Ultra-low-value freelance contracts through Ltd company?

[StevenR]

I'm interested in experimenting with some of the online freelancing work available (e.g. rentacoder.com, elance.com). I'm aware this isn't going to pay particularly well, but I think it might be a useful way to sharpen some skills I'm developing which aren't relevant to my main "full time" contract. Nothing like solving real-world problems to gain experience and so forth, and if I get a few beer tokens out of it then that's a bonus.

The money is going to be negligible so I don't care about the tax advantages of putting this work through my Ltd company. The limited liability is a potential benefit, though one I could probably live without. So the simple thing to do would be to just do this in my own name and not complicate things with the Ltd at all. But there's a snag.

While my "full time" contract explicitly allows work for other clients, I am effectively prohibited from performing any paid work for anyone other than my employer - i.e. my Ltd company. So if I do work in my own name, without going through the Ltd company, I would be in breach of this condition.

So, has anyone had any experience of working through a Ltd company with any of these websites? I am thinking in particular:
- how will I get paid? Will they be willing to pay into my business bank account? If not, is it an accounting problem if the money goes into my personal Paypal account (or whatever) and I then "forward that on" to the business account?
- is this likely to cause my accountant to have kittens? I'm charged a (pretty steep) fixed monthly fee, not per contract or anything, but if I might end up having ten micro-valued contracts (I don't know, call it $5 each) in a single month, I could see how that might be regarded as taking the **** a bit in terms of the paperwork generated. (I'd also feel a bit of a fool putting something that trivial through the business, but as I say, it's that or nothing at all.)

Any thoughts appreciated, including any recommendations for or against particular freelance websites.

[Crossroads]

Why do you think you are "effectively prohibited from performing any paid work for anyone other than my employer".

Also, work out the most tax efficient solution... which is probably through your Ltd.

[barrydidit]

I'd send that as an e-mail to your accountant to find out their views. Can't see why it would generate any additional paperwork though - there might be for you in the book keeping side of things, but not in terms of statutory reporting/taxation/payroll on the accountants side.

I'm confused too as to why your LTD would prevent you doing other paid work. If for some reason it did, what would be the implications? Do you have fellow directors who would take a dim view of this and try to sue you?

[tractor]

...

Also many contracts have clauses that prohibit you from providing services to the competition. If yours has such a clause you would need to ensure that the end user of any services or work is not a competitor of your contracted client.

[VectraMan]

I am effectively prohibited from performing any paid work for anyone other than my employer - i.e. my Ltd company. So if I do work in my own name, without going through the Ltd company, I would be in breach of this condition.

So your contract with your company forbids you from doing any other work? So are you saying that if you find out that you have been in breach of this condition, you are going to start disciplinary proceedings against yourself and possibly take legal action against yourself to recover any losses to you caused by your disregard of the contract you have with yourself?

I'd put it through the company as that way the tax is already taken care of, whereas if you do it personally you're going to have to worry about how you pay the extra tax on the tiny amount generated. I'd also not bother. Whenever I'd looked at those things I've always come to the conclusion that there must be something better and potentially more profitable I can do with the time. I.e. Plan B / learn something new / work in McDonalds.

[tractor]

...

So your contract with your company forbids you from doing any other work? So are you saying that if you find out that you have been in breach of this condition, you are going to start disciplinary proceedings against yourself and possibly take legal action against yourself to recover any losses to you caused by your disregard of the contract you have with yourself?

I'd put it through the company as that way the tax is already taken care of, whereas if you do it personally you're going to have to worry about how you pay the extra tax on the tiny amount generated. I'd also not bother. Whenever I'd looked at those things I've always come to the conclusion that there must be something better and potentially more profitable I can do with the time. I.e. Plan B / learn something new / work in McDonalds.

To be fair, many contract clauses are preceded by "The company warrants that the consultant will...." opening up the company to legal action if the consultant does not comply.

I think that is the issue here but not having seen the contract, we can only guess...

[TheCyclingProgrammer]

I would put it through the company. If you don't then you will also need to register as self employed which means more NIC and more paperwork when you do your tax return.

Open a business paypal account if you need to get paid via PayPal. Avoid mixing business money with personal money wherever possible.

[StevenR]

Thanks guys

Looks like opening a business account with Paypal is free, so I might speak to my accountants and see what they think. Does make sense that it doesn't really create that much extra work from their point of view.

It's not strictly the contract which prevents me doing work for anyone other than my own Ltd, nor is it any co-directors. I had to sign an agreement with the end client that I would seek their permission for any outside business interests (my own Ltd doesn't count). So strictly speaking I am not prohibited, but it would be a faff to ask permission (especially if I had to do it for each micro-contract). Yes, that is a completely pointless rule, but there you go. If doing this outside the Ltd would require me to go through all the self-employed tax hoops then I guess I wouldn't be doing that *anyway* regardless of this agreement; I'd assumed it would be a trivial extra entry on my online tax return.

[TheCyclingProgrammer]

I guess I've got to ask. What business is it of your client what you do outside of YourCo? You aren't their employee. I can't see how they could possibly enforce it as it seems entirely unreasonable. Their contract is with YourCo, not you.

[Contreras]

I'd put it through the company. If nothing else for the limited liability and separation from personal affairs.

Doing work on the side cash in hand, so to speak, could raise suspicions with Hector. Not to mention other authorities investigating dodgy affairs that you could unwittingly become associated with via the site.

As for complications, some services will now be outside the scope of VAT. I can't see this being a problem for the accountant though.

Having a Paypal account for business is fine. I seem to recall there were some issues setting up a business account and I ended up with a personal account in the company's name. If the balance is zero at year end then it can probably be conveniently ignored.

If your main contract restricts YourCo from taking on other business then that would be a concern (to be seen as an employee) unless qualified as restricting only that which would compromise ability to service the main contract. And if the rentacoder work would potentially compromise the main contract then clearly it should be paying more than $50/mo.