Reply to: Setting up a ltd company for a job I've already started

[TykeMerc]

It's quite possible to set up a Ltd a little after the event, so long as the contracting route isn't muddied by you initially signing up as a sole trader, as the others have said the agencies haven't been allowed to deal with people on that basis for years so odds are you've not signed one off yet.

It's true the insurances situation is a tad screwy, but invoicing wise it's simple enough once the contract is agreed and you plonk in an invoice.

Not unprecedented either as some of the accountants will no doubt be able to attest. I actually set my own current MyCo Ltd up a few weeks into a contract, I had originally intended to go Umbrella for the role for a few reasons and those changed, new contract issued and job jobbed.

[Fred Bloggs]

Don't forget VAT certification as well if it doesn't come with that.

Yes it does, took about two weeks for the cert to arrive.

[LondonManc]

Don't panic, if you want a Ltd Co, I rang the accountant at 9.00am and before 3.00pm I had the certificate of incorporation. No charge for that and a FreeAgent accounting package for £49 a month (plus VAT). Not bad.

Don't forget VAT certification as well if it doesn't come with that.

[Fred Bloggs]

Don't panic, if you want a Ltd Co, I rang the accountant at 9.00am and before 3.00pm I had the certificate of incorporation. No charge for that and a FreeAgent accounting package for £49 a month (plus VAT). Not bad.

[mudskipper]

It's a situation that should never happen, but does quite frequently. I'd imagine in the unlikely case of an IR35 enquiry, it would work against you though. Hard to argue you definitely see yourself as running a proper business when you were doing the same thing before the company was even set up.

Not sure this is true as OP was operating happily as a sole trader.

A great example of the fact that many of us incorporate to get work, not to avoid tax!

[Hobosapien]

But it should be. It's an awful position to be in.

Many newbies will get their first contracting interview thinking they have a 2 or 3 stage interview process to 'look forward to' as per permidom, and will be in shock when they are asked to start the following Monday.

Then the panic to get everything in place ensues. No point risking the contract while that takes place, so yes it will be fairly common for first timers to be sorting it out while attempting to start the contract.

Unusual for agencies to be so crap they let the individual sign up as an individual without a company/brolly, but not a surprise. As it's only paperwork between individual and the agency it should have no effect on the contract between the agency and client, so no big deal to get it sorted out in first few days of the contract, while they're supplying other info and proof of ID required/requested by agency.

[northernladuk]

None of this should be particularly unusual or unique so if going ltd then an accountant should be able to clarify specifics, otherwise a brolly may be able to ensure all issues covered.

But it should be. It's an awful position to be in.

[Hobosapien]

I'm guessing the contract has the individual named and it's when the timesheet was submitted that the agency realised they didn't want to pay an individual so need details of which company to pay (either via receiving an invoice or self billing if they have that in place).

So can just raise an invoice when ltd sorted out and have bank account ready to accept payment, or seek advice from brolly on how to proceed if it's more complicated via that route.

Agency will be ok waiting a number of weeks as it means they can get paid from client but not have to pay you until situation sorted out.

This type of delay is also common when setting up a new ltd and registering for VAT, where you can provide a VAT invoice later so can get the non-VAT part of the payment sooner while awaiting for VAT number.

None of this should be particularly unusual or unique so if going ltd then an accountant should be able to clarify specifics, otherwise a brolly may be able to ensure all issues covered.

[northernladuk]

You're worrying about this way too much. Even if it isn't strictly speaking correct it's pretty unlikely anyone will ever have a problem with it or even find out. You will of course need the Ltd. company to exist when you sign the contract and when you invoice. And you'll need a bank account for them to pay the invoice which is the part that can take the longest to set up.

Where you are probably correct it's a really bad situation for newbies to start thinking like this. When they know what they are doing, can calculate the fall out and assess the risk then that is an option. Until then I'd say be as clean as a whistle while you are learning.

[VectraMan]

The agency are telling me that this will be fine, but I wondered what other people thought. I've tried contacting HMRC and companies house but they both say they can't advise me on this.

If I can't claim for days worked before the company incorporation date, what should I do?

You're worrying about this way too much. Even if it isn't strictly speaking correct it's pretty unlikely anyone will ever have a problem with it or even find out. You will of course need the Ltd. company to exist when you sign the contract and when you invoice. And you'll need a bank account for them to pay the invoice which is the part that can take the longest to set up.

[LondonManc]

I'd suggest umbrella, at least for the first contract until you get the IR35 status of the contract and working practices confirmed. It'll give you more time to read the guides on the right about setting up a limited company, engaging an accountant, getting insurances set up and so on.

If you get an extension, that can go through the limited company.

[Maslins]

It's a situation that should never happen, but does quite frequently. I'd imagine in the unlikely case of an IR35 enquiry, it would work against you though. Hard to argue you definitely see yourself as running a proper business when you were doing the same thing before the company was even set up.

I'd suggest forget the specifics of timings of this, and think more generally about whether you want to go Ltd or umbrella...but think quickly. If in doubt, go umbrella. Much less painful to change from umbrella to Ltd Co a few months in than vice versa. If you do want to go Ltd, I personally wouldn't go with NotAllThere's advice about getting an off the shelf one and changing directors/shareholders and company name, as a brand new one can be incorporated from scratch typically within a working day.

[TheCyclingProgrammer]

To speculate a little, the OP could be onsite with only the promise of a formal contract, in which case they have a lot to learn. As you imply, an agency is unlikely to sign a contract with a sole trader given their potential liability for PAYE and NICs under the ITEPA, and they apparently aren't operating agency PAYE.

Agreed though in this case I would say there is at least an implied contract between the agency and OP as an individual (no contract could be formed with anyone else) and if any terms have been proposed or a draft contract made available to OP then I would expect those terms to be implicitly agreed upon if OP has started work.

I agree with the previous advice that its probably best to just form a company ASAP, get the agency to issue a proper contract between TheirCo and Agency and invoice accordingly.

[mudskipper]

Yes, I did this. I started my first gig when CoHo were doing an upgrade which took much longer than expected, so despite applying to set up my company before I started, (a process that should take a few hours) it didn't happen for two weeks. My accountant at the time was quite happy that I could invoice for work done before the company was formed - but obviously you can only do that after you've got the company. (Before NLUK asks, I was working direct, using my own contract template and the client was happy to delay signing until the company was set up)

However, as others have said, if running a company isn't part of your long term plan, then you may be better to consider an umbrella for this role. How certain are you of your IR35 status?

[NotAllThere]

You can have pre-formation expenses. So why not pre-formation income? (Ask an accountant - but the answer isn't going to change dependant on you going brolly or limited).

Creating a ltd. company can be done in a day (you purchase an already formed company (off-the-shelf) and take ownership and over as director), and with appropriate professional help isn't that hard to run. I'd always say ltd. over brolly unless the fees you are charging are quite low.