working with another freelancer

[pmeswani]

If you think it's a long term thing, why not create a new Ltd. company between you for this? You can split the share 60/40 or whatever. That's what I have for plan B co.

Or get him to set up a Ltd company (providing his contract of employment with his permie employer allows it) and get him to speak to an accountant to dot the i's and cross the t's. If you have 2 Ltd's under your name, your CT threshold will drop from £300k to £150k (if memory serves me correctly from reading another post somewhere else). I personally don't know what the benefits are for you to set up your own ltd company.

[VectraMan]

VectraMan, sounds a bit scary what are the advantages?

You can keep this business entirely seperate from whatever else you're doing, so if it flops you're protected from the debts. You pay yourselves out of dividends only and so avoid issues of PAYE, and you can control when you pay the dividends as best fits your personal tax situation.

[malvolio]

thanks guys, .. as this is going to be regular thing for quite a large sum of money, will that be ok with the tax man?

Perhaps, perhaps not... Get professional advice if this is going to be a long term thing . For example, the following problems spring immediately to mind:

• If he fails to pay his tax from this income, you will be liable for it
• If you don't have an audit trail of where the money went, you can get wrapped up in CT enquiries and/or money laundering investigations
• Hector may take an interest and see this as you personally trying to evade paying tax on a portion of your income
• What does his contract of employment say about taking on other external commercial ventures? He can hold shares in someone else's company, natch, but other variations may well be prohibited.

So a separate company is a good move, since it provides the separation from YourCo and you can both take divis in proportion to your shareholding (and there are ways to align those to work done). But get the legals straight, it is not as simple as any sane person would want it to be!

[g5604]

VectraMan, sounds a bit scary what are the advantages?

[g5604]

thanks guys, .. as this is going to be regular thing for quite a large sum of money, will that be ok with the tax man?

[VectraMan]

If you think it's a long term thing, why not create a new Ltd. company between you for this? You can split the share 60/40 or whatever. That's what I have for plan B co.

[voodooflux]

Tell him to give you an invoice (made out to Accounts Payable) and you pay the invoice by cheque or whatever method suits you, and let your freelancer friend declare the earnings in his self assessment and pay the tax accordingly.

WHS

[pmeswani]

he has a fulltime job and fills out a self assessment form.

i don`t treat him like a employee - its a collaboration. Just worried about paying tax on his share..

Tell him to give you an invoice (made out to Accounts Payable) and you pay the invoice by cheque or whatever method suits you, and let your freelancer friend declare the earnings in his self assessment and pay the tax accordingly.

[ratewhore]

I'm not sure the revenue like payment to private individuals anymore, even receipted. You may find they want you to take him on.

This is based on a conversation with a friend of mine who runs a non-IT related small business. He has a PAYE investigation and was told not to take cash-in-hand people on anymore, they had to go on the books even if it was just for one day (which sometimes it was as he runs a removals business).

[g5604]

he has a fulltime job and fills out a self assessment form.

i don`t treat him like a employee - its a collaboration. Just worried about paying tax on his share..

[Bluebird]

Hi,

I am working with another freelancer on a site that sells software. Its a 60/40 split and at the end of each month i get the money we earn and send him his share. Now, how do i square this with the tax man? is his share an expense? or does he need to be my employee? sorry i am clueless.

thanks,
g

is he self employed ?
does he want to be an employee ?
do you want to treak him as an employee ?

There is no straightfoward answer - it's up to you how you want to play it - however which ever way you go YOU need to ensure yours and his paperwork and contract etc are in place.

[DodgyAgent]

Hi,

I am working with another freelancer on a site that sales software. Its a 60/40 split and at the end of each month i get the money we earn and send him his share. Now, how do i square this with the tax man? it his share an expense? or does he need to be my employee? sorry i am clueless.

thanks,
g

If the software is a new version of spellchecker, I doubt that you will receive any interest from HMRC?

[g5604]

Hi,

I am working with another freelancer on a site that sells software. Its a 60/40 split and at the end of each month i get the money we earn and send him his share. Now, how do i square this with the tax man? is his share an expense? or does he need to be my employee? sorry i am clueless.

thanks,
g