Reply to: Software Development contract for US co - questions

[fatmcgav]

Evening all

Right, things are progressing along...

Have progressed the requirements, and re-estimated based on said requirements at ~110 hours.
Have been asked to put it in on a fixed-price basis rather than hourly, so as to provide a bit of protection to US co against over-runs etc, which I'm happy enough about as this is my first time doing this...

Have had a discussion with the UK SI, and it seems like they're expecting to use me as a contractor rather than a permie. Therefore I will still need to be in a position to be contracted by the UK SI, be that as a Sole Trader or a Ltd...

This then raises the question of "Is it worth going through the UK SI if I can contract direct to US co after registering MyCo?"
The only value I can see them adding currently is their experience, and off-the-shelf SOW/MSA documents...

I've been googling a bit to try and find a pro-forma SOW/MSA, however am struggling. Does anyone have a resource they've used before?
I'm leaning to doing it myself if I can get pro-forma documents and fill them out myself, with probably a bit of legal ratification.

Cheers again.
Gav

[fatmcgav]

Suitcase of cash in Café Nero at Euston station every other Thursday at 3p.m.

Seriously though as others have said with such a small amount you may as well just be self employed, and pay the necessary tax in that way.

Wouldn't, IMHO, be efficient/cost effective to bother with a company and accountant etc.....

Hehe, may have fun swinging that one...

Am trying to find out more about the going through the UK SI to see how they plan on handling it, so will see what comes of that.

Cheers
Gav

[Scrag Meister]

Suitcase of cash in Café Nero at Euston station every other Thursday at 3p.m.

Seriously though as others have said with such a small amount you may as well just be self employed, and pay the necessary tax in that way.

Wouldn't, IMHO, be efficient/cost effective to bother with a company and accountant etc.....

[fatmcgav]

WHS. £14 a year for the annual return, and if you get free banking that's all it costs. Most people here think a Ltd. is a terrifying thing that only an accountant can wrangle, but as you won't need PAYE or VAT there's little to actually do other than the year end accounts, and in your case that should be as simple as simple can be.

I think as a sole trader (or as an employee) you'll always be stuck being taxed in the tax year you earn the money, whereas with a Ltd. you could wait until it suits you.

VectraMan, cheers again.

I guess I need to decide when I need the money, and then look at the most efficient route to that purpose.

What about going the Ltd route, and then dissolve in a year or so and pay CG rather than higher rate IT?

[VectraMan]

A Ltd doesn't have to cost more than a token amount to set up and run - you can create it for £50 or less and I think renew your company status for about £20 a year if you do your own accounts.

WHS. £14 a year for the annual return, and if you get free banking that's all it costs. Most people here think a Ltd. is a terrifying thing that only an accountant can wrangle, but as you won't need PAYE or VAT there's little to actually do other than the year end accounts, and in your case that should be as simple as simple can be.

I think as a sole trader (or as an employee) you'll always be stuck being taxed in the tax year you earn the money, whereas with a Ltd. you could wait until it suits you.

[fatmcgav]

A Ltd doesn't have to cost more than a token amount to set up and run - you can create it for £50 or less and I think renew your company status for about £20 a year if you do your own accounts. However you'd be best using an accountant since this will impact your personal tax, probably NOT a contractor accountant but a generic one.

A direct contract with the US company would be my preference, is there a reason they don't want to do that?

d000hg,
Apologies, missed this post on my phone.

Useful to know with regards to running a Ltd Co.

I think the initial reason for US co seeking out a UK based partner was that neither of us have much experience in Software contracting in the UK, and all the requirements around that.

Cheers
Gav

[fatmcgav]

https://www.pcg.org.uk/ offers such templates to paid members, and they're pretty good. You can buy them other places too if you google around.

Cheers for the link. Will take a look.

[d000hg]

https://www.pcg.org.uk/ offers such templates to paid members, and they're pretty good. You can buy them other places too if you google around.

[fatmcgav]

Cheers both. Will do some more research into becoming a sole trader.

I've had some feedback from the US Co, and on principle they'd have no issues contracting me directly; However they are nervous that it's getting close to go time and they don't want to delay things where possible.
There's also the requirement for some docs to be produced, such as a Scheme of Work and a Master Software Agreement, which if I'm honest I've never done before.
Does anyone know of any off the shelf documents available, either free or paid.

Cheers
Gav

[TheCyclingProgrammer]

On balance, if you'd rather get the money sooner rather than later, I'd also recommend investigating he sole trader route too. Remember you will still have NI to pay.

[d000hg]

I would not use terms like "Sole Trader" with the US company because they won't necessarily know what that is, and it doesn't matter to them if you are a ST or not. All you want is a contract between them and you personally, i.e. a contract between John Smith and MegaCorp.

[fatmcgav]

Yes, it will save something. For the arrangement you describe with a US client, it probably wouldn't make sense to register for the VAT Flat Rate Scheme, but it might be worthwhile in future (if you have UK clients, because the FRS income generated by sales would probably be much larger than the FRS cost on purchases, although it's also worth noting that you can still reclaim VAT on large capital purchases under the FRS). For sales, the place of supply will be the US, so outside of the scope of VAT.

James, cheers for that. Will look into FRS...

Sole trader is far more tax-efficient than Ltd, it's the Holy Grail!

Stek, cheers for the vote. Will see if the US Co can trade with a sole trader.

Gav

[d000hg]

Start a Ltd. company. Then you can collect the money in that and pay yourself dividends as and when it suits you.

VectraMan,

I did toy with the idea of setting up a Ltd. company, but wasn't sure if it was worth it for a single piece of work. However I guess with the amount of money on the table, it may well be worth the overhead...

Is there anything special to consider when trading as a Ltd. co and working with a US co?

Cheers
Gav

What about setting up as a sole trader (if client are ok with it), not as tax efficient as a Ltd but better than a brolly.

A Ltd doesn't have to cost more than a token amount to set up and run - you can create it for £50 or less and I think renew your company status for about £20 a year if you do your own accounts. However you'd be best using an accountant since this will impact your personal tax, probably NOT a contractor accountant but a generic one.

A direct contract with the US company would be my preference, is there a reason they don't want to do that?

[stek]

What about setting up as a sole trader (if client are ok with it), not as tax efficient as a Ltd but better than a brolly.

Sole trader is far more tax-efficient than Ltd, it's the Holy Grail!

[jamesbrown]

Ltd would also allow me to Vat reg, which may be beneficial as I'm probably guna have to spend some money on new IT hardware to support testing etc.

Yes, it will save something. For the arrangement you describe with a US client, it probably wouldn't make sense to register for the VAT Flat Rate Scheme, but it might be worthwhile in future (if you have UK clients, because the FRS income generated by sales would probably be much larger than the FRS cost on purchases, although it's also worth noting that you can still reclaim VAT on large capital purchases under the FRS). For sales, the place of supply will be the US, so outside of the scope of VAT.