Commision on a Contract

**kingcook** · 16 February 2013, 15:19

Originally posted by Geekman View Post

Dear all,

Sorry, asking a rather delicate question here -
I am likely to get a contract (will be outside IR 35) however the person who is offering me the contract is an employee of the firm and the person is asking for a 20% commission on the earnings, so I will get 80%. Is this something done elsewhere? (I would have thought so). What's the best way of doing it so there is minimal risk, from legal, HMRC and the firm point of view, a few options could be:

1> The person's spouse (not working) could become a share holder/employee of the limited company and gets 20% worth of salary and dividend

2> Limited company is formed by only me. The other person's spouse sets up another limited company and my company pays some sort of expenses (website maintenance, training etc) to the spouse's company. But the expense amount being high (about £20,000 a year), I guess could cause troubles from HMRC.

Please help me if this is too risky and I should just not go down this route or this is being done in the market and one of the above or any other way is a way to do that?

I would be grateful for your quick response. Many thanks in advance!

Regards,
Geekman

20% commision?! That sounds a lot. You'll be working 1 day every week (assuming you work a full 5 day week) to pay this person. It's not like the person is going to pay you before any monies from the client has been received.

I really would negotiate a better rate, but anyhow, i'd just pay it as commision from your company accounts.

Is this persons employer (your client-to-be) happy with this arrangement?

**VectraMan** · 16 February 2013, 16:17

Indeed. It's hard to believe any company would be happy with their employees taking a personal cut of any kind of deal like this. It almost sounds like bribery.

20% does sound a little high, but that's up to you. It could still be worth it over not getting the job at all. However I don't see why you're jumping through hoops to help this bloke out. If he fancies himself an agent, he really should be sorting out his own legal and tax affairs, and you certainly shouldn't be pretending the money is for something other than what it is.

**Wanderer** · 16 February 2013, 17:03

Originally posted by Geekman View Post

I am likely to get a contract (will be outside IR 35) however the person who is offering me the contract is an employee of the firm and the person is asking for a 20% commission on the earnings, so I will get 80%. Is this something done elsewhere?

If the commission payment to the person has been agreed with the person's employer then that's fine.

If it's supposed to be a private arrangement then it's completely unacceptable and leaves you both open to prosecution under the Bribery Act and given up to 10 years imprisonment and an unlimited fine.

20% is far too much commission too.

**mudskipper** · 16 February 2013, 18:14

Originally posted by Wanderer View Post

If the commission payment to the person has been agreed with the person's employer then that's fine.

If it's supposed to be a private arrangement then it's completely unacceptable and leaves you both open to prosecution under the Bribery Act and given up to 10 years imprisonment and an unlimited fine.

20% is far too much commission too.

Agree, the norm would be to buy him a pint.

**SimonMac** · 16 February 2013, 18:31

To be honest most of these situations is where the end client has paid their employee a referral fee, which is taxed as any other income.

If you are saying the only way the person offering you the job is if you give him money that is bribery, no two ways about it, raise it with the Clients HR, take the contract from them and watch the employee collect his P45, anything other than that I would keep well away.

**kingcook** · 16 February 2013, 18:35

Originally posted by VectraMan View Post

However I don't see why you're jumping through hoops to help this bloke out. If he fancies himself an agent, he really should be sorting out his own legal and tax affairs, and you certainly shouldn't be pretending the money is for something other than what it is.

Good advice. The other person's tax affairs are not your problem. Don't piss around making them or their spouse a shareholder of your company. If you think you're doing a favour for this person, consider the "favour" they are doing by charging an extortionate rate of commision.

**Contreras** · 17 February 2013, 00:23

Originally posted by Geekman View Post

Dear all,

Sorry, asking a rather delicate question here -
I am likely to get a contract (will be outside IR 35) however the person who is offering me the contract is an employee of the firm and the person is asking for a 20% commission on the earnings, so I will get 80%. Is this something done elsewhere? (I would have thought so). What's the best way of doing it so there is minimal risk, from legal, HMRC and the firm point of view, a few options could be:

1> The person's spouse (not working) could become a share holder/employee of the limited company and gets 20% worth of salary and dividend

2> Limited company is formed by only me. The other person's spouse sets up another limited company and my company pays some sort of expenses (website maintenance, training etc) to the spouse's company. But the expense amount being high (about £20,000 a year), I guess could cause troubles from HMRC.

Please help me if this is too risky and I should just not go down this route or this is being done in the market and one of the above or any other way is a way to do that?

I would be grateful for your quick response. Many thanks in advance!

Regards,
Geekman

It seems unlikely that the commission arrangement has been sanctioned by the company.

If this was in any way legal then you wouldn't need to invent artificial arrangements to 'launder' the money. It would just be entered in the books as Commission and your cohort would take care of their own tax affairs.

That means what you are considering together is conspiracy to defraud. You would benefit from the contract earnings so, whether you intended it or not, you are part of the conspiracy (already).

Think about this - conspiracy to defraud and money laundering are covered by the Proceeds of Crime Act. Apart from a criminal record, and a possible jail term, you could see _all_ your assets seized until you were able to prove the assets were earned lawfully.

**ensignia** · 17 February 2013, 00:55

20% commission? I would, in no uncertain terms, tell them to **** off.

**DaveB** · 17 February 2013, 10:24

Originally posted by Geekman View Post

Dear all,

Sorry, asking a rather delicate question here -
I am likely to get a contract (will be outside IR 35) however the person who is offering me the contract is an employee of the firm and the person is asking for a 20% commission on the earnings, so I will get 80%. Is this something done elsewhere? (I would have thought so). What's the best way of doing it so there is minimal risk, from legal, HMRC and the firm point of view, a few options could be:

1> The person's spouse (not working) could become a share holder/employee of the limited company and gets 20% worth of salary and dividend

2> Limited company is formed by only me. The other person's spouse sets up another limited company and my company pays some sort of expenses (website maintenance, training etc) to the spouse's company. But the expense amount being high (about £20,000 a year), I guess could cause troubles from HMRC.

Please help me if this is too risky and I should just not go down this route or this is being done in the market and one of the above or any other way is a way to do that?

I would be grateful for your quick response. Many thanks in advance!

Regards,
Geekman

No. No, no, no. This is NOT normal in the contracting market, it does not happen elsewhere (not in public anyway).

As other have said this is basically him asking for a kickback on the contract. This is illegal. It will land both you and him in deep tulip if you get caught out. Prison time on conviction deep.

Do you have anything concrete in terms of evidence or has this all been off the record discussions?

I would shop him to his corporate HR and Legal people and walk away. Doing anything else is going to get you tarred with the same brush.

Commision on a Contract