Benefits of multiple people contracting under the same limited company

[renix]

Hi

Both me and my partner have our own limited companies.
We both work as IT contractors and are thinking if it would be more beneficial to just close one of the companies and we both would use the same one.

What would be the advantages of doing this?

Thanks
renix

[SueEllen]

If you work doing exactly the same job role then it maybe useful otherwise don't bother.

[jamesbrown]

None, really, except marginally reduced admin, perhaps. If you're on the FRS, you'll likely exceed the limits (150k for joining and 220k for leaving). The Employment Allowance is per employer. Consider the possibility that your partner won't be your partner at some point in the future.

[BolshieBastard]

Hi

Both me and my partner have our own limited companies.
We both work as IT contractors and are thinking if it would be more beneficial to just close one of the companies and we both would use the same one.

What would be the advantages of doing this?

Thanks
renix

What happens if you have a major fall out?

Advantages are you'd halve your accountancy costs.

[WordIsBond]

Minor advantage -- you'll probably save on accountancy fees, bookkeeping, maybe on insurance, banking fees, etc. This isn't going to be a lot, but some economies of scale.

Perhaps some significant IR35 advantages. Easier to claim you are a business rather than disguised employees if there are two of you bringing funds in. You can possibly substitute for each other on occasion, that would be a huge help with IR35.

It's nice if you can work from home and one of you is really under pressure with deadlines on a big contract. Even if you can't really help with the coding, simply talking through and explaining the code can go a long way, sometimes.

Biggest drawback is if your relationship goes bad, it gets tricky with the business. Are you in it for life? Since you say "partner" and not spouse, one or both of you isn't ready to tie up for life, so tying up the business can get messy. When there's a wedding ring, then it might be time to think this way. If you don't have joint personal accounts, why would you want joint business accounts?

One other drawback, even if it goes well long-term. Presumably you split shares evenly, but if you don't bring in equal amounts, dividends still are split evenly. If you share all expenses anyway and basically have joint funds, then that's not much of a problem. But if you bring in 2/3 of the consulting fees and half the dividends go into your partner's account, are you going to be ok with that?

You can solve this by having different classes of shares, but HMRC apparently pays more attention with two classes of shares, and any IR35 benefit you gain goes out the window. If you have different share classes, they won't see it as a single business with two consultants, they'll see it as two separate businesses or pseudo-businesses.

[jamesbrown]

There wouldn't be any IR35 advantages in this arrangement whatsoever. It's applied to each contract separately.

[WordIsBond]

There wouldn't be any IR35 advantages in this arrangement whatsoever. It's applied to each contract separately.

The BETs were withdrawn, but they gave insight into what HMRC viewed as "at risk". The more you look like you are running a business rather than a disguised permie the better. That's why things like company stationery have appeared in case law.

And if it makes substitution (even on a small scale) easier, it only has to happen once to end any IR35 conversation. And if substitution happened in your last contract, anyone defending you would be very glad to bring it up in a challenge on your current contract.

IR35 is not a case of ticking the boxes, it's a case of painting a picture.

[jamesbrown]

The BETs were withdrawn, but they gave insight into what HMRC viewed as "at risk". The more you look like you are running a business rather than a disguised permie the better. That's why things like company stationery have appeared in case law.

And if it makes substitution (even on a small scale) easier, it only has to happen once to end any IR35 conversation. And if substitution happened in your last contract, anyone defending you would be very glad to bring it up in a challenge on your current contract.

IR35 is not a case of ticking the boxes, it's a case of painting a picture.

Nonsense, I'm afraid. It isn't HMRC that determines these things, it's based on case law, and the case law is well-established. Principally, they need to demonstrate lack of an unfettered RoS, MoO and D&C. Turnover has no impact on any of these things. Putting aside whether working together with your partner makes you "look" more like a business (it doesn't), this is weak context information at best.

It is well-established that HMRC are dogged in their pursuit of claims (do some reading, and you will find that they don't back down even when presented with seemingly incontrovertible evidence, such as an actual substitution). Working with your partner will have literally no impact on IR35 status. If you think they will back down because you work with your partner, you're sadly mistaken.

Also, I question whether you understand what substitution means. A substitute is someone sent on behalf of YourCo to do the same work (as distinct from subcontracting). That doesn't mean the person has to be employed by (or a director of) YourCo. So, why should this make it easier to substitute?

[SueEllen]

Nonsense, I'm afraid. It isn't HMRC that determines these things, it's based on case law, and the case law is well-established. Principally, they need to demonstrate lack of an unfettered RoS, MoO and D&C. Turnover has no impact on any of these things. Putting aside whether working together with your partner makes you "look" more like a business (it doesn't), this is weak context information at best.

It is well-established that HMRC are dogged in their pursuit of claims (do some reading, and you will find that they don't back down even when presented with seemingly incontrovertible evidence, such as an actual substitution). Working with your partner will have literally no impact on IR35 status. If you think they will back down because you work with your partner, you're sadly mistaken.

Also, I question whether you understand what substitution means. A substitute is someone sent on behalf of YourCo to do the same work (as distinct from subcontracting). That doesn't mean the person has to be employed by (or a director of) YourCo. So, why should this make it easier to substitute?

It would make it easier to substitute in theory because either you or your partner could do the work, and you know they are trusted.

For example I had a client where another contractor had himself and his wife, with the same skillset, sharing the work between them. As long as the client knew who was coming in for security purposes and the work was going to be done they didn't care. (I know of a couple of other cases.)

So yes HMRC could pursue you but if you had tax insurance, legally reviewed contracts, etc and ensured that on some contracts both of you worked on them it would make their job harder leading them to more likely silently drop the investigation.

Personally I don't see any advantages in working with someone in IT contracting in the way the OP mentions unless you have similar skillsets and are related/married.

[jamesbrown]

It would make it easier to substitute in theory because either you or your partner could do the work, and you know they are trusted.

I fail to see the relevance. The OP and his/her partner will still have their own contracts. Thus, their availability will be the same. Likewise, having two companies versus one will not restrict the ability of the OP to substitute his/her partner. The whole point (definition) of substitution is that you're sending someone on behalf of YourCo to do the work, so the client is still dealing directly with YourCo. It is very straightforward to set-up a contract for services and I see no reason why having two companies versus one makes any difference.

I repeat, having one company versus two makes absolutely no material difference to the IR35 status of a particular contract operated by the OP or his/her partner.