How to deal with a friend doing some work for my company

[TedStriker]

We're talking under a thousand pounds but this could happen a few times so maybe £2500 max in any year. I wasn't aware of the reporting obligations but will take a look through and decide what to do.

It may well work out better/simpler all round just to take the money as wages/dividends in the way I usually would as if I'd done the work myself and pay him cash out of my pocket. In the end this will probably work out neutral as the CT I'll pay on it would be not far off the amount he'd have to pay when he declared the income at the end of the tax year anyway, in fact it will probably be a little lower.

Thanks for your help, guys!

[TheCoconutDog]

How to deal with a friend doing some work for my company

Stick all of the stuff you mentioned in a proper contract and sign it. There's templates on the IPSE website if you're a member.

[FarmerPalmer]

If your friend is not trading as a limited company and is doing this as self-employed but in full-time employment, and they don't declare/pay tax on the income, could the tax bill come back to your company for not deducting at source. I would be wary and ensure a written contract is in place to protect yourself.

I have only ever done this with the safety of subcontracting to another limited company, where there is a distinction between person and business.

[jamesbrown]

If your friend is not trading as a limited company and is doing this as self-employed but in full-time employment, and they don't declare/pay tax on the income, could the tax bill come back to your company for not deducting at source. I would be wary and ensure a written contract is in place to protect yourself.

I have only ever done this with the safety of subcontracting to another limited company, where there is a distinction between person and business.

No, you can subcontract a self-employed person. A self-employed person is responsible for paying their own taxes via their SATR. However, if the relationship looks more like one of employment (i.e. supervision, direction and control) then, yes, there is an obligation to deduct at source. Otherwise, there's also the new reporting requirement (see above). There's also a specific scheme for the construction industry.

[ceebeepps]

To be on the safe side, I would separate the whole friend thing and treat as a business transaction. You are subbing out the work, so one would assume that there will be a formal contract and insurance, you will get an invoice and you charge that invoice on, and your own contract with your client allows subbing. As the invoice is COS, you will technically make a little on the vat you have charged to your client versus FR 13.5% you pay (first year), and pay CT on that profit, but that will mean that you have no responsibility for the guys self assessment, EL, and taxes. Outside of that, with a business hat on I would consider it doing someone a "favour" which can bite you on the behind (why should they make more than you by not following rules & regs & taxes?).
Personally, I don't do "favours" in business. I would add a "finders fee" too (by way of reducing subbie charge) so you are getting something out of it.