Reply to: Taking on a Contractor

[tvr450]

Thanks for all the replies.

This person is a trusted person - my brother actually.

He does not have a limited company, planning just to declare in the income on his SA at the end of the year. The money involved will be small to start with as I will do most of the work while training him up - he will make around £4000 the first year and hence will not be VAT registered or anything.

I guess I need to use the PGC standard contract and make it clear it is not a permanent position etc?

[d000hg]

If you supply services to a business, then the place of supply is where they are based. If you supply to a person, the place of supply is where you are based.

Thanks for that nugget of info. Useful to know for freelancers in particular.

[Clare@InTouch]

It depends on place of supply. If you supply services to a business, then the place of supply is where they are based. If you supply to a person, the place of supply is where you are based. So then HMRC state:

If you are in the UK and the place of supply of your service is in the UK, you charge and account for VAT according to UK VAT rules.

If you are in the UK and the place of supply of your service is in another EU country, the supply is outside the scope of UK VAT.

[d000hg]

Looking here, if you are in the UK and are VAT registered, then you must charge VAT.

I've been working with clients outside the EU (specifically US & Hong Kong) for 4 years and never charged VAT (I'm not on FRS FWIW); my accountants have supported this.

In fact, even within the EU the advice I got was that working in the UK doing work for an EU country, I didn't have to charge VAT then either (there was a thread about this a while back I could try to find).

[DrEvil]

I already subcontract out work to two other companies (contractors) very simply process as the contract I have with the end client just caters for a piece of work to be done my a number of people with rates for different roles etc put in.

You will need to come out of FRS if you were in it as the sub contractors will be charging you VAT. Just make sure you make enough profit from them to easily cover anything extra its costs you.

Then when I invoice the end client its just one nice big invoice (shame its not all mine!!) and get separate bills from the subbies. No emplyment law etc to worry about.

I can imagine itd be easier to use the uk office to bill..

Oh and use people you know and trust. I'm lucky to know quite a few in my field so its simpler for me but I'd be wary of subbing to people I dont know, especially in the early days.

[Nixon Williams]

The only problem that I could see would be whether you risk going over the threshold for FRS, if you are in that.

This is a valid point, although a potentially larger issue is the risk you may be exposed to by the numerous employment laws, maternity, paternity, sickness, equality issues etc, in my experience these are areas often missed but could end up costing your business a tidy packet!

[TheFaQQer]

Looking here, if you are in the UK and are VAT registered, then you must charge VAT.

If you are in the UK and the place of supply of your service is in the UK, you charge and account for VAT according to UK VAT rules.

[TheFaQQer]

I am not on FRS as this contract is based in the USA

I'm not convinced that those two things go together.

but they have UK offices so I should check into whether I need to charge VAT I guess.

You need to see who the contract is with - if it's a UK entity, then you have to charge VAT if you are VAT registered. I'm not sure about invoicing the US direct.

[tvr450]

I am not on FRS as this contract is based in the USA, but they have UK offices so I should check into whether I need to charge VAT I guess.

Thanks for the TIP on T&M.

doohg - I wrote the application for them a few years ago and the supplier has disappeared, so there are not many people that know the system - they would like me available, even if not day to day.

[d000hg]

Why would a client be happy to go through the process of selecting a new contractor, only for him to put in a substitute before ever starting the gig? You'd think they'd just select another candidate.

[mudskipper]

The only problem that I could see would be whether you risk going over the threshold for FRS, if you are in that.

Make sure you get the payment terms agreed properly - if you have to pay your subbie before you get payment from the agency, ensure that you aren't going to hit cashflow problems.

Make sure the subbie has adequate insurance.

Use the PCG standard contract.

Also, if you're on FRS and your sub contractor is VAT registered, you'll have to pay that VAT, or leave the scheme.

[TheFaQQer]

Can anyone see any problems with doing this - the end client company are happy for me to do this, BTW.

The only problem that I could see would be whether you risk going over the threshold for FRS, if you are in that.

Make sure you get the payment terms agreed properly - if you have to pay your subbie before you get payment from the agency, ensure that you aren't going to hit cashflow problems.

Make sure the subbie has adequate insurance.

Use the PCG standard contract.

[Contreras]

What not to do:

If the contract has a fixed price element based upon deliverables, do NOT sub-contract on a T&M basis.

[quackhandle]

Up to you now to advertise the role, pick a candidate you trust to put forward, think about a rate you are willing to pay him, get a contract drawn up and then introduce them to the client.

Wow, if only there was some sort of company or person that could process all that for you, they could make quite a killing.

qh

[northernladuk]

You don't want to take on a contractor. Right set of lazy money grabbing winkers they are!!

Just kidding...

You should always have a right to substitution in your contract so (in theory) no client should have a problem with you sending someone in on your behalf.

Up to you now to advertise the role, pick a candidate you trust to put forward, think about a rate you are willing to pay him, get a contract drawn up and then introduce them to the client.