IR35 without being Director?

[LisaContractorUmbrella]

There would also be costs to close down the company if contracting didn't work out for you and you still need to consider your IR35 position - if you're outside you would be better of financially with a Ltd co but if you're inside it won't make much difference to you. 3-6 months with an umbrella company would also give you a chance to see if contracting is for you without the pressure of running your own company.

[Clare@InTouch]

Very much appreciate everyone's advice - it's incredibly valuable (and shockingly quick-coming too).

I wouldn't consider it long-term - 8 months or so (possibly a bit more but I'll base it on what I've been formally offered). The money isn't amazing, since this is my first foray into contracting and I'm not some super experienced IT fellow on £600+ per day, but checking the ir35 calculator it would still make a more than noticeable difference to what I end up with in my pocket every month. So - if I may ask further patience - is there a ballpark I can expect for all the various accountancy fees for setting up my Ltd? Other than the basic initial set-up costs I'm unsure what these other fees are likely to total. Since as you've all advised - it's only 8 months, so if it's going to cost me £500/1000 to actually get the thing set up all legally perhaps it wouldn't be worth the effort and an umbrella company would make it easier. But if it's more like a couple hundred, then I'd be more than happy to go through the processes required since the pay-off (as it were) would certainly be worthwhile.

You shouldn't be paying more than £100ish for incorporation, depending on how much work that covers (VAT, PAYE, flat rate VAT, bank, share structure etc).

Ongoing you'd probably be looking at £1000ish in fees for a full year, again depending on the level of service you want. Just make sure you're comparing like with like when it comes to what's included.

Then figure out if those fees are more than your tax saving!

[Reverend]

Very much appreciate everyone's advice - it's incredibly valuable (and shockingly quick-coming too).

I wouldn't consider it long-term - 8 months or so (possibly a bit more but I'll base it on what I've been formally offered). The money isn't amazing, since this is my first foray into contracting and I'm not some super experienced IT fellow on £600+ per day, but checking the ir35 calculator it would still make a more than noticeable difference to what I end up with in my pocket every month. So - if I may ask further patience - is there a ballpark I can expect for all the various accountancy fees for setting up my Ltd? Other than the basic initial set-up costs I'm unsure what these other fees are likely to total. Since as you've all advised - it's only 8 months, so if it's going to cost me £500/1000 to actually get the thing set up all legally perhaps it wouldn't be worth the effort and an umbrella company would make it easier. But if it's more like a couple hundred, then I'd be more than happy to go through the processes required since the pay-off (as it were) would certainly be worthwhile.

[Wanderer]

So, dunno - some of that may be incredibly thick and/or ignorant on my part

Yes, most of it is.

Sorry, i shouldn't laugh. I can see what you are driving at but as the accountants here have warned, going through a friend's LTD company is a Really Bad Idea. Your tax affairs get tied up with theirs and it gets really messy/complicated. Read the First Timers Guide. In particular, consider the three options available to you with regards to trading structures.

Umbrella or agency PAYE is the easiest though you will pay inside IR35 amounts of tax.
LTD is more complex but can be more tax efficient. It is easy to setup a LTD company by yourself but that is only a very small part of the process so don't go it alone. You will need an accountant sooner or later so get one engaged up front and they will guide you through all the things to do and avoid you getting fined or making dumb mistakes that cost you dearly.

Good luck!

[Nathan SJD Accountancy]

At the moment I'm precisely nothing in the company - not a shareholder, haven't set up my own Plc, I've just spoken to the guy about whether if I can do it through his company, since I'll avoid the faffing of setting up my own, it might avoid me some hassle, essentially, if the end result is the same. He said that's fine and got his accountant to work out how much would be taken off for NI and tax etc so I had a picture of what my income will be - I assume just directly paid from the company to me minus tax/NI etc. I've got a couple of weeks until I need to be paid by my client for the first time to actually 'set in stone' anything that I need to. So I suppose I'm effectively self-employed at this moment? As stated; still woefully ignorant of processes involved here.

Lisa - I imagine my view is incredibly simplified at the moment!

Edit: Thank you for that HMRC link too.

I see, you are just assessing your options. In my opinion, the only options I believe you should be considering are:

Whether you operate through an umbrella company

Whether you operate through a limited company

I wouldn’t even consider using your friends company. As no doubt there are many factors that need to be taken into account, as Clare said e.g. insurance.

Umbrella companies will have process etc already in place to make it easy for you. Why make an easier situation harder by using your friends company instead of an Umbrella company, that has been tried and tested and do these activities / situations on a day to day basis?

As Clare states, if the contract role is not short term, possibly high value, a limited company is possibly the best option to go down currently if you care about the amount of tax that is paid to HMRC and the amount of money left in your pocket.

I get the feeling from your first post that you do mind how much tax is deducted, since you are considering IR35 factors and what is included in the contract. Therefore a Limited company may be the best route for you at the moment.

You also mentioned you wanted to avoid ‘faffing of setting up’ the company. Since this thread started, the company could've been formed.

Other registrations take a couple of days, maybe weeks, but shouldn't prevent you from beginning the role.

[northernladuk]

? As stated; still woefully ignorant of processes involved here.

Lisa - I imagine my view is incredibly simplified at the moment!.

Simplified isn't the word you should be using here....

I presume your friend has given you a contract of employment? He also knows the legalities and responsibilities of employing you? You have agreed an expenses policy as well handling VAT and all that marlarky?

[Clare@InTouch]

At the moment I'm precisely nothing in the company - not a shareholder, haven't set up my own Plc, I've just spoken to the guy about whether if I can do it through his company, since I'll avoid the faffing of setting up my own, it might avoid me some hassle, essentially, if the end result is the same. He said that's fine and got his accountant to work out how much would be taken off for NI and tax etc so I had a picture of what my income will be - I assume just directly paid from the company to me minus tax/NI etc. I've got a couple of weeks until I need to be paid by my client for the first time to actually 'set in stone' anything that I need to. So I suppose I'm effectively self-employed at this moment? As stated; still woefully ignorant of processes involved here.

Lisa - I imagine my view is incredibly simplified at the moment!

Edit: Thank you for that HMRC link too.

If you're working through his company then your his employee. It's just like working through an umbrella really, but without the umbrella fees - that being said, I'd still recommend you go through a proper brolly. It saves the potential problems further down the line (does he have insurance to cover you for example?)

If you're contracting for 6 months or more and looking at income of £30k or more, then you need to be thinking about your own limited company if you're interested in being as tax efficient as possible.

[stek]

At the moment I'm precisely nothing in the company - not a shareholder, haven't set up my own Plc, I've just spoken to the guy about whether if I can do it through his company, since I'll avoid the faffing of setting up my own, it might avoid me some hassle, essentially, if the end result is the same. He said that's fine and got his accountant to work out how much would be taken off for NI and tax etc so I had a picture of what my income will be - I assume just directly paid from the company to me minus tax/NI etc. I've got a couple of weeks until I need to be paid by my client for the first time to actually 'set in stone' anything that I need to. So I suppose I'm effectively self-employed at this moment? As stated; still woefully ignorant of processes involved here.

Lisa - I imagine my view is incredibly simplified at the moment!

plc? Shirley you mean Ltd?

Is the role direct or via an agency, if the latter there's no way you can be self-employed, Agencies Act I think.....

[Reverend]

At the moment I'm precisely nothing in the company - not a shareholder, haven't set up my own Plc, I've just spoken to the guy about whether if I can do it through his company, since I'll avoid the faffing of setting up my own, it might avoid me some hassle, essentially, if the end result is the same. He said that's fine and got his accountant to work out how much would be taken off for NI and tax etc so I had a picture of what my income will be - I assume just directly paid from the company to me minus tax/NI etc. I've got a couple of weeks until I need to be paid by my client for the first time to actually 'set in stone' anything that I need to. So I suppose I'm effectively self-employed at this moment? As stated; still woefully ignorant of processes involved here.

Lisa - I imagine my view is incredibly simplified at the moment!

Edit: Thank you for that HMRC link too.

[LisaContractorUmbrella]

Apologies for joining and immediately making a thread, appreciate some lurking and posting in ongoing threads is looked upon better, but my specific issue I'm having trouble finding (after various vague search term attempts.) A fair warning too that I am incredibly new to this so sorry if I need things telling to me like I'm a five year old - I'm trawling advice websites and forums and learning as I go!

I think I would fall outside IR35 on the grounds of I wouldn't be employed as an employee at my current work if not employed as a contractor (i.e. they were never going to get anyone but a contractor because of time/expertise constraints; being an on-roll staff member was never an option.)

But as far as I could gather, the risk caveat of the legislation seems to be that you can escape being caught because of the financial risks you undertake by directing your own company - this doesn't apply to me. I have a contractor friend who has his company, he is happy to pay me through it, which obviously means I'm not directly taking on the risk of his company (not a formal director), but on the other hand if my work doesn't pay me, I am at large financial risk personally... my contract also has all the standard caveats of "the contractor is in no way an employee of... etc etc etc." I'm honestly not sure exactly where that lands me, legally.

So, dunno - some of that may be incredibly thick and/or ignorant on my part, and I beg patience from readers who may be able to advise - do I need to be a full company director to escape IR35, or is it possible still in some other way? If I do I'll need to be checking companies' house website pretty soon...

I think you have developed an over-simplistic view of IR35 - deemed employment is not the same as a company recruiting a contractor in preference to a permie - have a read of this http://www.hmrc.gov.uk/ir35/guidance.pdf

[northernladuk]

What Clare says. We need to know how you get your money from your 'friend' before you can say if IR35 applies.

Why do so many people go through friends companies at the moment? Sounds like a recipie for disaster to me. Money and friendship don't mix. Open your own company and do it properly. If he is paying you a salary you would probably be better off going Umbrella let alone LTD.

[Reverend]

At the moment I'm precisely nothing in the company - not a shareholder, haven't set up my own Plc, I've just spoken to the guy about whether if I can do it through his company, since I'll avoid the faffing of setting up my own, it might avoid me some hassle, essentially, if the end result is identical. He said that's fine and got his accountant to work out how much would be taken off for NI and tax etc so I had a picture of what my income will be - I assume just directly paid from the company to me minus tax/NI etc. I've got a couple of weeks until I need to be paid by my client for the first time to actually 'set in stone' anything that I need to. So I suppose I'm effectively self-employed at this moment? As stated; still woefully ignorant of processes involved here.

[Clare@InTouch]

IR35 is determined by what happens in practice, rather than whether the client deems you to be an employee or not. HMRC would look at whether you have control over what you do, whether you're obliged to do the work personally, and whether there are any implied (or real) obligations between the parties. If you're caught, then 95% of your income needs to be paid to you as salary.

If you're working through your friend's company and being paid 100% in salary, then IR35 doesn't apply as you're being paid like an employee already. As Nathan points out above, this could be different if you're a shareholder though, as you'd then be able to take dividends. Is there a reason for using his company rather than setting up your own or using a brolly?

You don't need to have your own limited company, but having one would enable you to take dividends and thus pay a lot less in tax (assuming you're outside of IR35).

[Nathan SJD Accountancy]

Apologies for joining and immediately making a thread, appreciate some lurking and posting in ongoing threads is looked upon better, but my specific issue I'm having trouble finding (after various vague search term attempts.) A fair warning too that I am incredibly new to this so sorry if I need things telling to me like I'm a five year old - I'm trawling advice websites and forums and learning as I go!

I think I would fall outside IR35 on the grounds of I wouldn't be employed as an employee at my current work if not employed as a contractor (i.e. they were never going to get anyone but a contractor because of time/expertise constraints; being an on-roll staff member was never an option.)

But as far as I could gather, the risk caveat of the legislation seems to be that you can escape being caught because of the financial risks you undertake by directing your own company - this doesn't apply to me. I have a contractor friend who has his company, he is happy to pay me through it, which obviously means I'm not directly taking on the risk of his company (not a formal director), but on the other hand if my work doesn't pay me, I am at large financial risk personally... my contract also has all the standard caveats of "the contractor is in no way an employee of... etc etc etc." I'm honestly not sure exactly where that lands me, legally.

So, dunno - some of that may be incredibly thick and/or ignorant on my part, and I beg patience from readers who may be able to advise - do I need to be a full company director to escape IR35, or is it possible still in some other way? If I do I'll need to be checking companies' house website pretty soon...

Hi,

Are you a shareholder in his company? If not, how will you be paid?

Will you be a self employed individual, or will you have your own Limited company and the work will be 'passed on' to you?

[Reverend]

Apologies for joining and immediately making a thread, appreciate some lurking and posting in ongoing threads is looked upon better, but my specific issue I'm having trouble finding (after various vague search term attempts.) A fair warning too that I am incredibly new to this so sorry if I need things telling to me like I'm a five year old - I'm trawling advice websites and forums and learning as I go!

I think I would fall outside IR35 on the grounds of I wouldn't be employed as an employee at my current work if not employed as a contractor (i.e. they were never going to get anyone but a contractor because of time/expertise constraints; being an on-roll staff member was never an option.)

But as far as I could gather, the risk caveat of the legislation seems to be that you can escape being caught because of the financial risks you undertake by directing your own company - this doesn't apply to me. I have a contractor friend who has his company, he is happy to pay me through it, which obviously means I'm not directly taking on the risk of his company (not a formal director), but on the other hand if my work doesn't pay me, I am at large financial risk personally... my contract also has all the standard caveats of "the contractor is in no way an employee of... etc etc etc." I'm honestly not sure exactly where that lands me, legally.

So, dunno - some of that may be incredibly thick and/or ignorant on my part, and I beg patience from readers who may be able to advise - do I need to be a full company director to escape IR35, or is it possible still in some other way? If I do I'll need to be checking companies' house website pretty soon...