1 year rule for contractors. Fact or opinion?

[ahalgryn]

I have a burning question for any gurus on limited company accounting.

Is there a rule that says a contractor who uses a limited company can only use it for 1 year and then they have to either move on, close or go PAYE? Surely such a rule would entice contractors to open and close companies every year and amount to avoidance?

I was chatting to a partner at another firm last week and he seemed adamant such a rule exists. I'm not so sure?

Thoughts?

[yamamma]

Is there a rule that says a contractor who uses a limited company can only use it for 1 year and then they have to either move on, close or go PAYE?

short answer - NO. The partner has his/her facts wrong.

[northernladuk]

Some clients have a 1 year rule about keeping contractors on, one that springs to mind was Barclays who had a 52 week rule. This was something to do with their policies and was nothing to do with the amount of time you run your LTD. Just make sure he isn't getting mixed up with client policies and your LTD.

There could be a whole host of other limitations he is speaking about. If you are not from the UK maybe there is something around Visa's or tax/vat for you but I don't know about that.

Reading the exact wording of your post the answer is there is no limit for running an LTD but make sure you are not at crossed purposes with your 'parner'

[jmo21]

He has no idea what he's talking about.

Sounds like it could be some kind of mix up with a companies rules over retaining contractors like NLUK says

[ahalgryn]

Thanks!

Thank you guys for your comments. Glad to see I'm not the only one that thought this was a bit obscure.

[TykeMerc]

He has no idea what he's talking about.

Sounds like it could be some kind of mix up with a companies rules over retaining contractors like NLUK says

Absolutely.

If nothing else I'd be willing to bet that at least 75% of the Ltd Co contractors on here have companies exceeding 12 months old, me included.
Apart from some clients having oddball internal rules there's no truth or sense to it.

[Tanya@SC Lee Accountant Ltd]

We have customers working for a London council for more than 4 years.

Absolutely.

If nothing else I'd be willing to bet that at least 75% of the Ltd Co contractors on here have companies exceeding 12 months old, me included.
Apart from some clients having oddball internal rules there's no truth or sense to it.

[TestMangler]

Absolutely.

If nothing else I'd be willing to bet that at least 75% of the Ltd Co contractors on here have companies exceeding 12 months old, me included.
Apart from some clients having oddball internal rules there's no truth or sense to it.

What he said ^^^

I've had my Ltd for 17 years.

Some clients do have odball internal rules. In recent years I've come across Barclays and the 52 week rule, HBoS had a 'two year' rule for contractors because a 'lawyer' told them that it 'stopped them becoming employees' and I worked at two smaller companies whos legal depts told them that contractors had to leave for two weeks every twelve !! none of this has anything to do with your Ltd though.

[Tanya@SC Lee Accountant Ltd]

some companies may not understand the real meaning of IR35 to set this kind of rule

What he said ^^^

I've had my Ltd for 17 years.

Some clients do have odball internal rules. In recent years I've come across Barclays and the 52 week rule, HBoS had a 'two year' rule for contractors because a 'lawyer' told them that it 'stopped them becoming employees' and I worked at two smaller companies whos legal depts told them that contractors had to leave for two weeks every twelve !! none of this has anything to do with your Ltd though.

[TestMangler]

some companies may not understand the real meaning of IR35 to set this kind of rule

I think we can file that in the 'NO SH1T, SHERLOCK' drawer.............