Advice on "employment" with USA-based company

[TheCyclingProgrammer]

Bit of an unusual one for me - I recently decided to get out of contracting and return to full-time employment. After several months of looking I have an offer (and possibly a second one around the corner) for a California-based company. It's a good offer, a high 6-figure $ salary plus share options.

The problem is, currently, they only hire non-US "employees" as "contractors", frequently through some kind of incorporated business. This puts me in a slightly tricky position. I've spent some time looking into the various options, searched on here and I've also spoken to their hiring manager about this. After making a big decision to stop being a freelancer/contractor it feels a bit odd to be contemplating taking on what is effectively another contract. I don't want a contract, I want to be able to publicly say "I've just joined XXX" as an employee etc.

So what exactly is the problem? Well, IR35 I guess. As far as I can tell, these are the potential options:

* Engage as a contractor through my existing Ltd. It's hard to see how it wouldn't be caught by IR35 - I haven't seen any contract yet but even if the contract could be twisted to be IR35 friendly I'm struggling to think how the working practices would put me outside. It's employment in all but name. If I operate IR35 then I'm going to take a big hit on the employer's NI. I could try and contrive a way to make it outside IR35 and hope I don't get investigated but I'd probably need to be very careful about how I present the role publicly which feels like I'd just be continuing as a contractor, which isn't what I wanted. Accountant has also advise that share options would make things very complicated too.

* Engage as a contractor on a self-employed basis. Potentially a simple solution and more tax-efficient than operating IR35 as I wouldn't need to worry about employer NIC. However it presents a new problem: I have a decent chunk of retained profits in MyCo and would ideally want to MVL and get that money out as capital. Engaging my new "employer" on a self-employed basis brings the TAAR into play - I'll almost certainly meet condition C and would have to rely on condition D and proving that gaining a tax advantage wasn't the main motivation for liquidating the company.

* Try and convince the company to give me a proper employment contract and arrange to pay my own taxes under HMRC's DPNI direct PAYE scheme. I feel like this is going to be a hard sell. It's quite obscure, there's very little information about it, they probably aren't going to want to arrange anything too custom just for me. They will probably still need me to submit "invoices" through the billing platform they use like everyone else. On the other hand, I don't mind the burden of running the payroll, there's no employer NIC liability and I think it allows me to MVL my Ltd without getting caught by the TAAR.

Are there any other options I've not considered? What approach should I be looking at? Its frustrating because its a good offer, for a really cool company, but one of the motivations for returning to perm employment is that I felt it was the best route for me to progress my career for more senior roles like principal engineer up to CTO in time. It feels like it would be hard to focus on these aspects of the role whilst remaining outside IR35 which in my mind rules out the Ltd company option, although apparently almost all of their non-US employees take this route.

The DPNI route seems like the best possible option but I strongly suspect they won't go for it.

What are the odds of being able to go down the self-employment route, whilst being able to MVL and avoid being investigated and caught by the TAAR and being hit with a massive income tax bill?

[cojak]

Ah, I think that you’d best speak to MF about this (seriously), as he has been in a similar situation.

I haven’t seen him around lately but he’s a good bet, I think.

[WordIsBond]

I don't know if this can fly or not but could you form a US company which contracts with the client and you be a foreign-based employee of your own US company?

Or is there a US based employment agency that would work with you on this? Comparable to a UK-based umbrella, so you'd be an employee?

[SuperLooper]

Should be pretty easy to get genuinely outside-IR35 working practices due to SDC? You work from your own premises, set your own hours, buy your own equipment, etc.

[TheCyclingProgrammer]

On the subject of SDC, it is true that I will have a lot of freedom, not just because I’m remote, but I will work my own hours, use my own equipment etc. No arguments there.

But there will be aspects that make me undeniably an employee IMO. I will have a line manager that I report to. There will be a structure for career progression which I intend to work my way up. I will need to comply with company rules and processes. The company will think of me as employee and I will be treated as such.

I’ve found a U.K. payroll company with experience of managing PAYE schemes for remote employers and they don’t charge much to run it so that’s an option if the company agrees.

As it turns out they are planning to start using an employer of record service which covers a number of countries - this company will effectively be my employer and will deal with employment contracts, HR and payroll and should be the long term solution, but it may not be in place until the new year, so I might be able to get away with a temporary contract either through the Ltd or self employed as a stopgap and worry about the MVL once I’ve got the employment contract.

[TheCyclingProgrammer]

So, some positive news. They do intend to move all contractors to employment through an employer of record service (remote.com) but in the meantime I’d have to be on contract potentially up to 6 months.

The contract they have sent me is actually very good, has clearly been written with IR35 in mind, is under England and Wales jurisdiction and contains an unfettered RoS clause - it only stipulates that they are notified and that the sub is qualified.

Ticks all the boxes, I’ve told them that we can treat it like a contract to perm and that while I’m on contract I need to be treated as such and that my status is clear. I’ve also asked that I charge a weekly rate, only get paid when I work and have a clearly defined schedule of work. Also that we drop the options until they can offer me an employment contract.

Haven’t accepted yet as I’m waiting on another offer but I’m trying to look at this positively - after a tulip year work-wise it’s an opportunity to bolster the company reserves by £30k or so before going perm and doing the MVL. One last gig!

[jamesbrown]

I really don’t see how this could be inside IR35 given the far more clearcut AB5 rule in CA and the difficulty in enforcing SDC, in practice, but you should get it reviewed.

I also don’t really see the problem with the DPNI scheme. It isn’t the CA company that manages this, it’s you. The advantage is employment without ErNI and also no problem w/r to MVL.

Still, it sounds like you’re going the contract route to begin with. Best of luck. You may want to purchase some forward contracts for GBP in USD to reduce currency risk. They may ask for a W8-BEN-E. Insurance should be simple with UK jurisdiction and governing law of E&W.

[Old Greg]

So, some positive news. They do intend to move all contractors to employment through an employer of record service (remote.com) but in the meantime I’d have to be on contract potentially up to 6 months.

The contract they have sent me is actually very good, has clearly been written with IR35 in mind, is under England and Wales jurisdiction and contains an unfettered RoS clause - it only stipulates that they are notified and that the sub is qualified.

Ticks all the boxes, I’ve told them that we can treat it like a contract to perm and that while I’m on contract I need to be treated as such and that my status is clear. I’ve also asked that I charge a weekly rate, only get paid when I work and have a clearly defined schedule of work. Also that we drop the options until they can offer me an employment contract.

Haven’t accepted yet as I’m waiting on another offer but I’m trying to look at this positively - after a tulip year work-wise it’s an opportunity to bolster the company reserves by £30k or so before going perm and doing the MVL. One last gig!

Congrats. How are you going to work the share options? Will YourCo have them rather than you? Or will you wait 6 months?

[SuperLooper]

If you think you might have to travel to the USA for work (eventually!), this might also affect how you structure your relationship. You might want to think about what you'd say to the CBP officer when they ask about the purpose of your trip to the USA. Turning up to "do some work" for an American company, if you don't have the correct visa, is a non-starter. And I'm not an expert but I don't know how they would sponsor you for a visa if you're working via some intermediary.

If you're contracting through your own Ltd, it's much easier to present yourself as travelling for "meetings with clients" without any visa hassles.

[TheCyclingProgrammer]

Congrats. How are you going to work the share options? Will YourCo have them rather than you? Or will you wait 6 months?

I’ve suggested we hold off on options until they can offer the perm role. It may affect the strike price but hey ho.