Originally posted by TheFaQQer
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Reply to: Sole Trader under SDC and Employer NICs
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Previously on "Sole Trader under SDC and Employer NICs"
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Originally posted by TheFaQQer View Post2/3 + half = a lot of time working
When I was his age I worked 60 hours a week. The difference was that my last 20 hours of work was exactly what I did for the first 40, and was soul-destroying, while his is likely to be somewhat rewarding and doing something completely different.
I admire what he's doing but I don't see it as all that difficult, in terms of the amount of work. It's the financial sacrifice, leaving family and friends, moving to a less developed country, all that, which seems a big deal to me.
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Originally posted by WordIsBond View Post
Thanks for mentioning that, I doubt if he thought of that. Not sure whether he'll remain tax resident here or not but I'll tell him he needs to look into it.
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Originally posted by TheCyclingProgrammer View PostSomebody else who didn’t read the post properly.
Originally posted by TheCyclingProgrammer View PostAlso you may pay tax where you are working but if OP’s friend remains U.K. tax resident he may be liable to tax here too.
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Somebody else who didn’t read the post properly.
Also you may pay tax where you are working but if OP’s friend remains U.K. tax resident he may be liable to tax here too.
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Originally posted by WordIsBond View PostOk, this is for a friend, not me. Despite what most everyone thinks after reading that opening sentence, it really isn't me, because I think it's totally daft what he wants to do.
So, my mate works for a relatively small company. He's been with them a long time, there's a lot of trust, he works at home most of the time.
He wants to emigrate to a non-EU / second-world country. (I told you this was daft.) His company doesn't want to employ him there because they don't want to be subject to whatever employment laws and taxes might emerge from the minds of second-world bureaucrats. (Not everyone in this story is daft, I'm with them.) They are willing to have him continue to work for them remotely as a self-employed individual. But he's definitely under Supervision/Direction/Control. That's probably not an issue once he's there, because they don't seem to have any IR35 equivalent, and they'll hopefully just be happy to have him there and paying tax. There will be no agency involved, everything will be direct.
But he's been told that his immigration process into this country will be difficult if he doesn't have a track record of self-employment before applying. He'll probably apply in about a year's time, so he wants to go self-employed now. Again, no agency.
So, if I understand correctly:
1) He'd pay Class 2 and Class 4 NIC, and income tax, as a sole trader.
2) IR35 won't apply since there's no intermediary.
3) But with him clearly under SDC, presumably with MOO, and no right of substitution, I assume there is a reasonable risk that HMRC would come back and say, "This is employment" and expect the company to pay employer NIC, a risk they don't want to take.
4) And the only safe way to protect the company from that is for him to incorporate and work inside IR35.
5) But if he forms a limited company and works for it he's not legally self-employed and has gained nothing.
So the best solution is for him to get some common sense and not emigrate, but failing that, are points 1-4 accurate? And if so, does anyone have any bright ideas to help this guy out? His company is willing to work with him but not take on a lot of risk, and they want him to be the one to figure out how to make this work.
He actually is doing this for a good cause, he wants to go work 2/3 time in IT, and work half-time (unpaid) in an orphanage. So I'd like to help him but don't know enough about the rules for sole traders.
(a) have the foreign company register as a foreign employer there (not possible in certain countries, including the UK), or
(b) have him manage is own local taxes there.
The second option is the most common, is generally preferred by local tax authorities (as they can easily get to him as opposed to a foreign employer in the UK) and is the least complicated. Some countries have a separate tax regime for this while in others people just register as self-employed, send an invoice and be done with it.
He pays tax where he lives, not where the company that he works for is, so HMRC has nothing to do with it, or else he will definitely get into trouble with the local tax authorities.
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Not thick, Lance, you just read too quickly.
Thanks, guys, pretty much what I thought. He doesn't want to chase other clients, and his job by definition requires too much SDC to change that.
We were tossing around ideas. He wondered about forming HisCo Ltd, have it sign a contract with the client, and then subcontract the work to him as a sole trader. That doesn't really change anything except it puts the liability on HisCo rather than his current employer. If HMRC comes back and says, "This is employment," well, he (HisCo) is on the hook instead of the client. But that just seems really messy.
He doesn't care about the tax, he's happy to structure it in a way that all the tax HMRC wants is paid, he just wants the independent employment status. Seems like there really ought to be some way he could do that.
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Originally posted by Lance View Postmaybe I'm being a bit thick, but if he's in a foreign country as a resident, why would NICs be relevant for him at all?
The employer would in effect be buying a service from a foreign country. Whether there are tariffs to pay is a different matter as it's not an EU country.
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maybe I'm being a bit thick, but if he's in a foreign country as a resident, why would NICs be relevant for him at all?
The employer would in effect be buying a service from a foreign country. Whether there are tariffs to pay is a different matter as it's not an EU country.
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Agree with CP. Whether the company (his nominal employer) is aware of the situation surrounding false self-employment, and the risks to them, and to what extent they are willing to change the relationship so that it does not resemble employment are obviously the critical factors here. Either way, your mate isn't liable for employment taxes as a sole trader, so if the company is willing to take these risks, he should be fine in the UK at least. Overseas is another matter, and that will really depend on the jurisdiction.
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As far as I can see, he only has really two options:
a) Incorporate, as you say, and operate IR35 (or alternatively use an umbrella which would be much less faff),
b) Convince his current employer to restructure their relationship to one of genuine self-employment. Allow him to have significant control over what he does, how he does and where he does it. Let him work from home, set his own hours and maybe do some work for other clients too.
Ultimately this is out of his hands because he takes no risk with option b, the risk is all on the employer/client's.
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Sole Trader under SDC and Employer NICs
Ok, this is for a friend, not me. Despite what most everyone thinks after reading that opening sentence, it really isn't me, because I think it's totally daft what he wants to do.
So, my mate works for a relatively small company. He's been with them a long time, there's a lot of trust, he works at home most of the time.
He wants to emigrate to a non-EU / second-world country. (I told you this was daft.) His company doesn't want to employ him there because they don't want to be subject to whatever employment laws and taxes might emerge from the minds of second-world bureaucrats. (Not everyone in this story is daft, I'm with them.) They are willing to have him continue to work for them remotely as a self-employed individual. But he's definitely under Supervision/Direction/Control. That's probably not an issue once he's there, because they don't seem to have any IR35 equivalent, and they'll hopefully just be happy to have him there and paying tax. There will be no agency involved, everything will be direct.
But he's been told that his immigration process into this country will be difficult if he doesn't have a track record of self-employment before applying. He'll probably apply in about a year's time, so he wants to go self-employed now. Again, no agency.
So, if I understand correctly:
1) He'd pay Class 2 and Class 4 NIC, and income tax, as a sole trader.
2) IR35 won't apply since there's no intermediary.
3) But with him clearly under SDC, presumably with MOO, and no right of substitution, I assume there is a reasonable risk that HMRC would come back and say, "This is employment" and expect the company to pay employer NIC, a risk they don't want to take.
4) And the only safe way to protect the company from that is for him to incorporate and work inside IR35.
5) But if he forms a limited company and works for it he's not legally self-employed and has gained nothing.
So the best solution is for him to get some common sense and not emigrate, but failing that, are points 1-4 accurate? And if so, does anyone have any bright ideas to help this guy out? His company is willing to work with him but not take on a lot of risk, and they want him to be the one to figure out how to make this work.
He actually is doing this for a good cause, he wants to go work 2/3 time in IT, and work half-time (unpaid) in an orphanage. So I'd like to help him but don't know enough about the rules for sole traders.Tags: None
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