Reply to: How many contractors does it need to be a business rather than a PSC?

[NotAllThere]

does multiple income streams make a difference?

No.

Next!

[mccark]

iR35

does multiple income streams make a difference?

[Fred Bloggs]

Ahhhh, the good old composite company structure........... Latterly known as a managed service company. What comes around goes around. For ever more, it seems.

[Fred Bloggs]

One thing that is worth making all your family, friends and acquaintances aware of is that the term "accountant" is not a protected profession and name in England and Wales.

So anyone can set up an accountancy business and call themselves an accountant. However those with scruples do not say they are an accountant unless they are registered with one of the accountancy bodies.

The standard advice is to ask ask any "accountant" you want to do do business with their professional body, then go online and confirm that they are registered and what their level of qualification is.

Very wise words. Same with Engineers. Always engage a Chartered Accountant, that way you can check the credentials and they have a code of practice (except if your name is Darren, apparently).

[Guvernator]

Well the accountants are MKL, they look legit to be honest, they have a proper website and don't look like some fly-by-night operation. I'll be giving them a call tomorrow to find out what the deal is.

I'd be very surprised if they aren't aware of the MSC legislation but from what this colleague was describing, that's exactly what they were running.

My worry is not only the increased tax implications but the fact that you can't hold money back in the company to build up a war chest for bench time, time off etc. At the moment if I've worked 11 months,I tend to take at least a month off a year because I've earned enough and can afford to take some time off with the surplus I have sitting in the company. Not only will I not have a surplus to be able to afford to do this, I still won't get holiday pay.

I still think the most effective way to fight this is through the employee rights. If they want to treat us as employees and tax us accordingly then we should also get the same rights as employees. I'd love to see my clients still forced to pay me my day rate while I sit on a beach sipping cocktails somewhere.

[SueEllen]

Hello, long time lurker but just registered. I've been following developments with interest and just wanted to add my 2 pennies worth.

I am a little surprised at the hostility on here sometimes, OK the OP may be posting stuff that long term posters know about but many contractors including myself have been working under a Ltd company happily for years (9 years and counting for me) so really had no need to investigate other avenues until the government decided to go on their crusade.

I too have been investigating all possible avenues but only came across the MSC legislation ban a few days ago. Until then I and many other contractors friends where happily talking about banding together to form a company so I don't think it can be taken for granted that everyone knows you can't do that anymore, in fact when I mentioned it to my contractor friends they were all taken aback.

I will also add that one of the guys who used to work here seems to be operating in just that fashion, multiple contractors renumerated via different class shares and has been for about 2-3 years. He isn't a close friend so was naturally reluctant to discuss full details about it but he did give me the details of his account who apparently says it is all above board?

One thing that is worth making all your family, friends and acquaintances aware of is that the term "accountant" is not a protected profession and name in England and Wales.

So anyone can set up an accountancy business and call themselves an accountant. However those with scruples do not say they are an accountant unless they are registered with one of the accountancy bodies.

The standard advice is to ask ask any "accountant" you want to do do business with their professional body, then go online and confirm that they are registered and what their level of qualification is.

[northernladuk]

. He isn't a close friend so was naturally reluctant to discuss full details about it but he did give me the details of his account who apparently says it is all above board?

We had a guy on last week who's accountant recommended he buy advertising in return for cash on some gift card or something.... Don't always trust what someone else's accountant says unless you have seen, in detail, the offering yourself.

[BR14]

Travel and Expenses is going to be a killer virtually everywhere except for those who both live and work in London....

unless you can work remotely.
it's getting more common in my field over the last five years, thank feck

[Guvernator]

Hello, long time lurker but just registered. I've been following developments with interest and just wanted to add my 2 pennies worth.

I am a little surprised at the hostility on here sometimes, OK the OP may be posting stuff that long term posters know about but many contractors including myself have been working under a Ltd company happily for years (9 years and counting for me) so really had no need to investigate other avenues until the government decided to go on their crusade.

I too have been investigating all possible avenues but only came across the MSC legislation ban a few days ago. Until then I and many other contractors friends where happily talking about banding together to form a company so I don't think it can be taken for granted that everyone knows you can't do that anymore, in fact when I mentioned it to my contractor friends they were all taken aback.

I will also add that one of the guys who used to work here seems to be operating in just that fashion, multiple contractors renumerated via different class shares and has been for about 2-3 years. He isn't a close friend so was naturally reluctant to discuss full details about it but he did give me the details of his account who apparently says it is all above board?

[IR35 Avoider]

Here is my idea: Something similar to an umbrella company where contractors team together to form a consultancy/services firm. No individual is allowed to own more than 5% of the firm. The firm handles invoicing etc and everyone is paid a basic minimal salary. Each contractors daily rate determines his percentage of ownership so that dividends can be paid proportionally. IR35 cannot be applied to these individuals regardless of "end-client SDC" as they do not meet the criteria of s51 ITEPA 2003. The firm can rightly bill out to the end-client or agency and expect to receive the full amount without the "deemed employee" deductions. Operating under this structure can be sold to end-clients as an "IR35 free" solution where they are not required to determine SDC.

The advantages of this structure over a typical umbrella company are obvious; the full range of business expenses can be deducted before tax. This structure would be particularly useful for contractors who need to stay away from home.

Disadvantages are likely to be a larger administrative burden, dealing with contractors who want to leave the group as an immediate replacement would need to be found to transfer the share ownership; potential legal complications or disputes if a contractor refuses to give up ownership or dies (meaning his shares will pass to his estate). This would need to all be accounted for in the legal contract between the share owners of the firm. I guess there will be other challenges that need to be ironed out.

I expect to be abused for this idea but I'll put it out for discussion anyway.

I've only skimmed your proposal, but I I think I've understood the gist of it. I feel qualified to comment as I joined a company set up on a (in some but not all respects) similar basis when IR35 was first introduced. (Hence my user-name, which is no longer apt.)

I think what you are missing is that it is not enough for each contractor to own less than 5% of the company. In order to satisfy a criterion that dividends can not reasonably be taken to be remuneration for individual contracts, you cannot have a direct mechanical link between what contractors bring in, and what they take out. Instead they would effectively have to hand over "their" contract income to the consultancy and trust it to see them right, on average over time. And the consultancy would have to actively avoid "seeing them right" in a transparent and straight-forward way, as if HMRC could prove there was a direct link between money brought in and benefits taken out, the contracts that generated that money would become caught.

The "consultancy" I joined abandoned this approach after about six months, because it was impossible to find sufficient contractors willing to place that level of trust in it. (As the idea was abandoned, no dividends were ever paid.)

Had they continued, the general idea was to remunerate people in a variety of ways, including via a company share ownership scheme where shares were awarded as performance-related bonuses. The shares would have paid a consistent dividend related to overall profits. The dividends received by an individual would not have been directly related to fees they generated for the company.

It's possible that an idea like this could be made to fly in the near future. If contractors do turn out to be "cornered" by new rules then more of them might be willing to resort to something that wasn't sufficiently attractive back in 2000. Also, IPSE exists, and could lend credibility by creating such a company themselves.

[eek]

Scotland?

The T&E is a big problem IMO for those of us that don't live within commute of the large urban conurbations.

Travel and Expenses is going to be a killer virtually everywhere except for those who both live and work in London....

[b r]

I guess that would be somewhere in Wales would it?

Scotland?

The T&E is a big problem IMO for those of us that don't live within commute of the large urban conurbations.

[RonBW]

Heck, that really was 10 years ago!
Managed Service Companies - MSC Legislation, Rules and Guides

Time flies and all that

[administrator]

Late 2000s - legislation announced December 2006, introduced 2007.

Heck, that really was 10 years ago!
Managed Service Companies - MSC Legislation, Rules and Guides

[RonBW]

The name of that idea is a Managed Service Company - it was Brookson's (firm of accountants) original business model and was banned in the early 2000s.

Late 2000s - legislation announced December 2006, introduced 2007.