Reply to: Sub-contracting work from ltd.co. to sole-traders

[TestMangler]

Ahhh there we go, we did get a useful answer out of you eventually! Thank you so much for sharing your wisdom and vast experience with us, it is much appreciated.

In future, maybe you can just cut to the chase and give a useful opinion with some practical advice like that and leave out the bickering and language that your granny would wash your mouth out for.

Yes, please accept my humble apologies for not realising the lack of knowledge I was dealing with.

Seeing as how any Ltd Co contractor working outside IR35 has to be, by definition, 'in business on his own account', I wouldn't have expected buying and selling services and the process of purchasing and invoicing to be so difficult to understand.

[psychocandy]

Remember the thick chinese bird off The Apprentice?

I seem to remember her boasting about her business empire and how she provided work for people (on her crappy market stall) then looking a bit dumbfounded when she was asked on telly about tax etc (she said she paid them cash which was well funny!).

I remember the subsequent program (after she got booted out), they asked her again and she said she'd done it all properly with regards to tax and the people she'd employed were students who didnt earn enough to pay tax. Obviously, some one had advised her sharpish to get her out a hole she'd dug for herself !!!!!

[Wanderer]

So, back to the OP, ensure your subbys are registered for SA. Add some other T&Cs if you feel the need (insurances etc). Bill the end client, get the subs to invoice you, pay the subs, spend the profit. It's no more complicated than that.

Ahhh there we go, we did get a useful answer out of you eventually! Thank you so much for sharing your wisdom and vast experience with us, it is much appreciated.

In future, maybe you can just cut to the chase and give a useful opinion with some practical advice like that and leave out the bickering and language that your granny would wash your mouth out for.

[TestMangler]

If you are such a "proper" business man then more power to you, sir but you are making a mistake deriding the other contractors here when 90% of them are quite happy operating exactly how you describe (and it's allowed by HMRC).

It's not a question of deriding contractors.

It's more to do with deriding contractors advice when they clearly do not understand how to do business outside the model they currently use.

As my old granny used to say, if ye don't know, keep yer f***in' mouth shut

So, back to the OP, ensure your subbys are registered for SA. Add some other T&Cs if you feel the need (insurances etc). Bill the end client, get the subs to invoice you, pay the subs, spend the profit.

It's no more complicated than that.

[Wanderer]

I absolutely agree. So much advice here is poorly applied to the reality of "properly" being in business, rather than running a 'sham' ltd co that actually has one client offering rolling 6month extensions, 1 director and shareholder who just happens to be you. Then a poorly veiled job of tax minimisation using a spouse and Pret receipts as subsistence. The HMRC will see though all this in a nutshell.

If you are such a "proper" business man then more power to you, sir but you are making a mistake deriding the other contractors here when 90% of them are quite happy operating exactly how you describe (and it's allowed by HMRC).

[PAH]

3) Just pay them as 'Suppliers'. ie. Get them to invoice you and basically stick them down as a simple company. If HMRC wants to delve deep on the incredibly small off chance you get some kind of audit for the period in question then good bloody luck to them.

This is what I did when I paid a mate for a few months work that he did for my ltd company as part of a plan B while I was busy contracting away from home.

Just got him to invoice and paid the amount. What he declared or did with his tax liabilities is his problem.

This is what I'd do again if it was only for a short time (months rather than years).

If longer than a few months then the risk of him possibly being deemed an employee would be more of a worry. This happened to me when I first went contracting. Was operating as self-employed (knew a director at the client so didn't go via an agent) for almost a year before they decided the risk of them having to pay NI etc for me was too great and required I set up a ltd or alternative.

[geoff from contracta IOM]

There is absolutely no problem with paying these guys gross without any deductions but what you must do is insist they are registered for Self Assesment then obtain their UTR ( unique tax reference ) number then check it is valid by contacting Hector and Bobs your uncle well maybe we'll call him Robert now.
You have fulfilled your obligations and their tax bill whether paid or unpaid is their problem.

There is a very clear legal definition of what constitutes an employment agency and this is not it.

This does of course not apply in the construction industry where CIS is applicable but architecture is consdered professional anyway

[jonathanOnshore2010]

Don't make the mistake of trying to apply your agency contract model where it isn't appropriate.

I absolutely agree. So much advice here is poorly applied to the reality of "properly" being in business, rather than running a 'sham' ltd co that actually has one client offering rolling 6month extensions, 1 director and shareholder who just happens to be you. Then a poorly veiled job of tax minimisation using a spouse and Pret receipts as subsistence. The HMRC will see though all this in a nutshell.

[TestMangler]

Sober up TM.

Back to the first point. If it's a simple 'mates rates' for a few months I would do the following

1) You can allocate a certain amount to 'ad-hoc' employees each month without having to go through loads of PAYE. I used to do it with Saturday staff. Allocate the payments to cheques and let your accountant sort the rest out. £500 p/m is probably too much though

2) Ask you accountant to register you for PAYE and pay them

3) Just pay them as 'Suppliers'. ie. Get them to invoice you and basically stick them down as a simple company. If HMRC wants to delve deep on the incredibly small off chance you get some kind of audit for the period in question then good bloody luck to them.

This is a non-question.

This ^^^^^

Troo Dat.

[MarillionFan]

F**k me with a hedgehog on a stick !!

Sober up TM.

Back to the first point. If it's a simple 'mates rates' for a few months I would do the following

1) You can allocate a certain amount to 'ad-hoc' employees each month without having to go through loads of PAYE. I used to do it with Saturday staff. Allocate the payments to cheques and let your accountant sort the rest out. £500 p/m is probably too much though

2) Ask you accountant to register you for PAYE and pay them

3) Just pay them as 'Suppliers'. ie. Get them to invoice you and basically stick them down as a simple company. If HMRC wants to delve deep on the incredibly small off chance you get some kind of audit for the period in question then good bloody luck to them.

This is a non-question.

[TestMangler]

Probably does, but that's a bit academic if your worker has buggered off back home to (insert foreign country here) without paying a penny of tax in the UK, HMRC can't find them and they are demanding that the company that employed them pays up....

Right, one more post then I'm going to give up

Outside the world of contracting (you know, one client at a time, contract and payment via agency etc etc) there is a big wide world where businesses do stuff. They buy, they sell, they sub contract out, they sub contract in and generally do businessy type tulip. In the course of doing that, they use a thing known as a 'purchase order'. This will generally have terms and conditions on the reverse to which the supplier agrees to when accepting the order. The supplier will also probably have terms and conditions to which the buyer will have to agree. Bloody useful things these 'purchase orders'. Sometimes, when 'big' businesses transact, they have legal teams assess these terms and conditions. When smaller businesses transact, they may just research the subject carefuly and formulate their own T&Cs or have them drawn up by a solicitor. They may also have a solicitor check the other party's T&C's to ensure they are happy with them.

Your 'proper contractors' who work on a business to business footing with their clients may well have used them !

Don't make the mistake of trying to apply your agency contract model where it isn't appropriate.

What the OP suggested does not fall into that category.

If all the other blockers mentioned in this thread (they might do a tulip job, they might run away with the payment, their auntie might grow testicles and become their uncle) were serious blockers to doing a simple bit of business, this country would be a lot deeper in the tulip than it already is.

There. I give up now

Outside the world of agency contracting, all these little pieces of business can be transacted in many different ways.

[Wanderer]

hedgehog on a stick !!

A lot of colourful language but still not answer on how you do it I see.

[Wanderer]

If you explicitly put it in the contract that they are responsible for their tax, and make sure they are not deemed as employed, is this still the case? Does it transcend what a contract says?

Probably does, but that's a bit academic if your worker has buggered off back home to (insert foreign country here) without paying a penny of tax in the UK, HMRC can't find them and they are demanding that the company that employed them pays up....

[TestMangler]

If you explicitly put it in the contract that they are responsible for their tax, and make sure they are not deemed as employed, is this still the case? Does it transcend what a contract says?

F**k me with a hedgehog on a stick !!

[d000hg]

You can do it, but if they are negligent, make sure your liability insurance covers them. Also, if they don't pay the right tax, then your company becomes liable (which is why agents won't deal with a sole trader).

If you explicitly put it in the contract that they are responsible for their tax, and make sure they are not deemed as employed, is this still the case? Does it transcend what a contract says?