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Mauro
19th March 2015, 19:54
Hi members,

I'm Mauro from Napoli, living with wife and baby boy in England. My wife is British and I moved here to Englnd in 2007.

Worked for accenture in both Italy and London before becoming a contractor.

I have some queries about my current situation with contract. Is not very clear where to post.

Mauro.

cojak
19th March 2015, 21:30
Hi Mauro, welcome to CUK.

Post your questions in this forum.

We can also help you with your English.

Mauro
20th March 2015, 09:21
Thank you cojak. I am a bit worried about my present situation in terms of whether I am doing it legally or not. As said earlier I'm from Italy originally (wife is British) but I am also a permanent resident in Britain. Sorry my English is not perfect, though I studied at University in English :--)

I will soon set up my limited company in Britain or go through umbrella but I have a bit of worry about my current situation. It might be completely normal/legal, but I thought I will check before I assume anymore.

Just to give a quick background, I have been contracting in England since 2013 January mainly in SAP functional areas of MM. I have a good friend in Britain (he is British) who has his own limited company for 15 years and he also employs consultants (similar like Accenture but a much smaller limited company). In the initial days I did not have good idea about Limited companies in UK (Still learning), So decided is ok to join his company as an employee with a few shares. He pays my Income tax and National insurance to HMRC on a monthly basis just like he does it for all the other employees of the company and I get payslips every month. He doesn't of course do this free and charges 8% on my earnings. I have my earnings pot separate (virtually) in the company.

The current arrangement is that he pays me a basic salary around £1200 and the profits (from my own pot) as dividends and bonus on which I pay full tax through the accountant to HMRC. I pay personal tax only on earnings over 40,000 pounds. To be honest, the accountant does all my tax returns after I verify and confirm my earnings.

I have fortunately read through about MSCs a couple of days ago and I am quite worried whether I am doing something illegal in this country. Spoke to my friend and also the qualified company accountant yesterday and they say is not illegal what we are doing. He is happy to give me a cheque for my money (from my pot) if I would like to move on from his company.

I have decided to set up my own company (after learning properly how the whole system works. Won't do the same mistake again without reading) or go with an Umbrella company after April as this current contract ends then. However I have a few questions for worst case scenario:

- Is what I'm doing illegal?

- Is there anything I can do to make sure that HMRC doesn't view what I am doing as illegal? Corrective measures, i meant.

- Or am I ok in the sense that I am a permanent employee of the limited company . The company pays tax on dividends and I pay personal tax on them too. All legal and happy.

- My worry is about the past 2 years and I would like to settle any bills with HMRC if I have done something wrong in ignorance.?

Sorry, the issue is a bit long. I think I learnt my lesson here and would in future do a lot more reading and understanding of the England tax system before I decide to continue contracting.

Grazie,

Mauro.

petergriffin
20th March 2015, 12:40
We can also help you with your English.
I don't think he'll post again after that.

Mauro
21st March 2015, 13:00
thank you. I can see my post now.

Mauro.

northernladuk
21st March 2015, 13:41
TL;DR



Sorry, the issue is a bit long. I think I learnt my lesson here and would in future do a lot more reading and understanding of the England tax system before I decide to continue contracting.
.

That's a good idea.

cojak
21st March 2015, 14:42
You are welcome here at any time Mauro.

Good luck for the future.

northernladuk
21st March 2015, 16:37
I will soon set up my limited company in Britain or go through umbrella but I have a bit of worry about my current situation. It might be completely normal/legal, but I thought I will check before I assume anymore.

Just to give a quick background, I have been contracting in England since 2013 January mainly in SAP functional areas of MM. I have a good friend in Britain (he is British) who has his own limited company for 15 years and he also employs consultants (similar like Accenture but a much smaller limited company). In the initial days I did not have good idea about Limited companies in UK (Still learning), So decided is ok to join his company as an employee with a few shares. He pays my Income tax and National insurance to HMRC on a monthly basis just like he does it for all the other employees of the company and I get payslips every month. He doesn't of course do this free and charges 8% on my earnings. I have my earnings pot separate (virtually) in the company.

The current arrangement is that he pays me a basic salary around £1200 and the profits (from my own pot) as dividends and bonus on which I pay full tax through the accountant to HMRC. I pay personal tax only on earnings over 40,000 pounds. To be honest, the accountant does all my tax returns after I verify and confirm my earnings.

It's good to be away from this situation. Money and friendship don't mix and it's a very complicated messy affair. Better to be in charge of your own stuff.



I have fortunately read through about MSCs a couple of days ago and I am quite worried whether I am doing something illegal in this country. Spoke to my friend and also the qualified company accountant yesterday and they say is not illegal what we are doing. He is happy to give me a cheque for my money (from my pot) if I would like to move on from his company.

Sounds like your set up is fine. Take you money and set up your own business for sure.



I have decided to set up my own company (after learning properly how the whole system works. Won't do the same mistake again without reading) or go with an Umbrella company after April as this current contract ends then. However I have a few questions for worst case scenario:

- Is what I'm doing illegal?

Which bit? You setting your own company or going umbrella? Nothing illegal about that. Your cicumstances may prevent you from doing it for some reason, I don't know what but nothing illegal. I think you are worrying too much about what is illegal or not. Stop thinking in those terms and just look at what is possible. If you follow the paperwork they will will say yes or no. They won't let you get in to a situation where you are breaking the law if you are honest.



- Is there anything I can do to make sure that HMRC doesn't view what I am doing as illegal? Corrective measures, i meant.

Just get on with your company and deal with it when a problem occurs. Nothing you can do about it now really.



- Or am I ok in the sense that I am a permanent employee of the limited company . The company pays tax on dividends and I pay personal tax on them too. All legal and happy.

You need to understand Ltd Companies. You will be a director of it not an employee. This should become clear as you research it and follow the process. Just make sure you do the research rather than just worrying about if it is illegal or not.



- My worry is about the past 2 years and I would like to settle any bills with HMRC if I have done something wrong in ignorance.?

If you are so worried get an accountant to go through your books. Can't keep banging on about things being illegal. Do something about it or don't. Your decision.

Have to say, by the end of writing this and reading the word legal so many times I am thinking you are not approaching this right or with the right mindset. If you are so unsure then definitely go Umbrella for 6 months just to get a feeling for what you are doing and go through your learning curve. You can go LTD anytime after that. It won't be as tax efficient but you won't be losing a lot. Better than messing it up from day one. I think this would be a better route for you reading your posts.

Mauro
21st March 2015, 18:12
Dear Northernladuk,

Your time to reply to my long note is very much appreciated. I thank you very much :--)

Northernladuk says - Which bit? You setting your own company or going umbrella? Nothing illegal about that. Your cicumstances may prevent you from doing it for some reason, I don't know what but nothing illegal

Sorry I don’t think I explained it well. After reading the below link on MSC companies, I panicked that I am doing something which isn’t valid anymore.

Composite and Managed Service Companies (MSC) - CLOSED! (http://www.contractorumbrella.com/comp_msc_closed.html)

So I was worried that I am being a part of a MSC. And hence did not want to get into something illegal unknowingly.

Northernladuk says- If you are so worried get an accountant to go through your books. Can't keep banging on about things being illegal. Do something about it or don't. Your decision.


Yes, I fully agree. I spoke to the accountant of the company and she told me that the arrangement of me using my friend’s company for contracting is fine.

I will finish this contract in April and I will definitely sit and read a bit more about how the system works in this country. With a youthful family and a small baby, I would like to be moral with my dealings at work and completely honest and not put them at any risk.

Again, my regards and thanks to northernladuk and of course to cojka for approving my long post. Regards to all the links. My next task is to understand the whole setup before my next contract :--)

Grazie mille,
Mauro.

northernladuk
21st March 2015, 19:06
Good luck.. Just make sure you have a good warchest though. This is the pot of money you have to one side that you can use when you are out of contract. Unless you are particularly niche or willing to travel and stay away it's likely you will spend some time out of work between contracts.

Mauro
24th September 2015, 07:42
I made decision to set up own company. Read a lot of link on this website and decided.

Following is my checklist. Not cheap but is ok to be safe.

- planning to use SJD accountants for company set up and accountant
- QDOS insurance with there IR35 included - thanks to all posters for scaring me on IR35. Understand it better now.:)
- bank HSBC
- IPSE plus insurance - think better to spend 300 GBP instead to have sleepless nights.
- IR35 contract reviews - QDOS (added in the insurance deal)

Please let me know if this looks good.

northernladuk - yes I have put a pot of money aside for emergency. Many thanks to your advice.
Grazie
Mauro

SueEllen
24th September 2015, 18:49
Beware that HSBC may not accept you so have a list of banks that you can try to get an account with e.g. Metrobank if you are in the SE.