Company wants to pay me gross (£150k+)

[Snarf]

It sounds a bit fishy to me that (by what you have said about the contract) you will be an employee of the UK based Ltd but that they will not be operating a payroll... I didnt think UK based employers had an option to opt out of PAYE for their employees.

The first thing I would do is ask them to clarify (Subject to how well the recruitment process is going obvs) then (and I know this sounds radical) call HMRC and ask for advice (you dont need to give a name if youre worried), they are not the cash stealing beast that everyone seems to think, they just want things done right and for you to pay the right amount of tax...

Better to get the advice directly from the horses mouth than get screwed over a mistake in a few years!

At the very least find a professional who understands the situation and can advise accordingly.

[ASB]

What is not clear, and may be relevant is the relationship between us co and the co. It is possible, but not particularly likely, that the us co is not required to operate paye etc. There is ibformation on this and the circumstance on the gov hmrc webtulipe.

It is also further possible that as a result no employers ni liability results.

Beung self employed is not a matter of choice - even if put forward as such. It is a matter ofcthe facts of the case. From the description it seems unlikely to be genuine self employent.

Though the risk of a failed status enquiry would generally fall on the next link up the supply chain.

There is absolutely nothing wrong with getting paid offshore. Just ensure it is properly declared.

[WordIsBond]

Many thanks for all the comments - first time I've posted here so I appreciate your help.

To clarify a few points.

This situation is definitely not IR35 friendly. The contract refers to employee throughout and holidays are paid for plus there's a single place of work.

There seems to be a slight benefit with "Sole Trader" according to some online calculators I've used (listetotaxman and hmrc)

£150k on paye nets £90176

£150k as sole trader paying class 2 and 4 NI nets £91137

Furthermore, there may be some legitimate allowable expenses I could get away with.

I've also looked at potential short term investments as I'll be sitting on approx. £25k every six months before it's due to be paid across to HMRC although it only seems to be ISA's that are of Any use but the return is minimal based on how low interest rateS are and the deposit limits.

Anyway, I was having wild dreams along the lines of US company paying into an offshore account in Panama blah blah...

Cheers anyway,

1970.

Several thoughts:
1. You've reinforced my view that sole trader is the way to go.
2. Good thought to note that you may be able to take some expenses as a sole trader but not as an employee. But I'd be careful here, personally. HMRC is likely to have the employer, rather than you, in their sights if they go after this. You are the "victim", they are the "oppressive company taking advantage of you to dodge Employer NI." But if it looks like you are taking the mick with your expense claims, then they could decide this was collusion between you and the company to avoid tax. So I'd recommend caution.
3. The big savings here is the company's -- the employer NI that is being saved. Maybe that savings is built into your compensation, and they are paying a higher amount for the privilege of dodging NI. But I don't see how they get away with it when Hector comes calling.
4. I'd look into 90 day notice accounts for your savings, that might be the best you'll get. The interest isn't going to make you rich, but it is free money, after all.

[MrMarkyMark]

Many thanks for all the comments - first time I've posted here so I appreciate your help.

To clarify a few points.

This situation is definitely not IR35 friendly. The contract refers to employee throughout and holidays are paid for plus there's a single place of work.

There seems to be a slight benefit with "Sole Trader" according to some online calculators I've used (listetotaxman and hmrc)

£150k on paye nets £90176

£150k as sole trader paying class 2 and 4 NI nets £91137

Furthermore, there may be some legitimate allowable expenses I could get away with.

I've also looked at potential short term investments as I'll be sitting on approx. £25k every six months before it's due to be paid across to HMRC although it only seems to be ISA's that are of Any use but the return is minimal based on how low interest rateS are and the deposit limits.

Anyway, I was having wild dreams along the lines of US company paying into an offshore account in Panama blah blah...

Cheers anyway,

1970.

Problem solved

[1970]

Many thanks for all the comments - first time I've posted here so I appreciate your help.

To clarify a few points.

This situation is definitely not IR35 friendly. The contract refers to employee throughout and holidays are paid for plus there's a single place of work.

There seems to be a slight benefit with "Sole Trader" according to some online calculators I've used (listetotaxman and hmrc)

£150k on paye nets £90176

£150k as sole trader paying class 2 and 4 NI nets £91137

Furthermore, there may be some legitimate allowable expenses I could get away with.

I've also looked at potential short term investments as I'll be sitting on approx. £25k every six months before it's due to be paid across to HMRC although it only seems to be ISA's that are of Any use but the return is minimal based on how low interest rateS are and the deposit limits.

Anyway, I was having wild dreams along the lines of US company paying into an offshore account in Panama blah blah...

Cheers anyway,

1970.

[kaiser78]

It sounds a bit fishy to me. And fishy + tax in same sentence = steer clear in my eyes.

[WordIsBond]

I feel like the above post doesn't really go into the proper detail that you would expect from an accountant and misses obvious points. For example, an obvious omission from the above post is that trading as a limited company is potentially a terrible idea if your contract is caught by IR35. This is because you could potentially be lumbered with all the employer NIC at 13.8% (not the case as self employed) and employee NI at 12% (only 9% as self employed) if you were found to be inside of IR35. This could expose the original poster to an additional £10k+ in tax, accountancy fees, interest and fines per tax year assuming they are only on £150k.

And I don't know why the original poster would risk being inside of IR35 via a limited just to help the employer from any potential self-employed versus employed HMRC investigation; how is that helping the original poster?
Surely if you are suggesting that the employer is at risk, then the original poster would be transferring that risk onto themselves from an IR35 point of view if they went limited!

Another obvious omission from the above post is the limited liability protection afforded to limited companies. Although from reading the above it sounds unlikely you would be sued and professional indemnity insurance cover of £5M should help to cover any blunders that you make.

Instead a bizarre mention to "income flows" whatever the earth that is and helping protect the employer were put forward as benefits for limited company status. If the original poster takes all the funds out of their company they will get hit by just as much tax as a sole trader (possibly more) because they would need to pay 19% corporation tax as well as 32.5% dividend tax which is an extremely high marginal rate of tax.

I don't understand why someone claiming to represent Intouch would only present half the story. I really do hope this was not some sort of opportunity taken just to get another client for Intouch! If you are going to comment you need to comment in full or otherwise risk create a misleading picture and ruining someone's life!

First, I bashed Intouch recently for their private medical cover article leaving out important info, so I'm no shill for Intouch. But I think you are being a little harsh here.

"Income flows" is a reference to the fact that with a Ltd you don't have to take all the income personally at the time it arrives. So you can leave some of it in the company to cover future bench time or perhaps do an MVL, rather than get hit with higher rate dividend tax. It's an important and valuable consideration, and just because you didn't know what he was talking about doesn't mean it wasn't worth mentioning.

And you've criticised Patrick for mentioning the protection / benefit to the employer / engager of having OP use a Ltd company. He was describing a negotiation where you are asking someone to change the way they are doing something. The fact that it benefits YOU doesn't matter to THEM. If you are going to ask them to go about it a different way, you are likely to have more success if you can point out to them the benefits of doing so.

Now, all that said, your point about the risks of IR35 coming on OP if he goes Ltd, rather than sole trader, is sound. It sounds like they are effectively going to view him as an employee. In that case, IR35 is highly likely to be an issue. If he were engaging with the parent (US) company, that might be manageable, but since it is going through their UK subsidiary, it's going to be difficult to stay outside IR35. If I were OP, I'd stick with the sole trader approach, personally. You can forget about IR35. The risk of being deemed an employee falls entirely on the client.

OP:
This just sounds like an IR35 case to me. Employee-type language. Bonuses. Etc. Do you get paid holidays? I think someone is likely to end up on the wrong side of HMRC / employment tax, and I'd rather it be them in trouble for treating you as a sole trader than you in trouble for not operating IR35.

If they are willing to pay you through the US company, and pay your Ltd Co, I'd go that way. First, you probably aren't as likely to be investigated, because there are fewer ways for you to get on HMRC's radar screen. Second, if you can get IR35 friendly wording in the contract like substitution, you are in great shape, because the US company doesn't have to talk to HMRC about working practices. So they really only have the contract to go on. Third, they'll have a harder time claiming that your engager is controlling you if you aren't even in the same country. The presence of the UK subsidiary doesn't help on this point, though. Would you work on site at the UK subsidiary, or work from home?

If it has to go through the UK subsidiary, I'd probably stay with sole trader. Higher tax, but no risk.

If you do work it out for the US company to pay you, you have to work out the mechanism. If you can open a US bank account into which they pay, that would handle it, but then you have the exchange rate risk. If you can get them to pay pounds into your UK account, that's better -- but they may ask why not just do it through their subsidiary.

It may be appealing to them to do it through their US company since the expense would then be charged against US, rather than UK, profitability. Since Corp Tax is higher in the US than the UK, this could be attractive to them. Probably, it would complicate matters enough that they wouldn't be interested. But you could ask.

There's a lot of different things to consider here. I've worked here for a US company as an employee. And I have US clients now. So I understand some of the issues. Even so, if I were considering this, I'd be looking for professional advice from someone who really understands all the possible ramifications.

[JB3000]

Firstly, without knowing the specifics of your role or circumstances it is difficult to really advise but it would be interesting to see how they justify you being self employed as opposed to being an employee.

An "employer" cannot simply decide to pay you gross, there must be a basis for deciding that you are a self employed individual.

Is there a specific reason why they won't allow you to operate through a PSC? This would be better for you in terms of managing the income flow and taxes and better for them in terms of shielding any claims for employment status.

I would have a conversation with them about employment status and the benefits of you trading through a limited company as opposed to being self employed.

I feel like the above post doesn't really go into the proper detail that you would expect from an accountant and misses obvious points. For example, an obvious omission from the above post is that trading as a limited company is potentially a terrible idea if your contract is caught by IR35. This is because you could potentially be lumbered with all the employer NIC at 13.8% (not the case as self employed) and employee NI at 12% (only 9% as self employed) if you were found to be inside of IR35. This could expose the original poster to an additional £10k+ in tax, accountancy fees, interest and fines per tax year assuming they are only on £150k.

And I don't know why the original poster would risk being inside of IR35 via a limited just to help the employer from any potential self-employed versus employed HMRC investigation; how is that helping the original poster?
Surely if you are suggesting that the employer is at risk, then the original poster would be transferring that risk onto themselves from an IR35 point of view if they went limited!

Another obvious omission from the above post is the limited liability protection afforded to limited companies. Although from reading the above it sounds unlikely you would be sued and professional indemnity insurance cover of £5M should help to cover any blunders that you make.

Instead a bizarre mention to "income flows" whatever the earth that is and helping protect the employer were put forward as benefits for limited company status. If the original poster takes all the funds out of their company they will get hit by just as much tax as a sole trader (possibly more) because they would need to pay 19% corporation tax as well as 32.5% dividend tax which is an extremely high marginal rate of tax.

I don't understand why someone claiming to represent Intouch would only present half the story. I really do hope this was not some sort of opportunity taken just to get another client for Intouch! If you are going to comment you need to comment in full or otherwise risk create a misleading picture and ruining someone's life!

[Andy Hallett]

Thanks - what you say makes a lot of sense.

I'm at the final stage but not yet negotiating so I'm sure I can address this. I only happen to know about the way they pay as an ex employee I know has already supplied me with a copy of their UK employment contract.

My initial thought is that they are saving a fortune on employers NI as everyone based in London is on over £100k.

Employment contract = Employer Taxes

If you are to be Self Employed it will be a contract for services.

[ChimpMaster]

Can I have a job there?

I mean, it'll be a pay cut but sounds like it could be a change.

[IMHO]

Looks like a great opportunity, take the gig, dont pay PAYE on your tax return as its not your liability, and tell the taxman that you are self employed instead. If the taxman says you are really the americans their employee they will go after the employer for tax and national insurance not you.

[1970]

Thanks - what you say makes a lot of sense.

I'm at the final stage but not yet negotiating so I'm sure I can address this. I only happen to know about the way they pay as an ex employee I know has already supplied me with a copy of their UK employment contract.

My initial thought is that they are saving a fortune on employers NI as everyone based in London is on over £100k.

[Patrick@Intouch]

Firstly, without knowing the specifics of your role or circumstances it is difficult to really advise but it would be interesting to see how they justify you being self employed as opposed to being an employee.

An "employer" cannot simply decide to pay you gross, there must be a basis for deciding that you are a self employed individual.

Is there a specific reason why they won't allow you to operate through a PSC? This would be better for you in terms of managing the income flow and taxes and better for them in terms of shielding any claims for employment status.

I would have a conversation with them about employment status and the benefits of you trading through a limited company as opposed to being self employed.

[1970]

Hi,

I'm currently employed under a regular employment contract and pay PAYE. I'm on self assessment as I earn over £100k.

I'm deep into an interview process for a new job and I've just found out they pay employees gross. Thus I'd have to take care of my own PAYE and NI through my tax return. There is not an option to work for them via an umbrella company or my own Ltd. Co.

Here are the basics:

Parent company is based in the US.
I will be employed by a London based Ltd. Co. wholly owned by the parent company.
Funds will be paid to me gross on a monthly basis by the UK entity.
Annual basic salary £150k + potential of £15k a quarter in bonus.
Apart from this the company seems ok - 60 employees, 3 years old, backed by Verizon to the tune of $48m

So having done the contractor thing before I'm trying to see how I can reduce my tax liability. Technically I'll be a sole trader.

Any ideas or should I just resolve that it is what it is and do everything the normal way through SA. Is offshore an option anymore or is that dead?

Would it make any difference if the US company paid me instead of the UK company?

Many thanks in advance.

Cheers,

1970.