Ltd company/IR35 issues

[the_rangdo]

I may be wrong but I think employers liability rules were relaxed so a LtdCo where the director is also the sole employee doesn't require it.

[TykeMerc]

One additional question I have is regarding what insurance to get. So at this stage:

1) I am the sole employee of a Ltd company that I am 100% shareholder of.
2) I'm a member of PCGplus and thus get some insurance cover there.
3) Currently I have 1 client.

Should I get professional indemnity, employers liability & public liability insurance? I will probaly go down the Qdos channel as they look well respected.

Thanks

As to supplier of insurances take your pick, but in my opinion you should get them. Odds are you will never need them, but if you do they're worth having. Plus some clients and agents won't take you on unless you can demonstrate that you have them in place.
My memory's a bit weak and I haven't time to look it up, but I have a strong feeling Employers Liability is obligatory by law anyway, happy to be corrected on this.

[Shanshan]

One additional question I have is regarding what insurance to get. So at this stage:

1) I am the sole employee of a Ltd company that I am 100% shareholder of.
2) I'm a member of PCGplus and thus get some insurance cover there.
3) Currently I have 1 client.

Should I get professional indemnity, employers liability & public liability insurance? I will probaly go down the Qdos channel as they look well respected.

Thanks

[NotAllThere]

In IT, I'd expect as a rule of thumb a permie salary of £30K to equate to £30 an hour or £300 a day. Now that varies according to skill set, sector etc.

By taking on a contractor the employer benefits in a number of ways, which have to be offset against the higher rate, and against the admin cost of handling your invoices:

1. No ERNIC
2. No payroll costs
3. No pension
4. No insurance
5. No sick pay
6. No holiday pay
7. No employment rights
8. Often, no or small notice period

You can see from this that many of the points wouldn't be included in your calculation. They're saving far more than ERNIC, pension and holiday pay. On the other side, you've got additional costs.

1. Pension
2. Insurances
3. Accountant fees
4. Covering time on the bench
5. Tax investigation costs

I'd start negotiating at double what you're currently getting, with the above grounds. What you settle for is up to you. A 20% uplift simply isn't worth it.

[Shanshan]

Thanks again for your help.

One more question I have is regarding the difference in hourly rate charged. In my view, my moving from PAYE to Ltd provides a saving to the client.

I estimate the savings for the client to be 12.67% (30 days annual leave pa forgone), 14% (employer pension contribution forgone) plus 12.8% (employers NI forgone). Coming to 39.47%, is this correct?

Is it reasonable for this saving to be shared 50/50 ie. my rate increase by appro 20% and in turn they will have a saving of approx 20%.

Also what are the payment days on your invoices? I'll probaly invoice fortnightly and have 14 days to pay. Is this reasonable?

In regards to PCG membership, is the standard membership enough? Or is the Plus membership worth the extra?

Thanks

[Malingering BA]

Thanks for your help, I'll get in touch with them.

Also, any idea of issues that flag reviews with HMRC?

I read that Ltd companys get reviewed every 3 years, I assume 3 years, on average, after company setup. Or do they review early on?

Thanks again

3 years might be an average but I've been contracting for 10 years and have never heard a peep out of them. No doubt some people have had the knock on the door after 1 year.

As to likely flags, no one can know for sure but read these for some clues.

[Shanshan]

Thanks for your help, I'll get in touch with them.

Also, any idea of issues that flag reviews with HMRC?

I read that Ltd companys get reviewed every 3 years, I assume 3 years, on average, after company setup. Or do they review early on?

Thanks again

[Malingering BA]

Thanks again for your help with this.

I am paid per hour. I started working the standard 35 hr week, but then other projects arose which I put myself forward for and got assigned to. This is where the varying hours arose. Since this was the case, I thought I would start working through a limited company.

Any idea if the insurance is worth it. At this stage all I have is the accountants.

I am currently working with no contract at all. Would a contract assist my case? I would dictate/write the contract and the client would agree/authorize.

There's a mixed message here as far as IR35 goes. You work as a standard bod (bad), but you in essence bid for the contracts (good). Very hard to say. Outfits like Bauer and Cottrell will give you an IR35 opinion but only based on a contract. Of course, your working practices much match the contract for that opinion to be worth anything.

Needless to say, you should get a contract in place, just to protect yourself. FWIW, PCGPlus is what I have plus as I said membership gives you access to sample contracts making this job easier.

[Shanshan]

Thanks again for your help with this.

I am paid per hour. I started working the standard 35 hr week, but then other projects arose which I put myself forward for and got assigned to. This is where the varying hours arose. Since this was the case, I thought I would start working through a limited company.

Any idea if the insurance is worth it. At this stage all I have is the accountants.

I am currently working with no contract at all. Would a contract assist my case? I would dictate/write the contract and the client would agree/authorize.

[VectraMan]

I imagine they'd ask would you still be doing the same work if you'd stayed PAYE? And the answer is yes, you probably would. Also the way you say "other projects have arisen" makes it sound like your work is being assigned to you, which is direction and control.

Are you paid per hour? If you can agree a fixed price for each project, that's evidence of risk and will help your case.

Of course there's a good chance you can do whatever you want, and will never get caught.

IANAL.

[Shanshan]

I was under PAYE initially. But since then other projects have arisen ie. a second employee who is only working 3 days a week. So I am working on varying projects that have a finite life ie. year end work.

I thought this type of work (varying projects with finite life) would be more a contractor than an employee

[VectraMan]

WHS.

One problem is that you were on PAYE. It kind of looks like you've only setup the company to avoid tax, and that's what IR35 was setup to stop. Also if you're covering for a sick employee, then that suggests the work is that of an employee.

[Shanshan]

Hi there,

Thanks for the very quick reply.

I have read a fair bit of IR35 and understand broadly how it works. I am simply unsure of the weighting of varying factors. I understand the substitute issue is fairly high on the list, I would not satisfy this requirement.

Other issues, working through the limited company I will not be entitled to pension, annual leave or sick leave and thus the financial risk lies with me.

Also in regards to IR35 insurance, I also read on this forum that the insurance is only applicable if you are outside IR35. Thus if I do take out insurance, and am found to be inside IR35, then the insurer would not assist. Is this correct? The insurance seems pointless in this case.

So would would suggest it is worthwhile obtaining membership with PCG, say PCGplus membership.

Thanks again for your help.

[Malingering BA]

Firstly, have you read the IR35 guide here? Then if I were you I would get yourself over to http://www.pcg.org.uk and read their IR35 guide. This will familiarise you with the issues. If you join the PCG, you will also get access to sample contracts, IR35 insurance and other bits and bobs.

Disclaimer: there are also other providers of these solutions as other posters may wish to point out (or not).

[Shanshan]

Hi all,

I have read through the threads and found it all very informative. I would, however, like further information.

My situation.

I started working in March on a 6 month contract directly with a client (no agency) under PAYE providing accounting services. I have now setup a Limited company and intend to work through the Ltd company from 11 Aug 08 (backdated). The client is fine with this.

The new contract will probably be for 4 months only, but will not be for a set period as it is dependant on work load. I will seek another contract elsewhere once this contract is complete.

IR35 issues:
1) I work varying hours depending on work load.
2) I have no set starting/finishing hours/lunch break
3) I dictate the hours I work
4) I am on college intranet
5) I am covering for a permanent employee who is on sick leave and another permanent employee who works 3 days a week. When they return I will no longer be required.
6) I work 95% at client premises, 5% from home
7) While at client premises, I use their equipment. At home I use my own.

I will need to provide a contract for the client to sign. Any idea what this should state? Or who I should seek to obtain further information.

I have employed accountants, Danbro, and they have provided the company setup and other maintenance but are limited (I think) in terms of IR35. Based on the above, would I be in or outside IR35?

I will invoice the client, probaly fortnightly, and as mentioned above it will be for varying amounts. I will be Vat (flat rate) registered.

Is it worth becoming a member of PCG?

Is it worth getting contractor insurance?

Any other advice on the above and other issues I need to address would be greatly appreciated.

Thanks