Consulting on the side of PAYE job

[oilboil]

Whilst all input appreciated, I'm fully aware of the situation and this is not an issue for me or my employer, although I appreciate it could be in many industries/companies.

Cool - if you know the potential pitfalls and your main employer doesn't have an issue then that changes it.

Normally it would be pointless to do a LTD company for 30K yearly income as the whole amount could just go out in salary etc for little tax imposition.

In your position though I'd go LTD and just leave the cash in the account until you decide to take a sabbatical from your main job (or decide to leave and go back to contracting where you'd have a starter war chest already built).

Yes you'll lose 19% (and a few pennies in filing charges) for Corp Tax but that's less than PAYE on the extra 30K

[jayn200]

I can't really help from accounting advice perspective although at your tax bracket I would imagine ER is the most tax efficient method of extracting money (no idea if you qualify as I have never gone through the process myself) second would be splitting it with your wife. Between my wife and me I have never taken out more than 100k a year. I'd hate to take out money at 32.5%, i refuse to do it... let alone the 38.1% (22.8% if you split) you will have to pay (+ Corporation tax).

Are you billing enough? Is it really worth doing this for 30k? If all you're producing is a strategy document + giving advice ad hoc throughout the year to a newly hired CIO/IT Director/Head of IT then sure that's probably not too bad for that amount of money.

However from your post it sounds like you might also be getting involved in hiring the team, it procurement, systems implementation, etc. That's a ton of work if you're doing it solo and 30k doesn't seem worth that hassle. I have billed 30k building a single dashboard (exceptional circumstances but still a point of reference).

[richardrichard]

Does this side-gig have any resemblance to the work you do in your day job? If so I would suggest you have a very good word with your companies HR and employment lawyers, they are likely to go mental at you doing this...

They will argue that you are using information and practices that you have gained through your employment and now using it for personal gain and to allow another company to gain a professional advantage at a discount (£30k instead of the £150k it costs them) - in my past role we did this to many people who attempted what you suggest doing

Overall I'd say it just won't be worth the ball-ache. Even if you can manage them both at the same time and they don't conflict, the moment you do anything wrong in the perm gig they'll show you the door and justify it saying that you were distracted by your other role

Put it to bed and enjoy pulling in a very healthy salary with no economic risk attached

Whilst all input appreciated, I'm fully aware of the situation and this is not an issue for me or my employer, although I appreciate it could be in many industries/companies.

[oilboil]

Evening all. Looking for input on this from the good learned folks of the forum, any advice/thoughts appreciated.

I'm a permanent employee, several years since I last contracted, but have been approached about some advisory/consulting work for another company. Issues with my employment contract aside, I'm trying to figure out the best way to go about this. Part of the answer I'm sure will involve engaging an accountant, but I'm not sure if one of the £75 a month online jobbies is the best place to go, nor if they will be able to answer some of my questions.

Some facts;

• Salary plus bonuses this tax year in permie gig approx £150k (relevant from a tax bracket perspective)
• Consulting gig worth approx £30k over the next 9-12 months
• Nature of the work will be advisory - on IT strategy development, building an in-house IT capability (currently outsourced), bringing in some sector specific software solutions etc
• I won't be on site, using their equipment, under their direction (quite the opposite) etc.

My questions

• Most tax efficient way to go about this, assuming I don't want to put it all into pension? I'm thinking Ltd co with myself and my wife as equal shareholders, all paid out in dividends after corp tax (wife earns approx £20k pa currently)
• Do I need to pay myself a salary at all? Obviously I have no personal tax allowance so this would seem silly unless a requirement.
• Anything else to consider such as deferring portion of the dividend until next tax year? Would this open up another £4k tax free, and also my income may be lower next year so I wouldn't pay the highest rate of tax on the divvy.
• Considering the gig/company will only last ~12 months, is entrepreneurs relief something I can take advantage of?
• Do I need a contract? I would be happy enough simply invoicing as appropriate. Not sure whether it's desirable or not to have a contract from an IR35 perspective. Intention is roughly £5k per month of invoices for the first 3 months or so, tapering off after that
• How necessary are things like PI/PL insurance?

Again, thanks in advance for input.

Does this side-gig have any resemblance to the work you do in your day job? If so I would suggest you have a very good word with your companies HR and employment lawyers, they are likely to go mental at you doing this...

They will argue that you are using information and practices that you have gained through your employment and now using it for personal gain and to allow another company to gain a professional advantage at a discount (£30k instead of the £150k it costs them) - in my past role we did this to many people who attempted what you suggest doing

Overall I'd say it just won't be worth the ball-ache. Even if you can manage them both at the same time and they don't conflict, the moment you do anything wrong in the perm gig they'll show you the door and justify it saying that you were distracted by your other role

Put it to bed and enjoy pulling in a very healthy salary with no economic risk attached

[Ricky@IntouchAccounting]

Evening all. Looking for input on this from the good learned folks of the forum, any advice/thoughts appreciated.

I'm a permanent employee, several years since I last contracted, but have been approached about some advisory/consulting work for another company. Issues with my employment contract aside, I'm trying to figure out the best way to go about this. Part of the answer I'm sure will involve engaging an accountant, but I'm not sure if one of the £75 a month online jobbies is the best place to go, nor if they will be able to answer some of my questions.

Some facts;

• Salary plus bonuses this tax year in permie gig approx £150k (relevant from a tax bracket perspective)
• Consulting gig worth approx £30k over the next 9-12 months
• Nature of the work will be advisory - on IT strategy development, building an in-house IT capability (currently outsourced), bringing in some sector specific software solutions etc
• I won't be on site, using their equipment, under their direction (quite the opposite) etc.

My questions

• Most tax efficient way to go about this, assuming I don't want to put it all into pension? I'm thinking Ltd co with myself and my wife as equal shareholders, all paid out in dividends after corp tax (wife earns approx £20k pa currently)
• Do I need to pay myself a salary at all? Obviously I have no personal tax allowance so this would seem silly unless a requirement.
• Anything else to consider such as deferring portion of the dividend until next tax year? Would this open up another £4k tax free, and also my income may be lower next year so I wouldn't pay the highest rate of tax on the divvy.
• Considering the gig/company will only last ~12 months, is entrepreneurs relief something I can take advantage of?
• Do I need a contract? I would be happy enough simply invoicing as appropriate. Not sure whether it's desirable or not to have a contract from an IR35 perspective. Intention is roughly £5k per month of invoices for the first 3 months or so, tapering off after that
• How necessary are things like PI/PL insurance?

Again, thanks in advance for input.

- Share split with your wife definitely something to consider
- You don't have to pay yourself a salary as director but as NI is calculated on each employment and Corporation Tax relief is obtained on the salary it is usually worth having in place
- The real tax efficiency of the limited company is you are in control of the tax you pay by when you take the funds from the business, so if your income is lower next year then deferring the dividends is another thing to consider if you are not needing to draw the funds in the current tax year.
- Would advise getting a contract not only from an IR35 point of view but also so there are no misunderstandings down the road between you and your client in relation to the scope of work or business relationship.
- Would always recommend the insurance

[zonkkk]

What does your current employment contract say? Some do not allow you to have a side gig.
No need to pay yourself a salary from your LTD.
Do get a contract written up.
Do get insurance.

[edison]

It might be "easily handled in the contract" but if the reality of your working practices indicate otherwise, and your contract is challenged, such contract clauses are effectively ignored. Would the client be classified as small under the April 2021 regulations coming into force? if not, its very important what the client thinks and if they are willing to take on that risk.

More generally, I'd say Ltd company/split shareholding with spouse is the way to go. You don't have to pay yourself a salary as a director, but I imagine that most accountants would recommend it.

I'd definitely recommend a contract - its amazing how good professional relationships can turn sour at the smallest thing and the contract is your protection. Likewise, for the same of a few hundred quid, get insurances.

Given your rather niche circumstances, I'd visit a local accountant and see what package they could put together to advise and administer the above for a year.

Overall this is good advice, especially about getting a contract and insurances. Of course, the client will have their own view of IR35 but I can't see why the work the OP described in the original post couldn't be delivered as specific, deliverables based work packages outside IR35.

[Paralytic]

We haven't had that discussion, interested why you say that though? I can't see how the gig has a single hallmark of "inside", other than perhaps right of substitution which is easily handled in a contract.

It might be "easily handled in the contract" but if the reality of your working practices indicate otherwise, and your contract is challenged, such contract clauses are effectively ignored. Would the client be classified as small under the April 2021 regulations coming into force? if not, its very important what the client thinks and if they are willing to take on that risk.

More generally, I'd say Ltd company/split shareholding with spouse is the way to go. You don't have to pay yourself a salary as a director, but I imagine that most accountants would recommend it.

I'd definitely recommend a contract - its amazing how good professional relationships can turn sour at the smallest thing and the contract is your protection. Likewise, for the sake of a few hundred quid, get insurances.

Given your rather niche circumstances, I'd visit a local accountant and see what package they could put together to advise and administer the above for a year.

[richardrichard]

We haven't had that discussion, interested why you say that though? I can't see how the gig has a single hallmark of "inside", other than perhaps right of substitution which is easily handled in a contract.

[GhostofTarbera]

Looks inside IR35 to me,what’s end client thoughts on IR35?


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[richardrichard]

Evening all. Looking for input on this from the good learned folks of the forum, any advice/thoughts appreciated.

I'm a permanent employee, several years since I last contracted, but have been approached about some advisory/consulting work for another company. Issues with my employment contract aside, I'm trying to figure out the best way to go about this. Part of the answer I'm sure will involve engaging an accountant, but I'm not sure if one of the £75 a month online jobbies is the best place to go, nor if they will be able to answer some of my questions.

Some facts;

• Salary plus bonuses this tax year in permie gig approx £150k (relevant from a tax bracket perspective)
• Consulting gig worth approx £30k over the next 9-12 months
• Nature of the work will be advisory - on IT strategy development, building an in-house IT capability (currently outsourced), bringing in some sector specific software solutions etc
• I won't be on site, using their equipment, under their direction (quite the opposite) etc.

My questions

• Most tax efficient way to go about this, assuming I don't want to put it all into pension? I'm thinking Ltd co with myself and my wife as equal shareholders, all paid out in dividends after corp tax (wife earns approx £20k pa currently)
• Do I need to pay myself a salary at all? Obviously I have no personal tax allowance so this would seem silly unless a requirement.
• Anything else to consider such as deferring portion of the dividend until next tax year? Would this open up another £4k tax free, and also my income may be lower next year so I wouldn't pay the highest rate of tax on the divvy.
• Considering the gig/company will only last ~12 months, is entrepreneurs relief something I can take advantage of?
• Do I need a contract? I would be happy enough simply invoicing as appropriate. Not sure whether it's desirable or not to have a contract from an IR35 perspective. Intention is roughly £5k per month of invoices for the first 3 months or so, tapering off after that
• How necessary are things like PI/PL insurance?

Again, thanks in advance for input.