can get paid "cash in hand" and not declare the income or pay tax on it and that is going to end badly....

[Sausage Surprise]

Done it once.....never again!

[DShand]

As his employer you will be liable for employers NI, holiday pay and possibly sick pay. If the contract lasts for more then 12 weeks, then everything that goes along with the Agency Working Regulations such as 4 weeks of pay between assignments and equal employee benefits.... Sounds like a bad idea to me.

[andydd]

I've been in this situation and wonder if anyone has any more information.

Do you actually HAVE TO be an employee of the Ltd Company ? Isn't it possible just for the Ltd Co. to invoice the client, receive payment and then to pass the payment onto the individual concerned.

Assuming the pitfalls mentioned are complied with, i.e. Liability insurance is obtained, Self Assesment taxes are paid, NI is paid.

I've used this scenario a few times in the past without issue (a family members Ltd Co.) and hav'nt had any problems from agency, clients, etc..although recently a company did insist that I would need to be a director of said Ltd. Co. (which I'm not so I've gone down the Umbrella route).

Thanks

Andy

[Jessica@WhiteFieldTax]

I've been in this situation and wonder if anyone has any more information.

Do you actually HAVE TO be an employee of the Ltd Company ? Isn't it possible just for the Ltd Co. to invoice the client, receive payment and then to pass the payment onto the individual concerned.

Assuming the pitfalls mentioned are complied with, i.e. Liability insurance is obtained, Self Assesment taxes are paid, NI is paid.

I've used this scenario a few times in the past without issue (a family members Ltd Co.) and hav'nt had any problems from agency, clients, etc..although recently a company did insist that I would need to be a director of said Ltd. Co. (which I'm not so I've gone down the Umbrella route).

Thanks

Andy

Employment status - basically IR35 pitched from a different direction.

If you pass the payment to the individual and they don't pass employment status tests then there is a PAYE/NI liability back to deemed employer, i.e. yourco.

Leaving aside the agency rules, this is why even in direct contracts clients prefer limited company contractors - it removes an element of their tax risk.

Obviously this is a simplistic overview of a complex area of law combining tax aw, employment law, contract law and government extortion.