PDA

View Full Version : How many contractors does it need to be a business rather than a PSC?



b r
26th November 2016, 18:04
Both myself and my wife contract through the same Limited company, and have done for +10 years. While most of her contracts have been through agencies, mine are usually direct.

Her current contract is with the Public Sector, thru an agency - so there is concern that they'll from April pay her PAYE. But if she was working for a Professional Services firm (as a contractor) I'm pretty sure they'd be paid the day rate, and then pay her her day rate.

So how many people do we need working for us to be classed as a business, and paid a day rate?

Or is it a too simple view?

northernladuk
26th November 2016, 18:56
Too simplistic is an understatement. She is still selling her personal services. The company behind is irrelevant. It's how she's engaged. She's a bum on seat through an agency and that's that.

b r
30th November 2016, 10:00
Ok, I understand that, but what is it that Professional Services firms do different (or are seen as different) vs ourselves doing the same?

Having worked as a contractor for a PS firm engaged on an end-client project the only thing different (I assume, as I didn't see it) is either the contract or how the end-client Engager sees it (especially under the new rules).

Thoughts?

northernladuk
30th November 2016, 10:03
You are missing some much it's going to take a long post to try and bring you up to speed.

Try reading this first. It will tell you what you are for starters.

http://www.contractoruk.com/limited_companies/a_guide_to_personal_service_companies.html

MrMarkyMark
30th November 2016, 10:06
But if she was working for a Professional Services firm (as a contractor) I'm pretty sure they'd be paid the day rate, and then pay her her day rate.


No, completely incorrect.

Consultancies are caught too, in that if they take on contractors the contract will still be IR35 caught.

northernladuk
30th November 2016, 10:06
Very very briefly.. The big consultancies offer a packaged service. Deliver X for Y cost. The staffing, how they do it isn't really a concern of the client. You are just a bum on a seat paid per day. Lots more to it than that but it's a start.

jonnyboy
30th November 2016, 11:24
Very very briefly.. The big consultancies offer a packaged service. Deliver X for Y cost. The staffing, how they do it isn't really a concern of the client. You are just a bum on a seat paid per day. Lots more to it than that but it's a start.

Are you sure - I asked (a few times) if we changed model from Bum on Seat day rate to "go away, design and deliver x, install it, and at the end get paid y" it would skip all of these and nobody wanted to say that it would be outside IR35. This has been the confusion for me all along - what is the difference between...

1) Big software Co, comes in, develops x at a cost of Y using their staff - are they in or out of IR35?
2) Medium SOftware co, sells of the shelf product, but as part of that, they put 20 consultants on site to deploy it, train the users, customise it - are they in or out of IR35?
3) One man band PSC co provides service x, at a day rate of y - clearly a bum on seat - clearly inside IR35
but
4) On man band PSC co provides a development service, goes away, develops product Y, installs it, charges £z pounds - inside or outside IR35? If inside, why is this different from (1) and (2)?

MrMarkyMark
30th November 2016, 11:28
Are you sure - I asked (a few times) if we changed model from Bum on Seat day rate to "go away, design and deliver x, install it, and at the end get paid y" it would skip all of these and nobody wanted to say that it would be outside IR35. This has been the confusion for me all along - what is the difference between...

1) Big software Co, comes in, develops x at a cost of Y using their staff - are they in or out of IR35?
2) Medium SOftware co, sells of the shelf product, but as part of that, they put 20 consultants on site to deploy it, train the users, customise it - are they in or out of IR35?
3) One man band PSC co provides service x, at a day rate of y - clearly a bum on seat - clearly inside IR35
but
4) On man band PSC co provides a development service, goes away, develops product Y, installs it, charges £z pounds - inside or outside IR35? If inside, why is this different from (1) and (2)?

What are you on about, if the consultants are Perms, there is nothing to consider on the IR35 front :confused:.
If that consultancy hires contractors they will be IR35 caught, at least that's what the regulations seem to say.

eek
30th November 2016, 11:33
The test appears to be responsibility for delivery.

Fixed price - responsible for what is finally delivered - outside IR35
Time and materials - responsible for what is delivered - probably outside IR35
Bum on seat with someone else responsible for the entire project - inside IR35

jonnyboy
30th November 2016, 11:38
Yep - that is my thought process and understanding of the proposed regs...

Deliver product X for £y and we (as developers decide/quote how long and how) = outside IR35.. on the basis that other than the requirement (we need an X that can do Y), there is no SCD?

Yes/No?

northernladuk
30th November 2016, 11:40
Are you sure - I asked (a few times) if we changed model from Bum on Seat day rate to "go away, design and deliver x, install it, and at the end get paid y" it would skip all of these and nobody wanted to say that it would be outside IR35. This has been the confusion for me all along - what is the difference between...

1) Big software Co, comes in, develops x at a cost of Y using their staff - are they in or out of IR35?
2) Medium SOftware co, sells of the shelf product, but as part of that, they put 20 consultants on site to deploy it, train the users, customise it - are they in or out of IR35?
3) One man band PSC co provides service x, at a day rate of y - clearly a bum on seat - clearly inside IR35
but
4) On man band PSC co provides a development service, goes away, develops product Y, installs it, charges £z pounds - inside or outside IR35? If inside, why is this different from (1) and (2)?

Firstly... You need to understand PS engagements. All this hypothesising is pointless if you cannot get on GCloud and offer a service. The routes in to PS are very rigid and complex so it's not point worry about what could be. You need to look in to what can be. This is part of the problem the OP is not getting. It doesn't matter what he thinks he is or wants to be, it depends on how the PS is going to engage him. If he wants to offer a full managed solution he's going to have to get on GCloud which won't happen as they've tightened it up. The other ways (and I don't know them all that well) are CL1 - 4, NMNC and another one I can't remember. But it's all down to the PS client and under which framework they offer the gig under.

IMO I wouldn't bother trying to unpick the model, you've only got certain options and becoming a managed supplier to fill bum on seat roles isn't one of them for the vast majority. Even if you do it's caught as per the example in the legislation.

All that and on top of that is the fact it's just too early trying to fix it all in one post. We haven't even seen the bleeding tool yet so why is everyone trying to massage their models to fit when we don't even know how the rules will be applied?

EDIT : Oh and you've not got your options right either which doesn't help. I don't agree with Option 3 at all without going in to the others.

malvolio
30th November 2016, 11:40
The test appears to be responsibility for delivery.

Fixed price - responsible for what is finally delivered - outside IR35
Time and materials - responsible for what is delivered - probably outside IR35
Bum on seat with someone else responsible for the entire project - inside IR35
So what you are saying, in effect, is that HMRC does not believe the knowledge-based service economy actually exists. You're in business if you can deliver a "thing" but not if you only deliver something intangible, like a capital saving or a strategic goal

eek
30th November 2016, 11:41
Yep - that is my thought process and understanding of the proposed regs...

Deliver product X for £y and we (as developers decide/quote how long and how) = outside IR35.. on the basis that other than the requirement (we need an X that can do Y), there is no SCD?

Yes/No?

Yep - I think that's very much it...

malvolio
30th November 2016, 11:42
Yep - I think that's very much it...
To be fair that has always been the case - the hard part being to get such a gig in the first place.

eek
30th November 2016, 11:46
So what you are saying, in effect, is that HMRC does not believe the knowledge-based service economy actually exists. You're in business if you can deliver a "thing" but not if you only deliver something intangible, like a capital saving or a strategic goal

Look at CL1 and the other schemes Consultancy 1 and digital outcomes and you can see their logic.

But I think your question is covered by Consultancy one which would allow both the capital saving or a strategic goal to be made via a delivered document but that has to be explicitly sought in the first place.

The first thing we are going to see is departments having to be a lot more clear in what they are trying to achieve and picking the appropriate means of doing so. Ideally this may result in departments actually outsourcing entire projects to small consultancies rather than trying to deliver in house (yes I know I'm expecting pigs to fly).

jonnyboy
30th November 2016, 12:03
What are you on about, if the consultants are Perms, there is nothing to consider on the IR35 front :confused:.
If that consultancy hires contractors they will be IR35 caught, at least that's what the regulations seem to say.

I am on about example 3 from the document...

A consultancy PLC contracts to provide on-site consultancy services at the Ministry. This
consists of ten information management consultants to work in the Ministry’s policy unit for up
to six months, as well as some software and online support. The supply of ten staff in this
contract would be within the scope of the proposed measure. The consultancy would need to
use the online tool and consider the new rules.

MrMarkyMark
30th November 2016, 12:09
I am on about example 3 from the document...

A consultancy PLC contracts to provide on-site consultancy services at the Ministry. This
consists of ten information management consultants to work in the Ministry’s policy unit for up
to six months, as well as some software and online support. The supply of ten staff in this
contract would be within the scope of the proposed measure. The consultancy would need to
use the online tool and consider the new rules.

Yeh, but not if they are perm for the consultancy.

If the consultancy wishes to body shop contractors in, then they have to consider the new rules.

RonBW
30th November 2016, 12:32
1) Big software Co, comes in, develops x at a cost of Y using their staff - are they in or out of IR35?
2) Medium SOftware co, sells of the shelf product, but as part of that, they put 20 consultants on site to deploy it, train the users, customise it - are they in or out of IR35?
3) One man band PSC co provides service x, at a day rate of y - clearly a bum on seat - clearly inside IR35
but
4) On man band PSC co provides a development service, goes away, develops product Y, installs it, charges £z pounds - inside or outside IR35? If inside, why is this different from (1) and (2)?

1 - outside. Individuals don't own 5 per cent of the company.
2 - outside. Individuals probably don't own 5 per cent.

IR35 cannot apply in those circumstances, regardless of how the engagement works.

MrMarkyMark
30th November 2016, 12:34
1 - outside. Individuals don't own 5 per cent of the company.
2 - outside. Individuals probably don't own 5 per cent.

IR35 cannot apply in those circumstances, regardless of how the engagement works.

Correct they are consultant perms so IR35 is completely irrelevant, any seasoned contractor should know that, IMO.

eek
30th November 2016, 12:37
Are you sure - I asked (a few times) if we changed model from Bum on Seat day rate to "go away, design and deliver x, install it, and at the end get paid y" it would skip all of these and nobody wanted to say that it would be outside IR35. This has been the confusion for me all along - what is the difference between...

1) Big software Co, comes in, develops x at a cost of Y using their staff - are they in or out of IR35?
2) Medium SOftware co, sells of the shelf product, but as part of that, they put 20 consultants on site to deploy it, train the users, customise it - are they in or out of IR35?
3) One man band PSC co provides service x, at a day rate of y - clearly a bum on seat - clearly inside IR35
but
4) On man band PSC co provides a development service, goes away, develops product Y, installs it, charges £z pounds - inside or outside IR35? If inside, why is this different from (1) and (2)?

1. outside using staff so IR35 isn't an issue
2. Covered by example 3 in the consultation. Contractors bought in as part of those 20 consultants may or may not be outside depending on who is responsible for the contract as a whole (may be inside, may be outside it will depend on the amount of risk the consultancy is willing to take).
3. Bum on seat inside
4. Outside assuming its fixed price contract otherwise will depend on the amount of risk the client is willing to accept.

fidot
30th November 2016, 13:33
21 people each holding less than 5% cannot be caught by IR35

b r
30th November 2016, 13:38
Ok, so you're saying that ANY company supplying staff into the PS, where some of these staff are contractors will/may have to take them on on a PAYE basis. Hmm, be good to do a FOI request in a years time to see the compliance on that :-)

As it is, my OH is looking back into the private sector for her next contract, senior PM with FS experience so hopefully she'll be fine.

malvolio
30th November 2016, 13:54
21 people each holding less than 5% cannot be caught by IR35
Ramsay aside, meaning the intermediary company will be disregarded, IR35 is on a per contract basis and will look at the individual engagement. You can still be inside IR35 then, meaning your 20 partners will be paying your taxes in proportion to their shareholding. Can't see that happening somehow...

But you miss the point. Any engagement with a PS body that exhibits any degree of control over the worker will be deemed to be inside IR35 anyway. You may not be inside, in fact, but getting the imposed taxes back is your problem.

northernladuk
30th November 2016, 13:57
Ok, so you're saying that ANY company supplying staff into the PS, where some of these staff are contractors will/may have to take them on on a PAYE basis. Hmm, be good to do a FOI request in a years time to see the compliance on that :-)

As it is, my OH is looking back into the private sector for her next contract, senior PM with FS experience so hopefully she'll be fine.

She'll be more than fine. There will be tons and tons of roles for her....... Tax wise... Hmmmm

eek
30th November 2016, 14:00
Ok, so you're saying that ANY company supplying staff into the PS, where some of these staff are contractors will/may have to take them on on a PAYE basis. Hmm, be good to do a FOI request in a years time to see the compliance on that :-)

As it is, my OH is looking back into the private sector for her next contract, senior PM with FS experience so hopefully she'll be fine.

No what we are saying is that they may need to be paid via the convoluted scheme being created as if they are PAYE depending on the level of risk the company is willing / needs to take to get the skill set they need.

b r
1st December 2016, 08:48
There is also the issue that when Professional Services firms do work there is always 'hours/days' allocated to senior Managers and Partners (and the like), some who will be owners - will those elements also need to be PAYE?

northernladuk
1st December 2016, 10:16
Depends.

Are you trying to come to a conclusion that you can apply to yourself or are you just asking out of interest now?

b r
1st December 2016, 15:19
Curious now, I always like to see a level playing field, but know it rarely occurs :-)

northernladuk
1st December 2016, 15:30
Curious now, I always like to see a level playing field, but know it rarely occurs :-)

But you need to fully understand and appreciate the full model and how your question affects that. Just asking the odd question that doesn't relate to anything isn't going to help.

breaktwister
22nd February 2017, 11:40
1 - outside. Individuals don't own 5 per cent of the company.
2 - outside. Individuals probably don't own 5 per cent.



Can you elaborate or provide links to further info re: individuals owning 5% of the company?

m0n1k3r
22nd February 2017, 11:54
Can you elaborate or provide links to further info re: individuals owning 5% of the company?

Income Tax (Earnings and Pensions) Act 2003 (http://www.legislation.gov.uk/ukpga/2003/1/part/2/chapter/8)

See 51(4).

northernladuk
22nd February 2017, 11:55
Income Tax (Earnings and Pensions) Act 2003 (http://www.legislation.gov.uk/ukpga/2003/1/part/2/chapter/8)

See 51(4).

Why do I get the feeling we'll shortly be seeing a post where this is regurgitated incorrectly very soon.

breaktwister
22nd February 2017, 12:11
Why do I get the feeling we'll shortly be seeing a post where this is regurgitated incorrectly very soon.

Why do I get the feeling that everytime I post something, an idiot will pop up with some attempt at an insult which only serves to prove his idiocy.

RonBW
22nd February 2017, 12:24
Can you elaborate or provide links to further info re: individuals owning 5% of the company?

See page 8 of this guide: http://www.accountingweb.co.uk/sites/default/files/attachments/aw_ir35_Jan2015%20(6).pdf

HMRC guidance on whether you have a material interest can be found here (https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim20212).

breaktwister
22nd February 2017, 13:03
Any engagement with a PS body that exhibits any degree of control over the worker will be deemed to be inside IR35 anyway. You may not be inside, in fact, but getting the imposed taxes back is your problem.

From my understanding of the ITEPA 2003 it seems that many discussions are incorrectly simplifying what is meant by "inside IR35" focusing only on the elements at 49(1) "similar to an employee" etc while making an assumption that conditions as specified in 50 and 51 are satisfied (including material interest in the intermediary receiving payment).

I tend to agree with fidot on this, if you do not hold more than 5% interest or control of the intermediary company receiving payment then the earnings of that intermediary cannot be deemed to be employment earnings for income tax purposes which is a triggering condition in s61M(d)(I) of the Finance Bill 2017.

In short, if you do not own or control more than 5% of the company supplying services there is no legal right for any entity to make any "deemed employee" deductions from that companies earnings; and there would be no legal onus to provide your NI details to any party to enable such a deduction.

It seems that a company with 21 equal shareholders escapes any IR35 issues, although this might be extremely difficult to operate in practice. Dividend distribution would be a nightmare. But, at least "legitimate business expenses" could once again be offset before taxation. This structure has advantages for a group of contractors who wish to team up where T&S is not available under any other avenue. I am unsure if there are any laws, other than ITEPA or the Finance Bill, which step in to cover this gap and disallow such a structure?

northernladuk
22nd February 2017, 13:09
You mean like the IPSE Flc?

breaktwister
22nd February 2017, 13:29
You mean like the IPSE Flc?

First I've heard of that, I see the idea cropped up in 2014 or so, did it ever take off?

From a personal perspective, I don't care that much about having to take a hit on a payroll, but I need T&S to be deductible or most contract opportunities simply will not be viable for me (I live in a remote part of the UK, I won't be moving my family around with me and I want to get home every weekend). With no T&S I am royally screwed and will be forced to look for scraps or poorly paying permie roles in and around my home area. I am sure a lot of contractors will be left in this position, especially if they roll this nonsense out to the private sector.

northernladuk
22nd February 2017, 14:10
With no T&S I am royally screwed and will be forced to look for scraps or poorly paying permie roles in and around my home area. I am sure a lot of contractors will be left in this position, especially if they roll this nonsense out to the private sector.

I guess that would be somewhere in Wales would it?

breaktwister
22nd February 2017, 14:23
I guess that would be somewhere in Wales would it?

A 1-in-3 chance but NO!

2 choices left!

breaktwister
23rd February 2017, 11:42
You mean like the IPSE Flc?

I read the FLC thread on here from 2015 and it didn't actually say what the scheme was or provide any links to it. I guess it never took off.

Here is my idea: Something similar to an umbrella company where contractors team together to form a consultancy/services firm. No individual is allowed to own more than 5% of the firm. The firm handles invoicing etc and everyone is paid a basic minimal salary. Each contractors daily rate determines his percentage of ownership so that dividends can be paid proportionally. IR35 cannot be applied to these individuals regardless of "end-client SDC" as they do not meet the criteria of s51 ITEPA 2003. The firm can rightly bill out to the end-client or agency and expect to receive the full amount without the "deemed employee" deductions. Operating under this structure can be sold to end-clients as an "IR35 free" solution where they are not required to determine SDC.

The advantages of this structure over a typical umbrella company are obvious; the full range of business expenses can be deducted before tax. This structure would be particularly useful for contractors who need to stay away from home.

Disadvantages are likely to be a larger administrative burden, dealing with contractors who want to leave the group as an immediate replacement would need to be found to transfer the share ownership; potential legal complications or disputes if a contractor refuses to give up ownership or dies (meaning his shares will pass to his estate). This would need to all be accounted for in the legal contract between the share owners of the firm. I guess there will be other challenges that need to be ironed out.

I expect to be abused for this idea but I'll put it out for discussion anyway.

northernladuk
23rd February 2017, 11:49
I read the FLC thread on here from 2015 and it didn't actually say what the scheme was or provide any links to it. I guess it never took off.

Here is my idea: I'll just stop posting for awhile and not dilute a useful and highly topical thread with fanciful crap for awhile..

FTFY

MrMarkyMark
23rd February 2017, 11:51
I read the FLC thread on here from 2015 and it didn't actually say what the scheme was or provide any links to it. I guess it never took off.

Here is my idea: Something similar to an umbrella company where contractors team together to form a consultancy/services firm. No individual is allowed to own more than 5% of the firm. The firm handles invoicing etc and everyone is paid a basic minimal salary. Each contractors daily rate determines his percentage of ownership so that dividends can be paid proportionally. IR35 cannot be applied to these individuals regardless of "end-client SDC" as they do not meet the criteria of s51 ITEPA 2003. The firm can rightly bill out to the end-client or agency and expect to receive the full amount without the "deemed employee" deductions. Operating under this structure can be sold to end-clients as an "IR35 free" solution where they are not required to determine SDC.

The advantages of this structure over a typical umbrella company are obvious; the full range of business expenses can be deducted before tax. This structure would be particularly useful for contractors who need to stay away from home.

Disadvantages are likely to be a larger administrative burden, dealing with contractors who want to leave the group as an immediate replacement would need to be found to transfer the share ownership; potential legal complications or disputes if a contractor refuses to give up ownership or dies (meaning his shares will pass to his estate). This would need to all be accounted for in the legal contract between the share owners of the firm. I guess there will be other challenges that need to be ironed out.

I expect to be abused for this idea but I'll put it out for discussion anyway.


Tell you what, why don't you just go for it, then let us know how you get on.

:D

RonBW
23rd February 2017, 11:51
Disadvantages are likely to be a larger administrative burden, dealing with contractors who want to leave the group as an immediate replacement would need to be found to transfer the share ownership; potential legal complications or disputes if a contractor refuses to give up ownership or dies (meaning his shares will pass to his estate). This would need to all be accounted for in the legal contract between the share owners of the firm. I guess there will be other challenges that need to be ironed out.

Share ownership based on daily rate is never going to work out.

Let's assume that you start out with 20 contractors who all bill at £500 a day. Everyone owns 20% because that's optimal. Contractor 1 leaves his contract at the end of it, so now has a zero billing rate. Under your proposal, he has to do something with his shares because he is no longer billing. The rest of the company aren't interested in buying him out. What happens to the shares? 10 of the remaining 19 change their mind but the others don't - can the 10 buy the shares and then own more than 5%? The other 9 change their mind so now 19 want to buy him out, but he changes his mind and now refuses to sell. No-one can force him to sell, and he now has 5% of the company and does nothing to bring money in.

Contractor 2 gets a new contract and now charges £1000 a day. At the same time, contractor 3 gets a new contract and charges £400 a day. How does anyone force one individual to buy shares in the company and the other one to sell? What happens if one contractor gets a two day contract doing specialist work for £2000 a day - when and how does that get figured into the business? Contractor 10 decides she wants to take a 6 week break and does so - what happens to her shares during that time?

It's a ridiculous idea, trying to work around IR35. IR35 has been around for 17 years. If your idea was remotely workable, everyone would have done it - so why don't you talk to a company that works in the way you describe and see what their problems to date have been?

MrMarkyMark
23rd February 2017, 11:54
Share ownership based on daily rate is never going to work out.

Let's assume that you start out with 20 contractors who all bill at £500 a day. Everyone owns 20% because that's optimal. Contractor 1 leaves his contract at the end of it, so now has a zero billing rate. Under your proposal, he has to do something with his shares because he is no longer billing. The rest of the company aren't interested in buying him out. What happens to the shares? 10 of the remaining 19 change their mind but the others don't - can the 10 buy the shares and then own more than 5%? The other 9 change their mind so now 19 want to buy him out, but he changes his mind and now refuses to sell. No-one can force him to sell, and he now has 5% of the company and does nothing to bring money in.

Contractor 2 gets a new contract and now charges £1000 a day. At the same time, contractor 3 gets a new contract and charges £400 a day. How does anyone force one individual to buy shares in the company and the other one to sell? What happens if one contractor gets a two day contract doing specialist work for £2000 a day - when and how does that get figured into the business? Contractor 10 decides she wants to take a 6 week break and does so - what happens to her shares during that time?

It's a ridiculous idea, trying to work around IR35. IR35 has been around for 17 years. If your idea was remotely workable, everyone would have done it - so why don't you talk to a company that works in the way you describe and see what their problems to date have been?

Because he's having a few Stevie moments...

https://i1.imgiz.com/data/artist3/stevie-wonder-14840560921.jpg

RonBW
23rd February 2017, 11:56
I read the FLC thread on here from 2015 and it didn't actually say what the scheme was or provide any links to it. I guess it never took off.

I guess you didn't read too hard

2014 - Contracting is a policy priority, Labour told :: Contractor UK (http://www.contractoruk.com/news/0011724contracting_policy_priority_labour_told.htm l)

2015 - IPSE revives Freelancer Limited Company plan :: Contractor UK (http://www.contractoruk.com/news/0012197ipse_revives_freelancer_limited_company_pla n.html)

2015 document - https://www.ipse.co.uk/sites/default/files/media/downloads/The%20Freelancer%20Limited%20Company.pdf

northernladuk
23rd February 2017, 12:01
I guess you didn't read too hard

2014 - Contracting is a policy priority, Labour told :: Contractor UK (http://www.contractoruk.com/news/0011724contracting_policy_priority_labour_told.htm l)

2015 - IPSE revives Freelancer Limited Company plan :: Contractor UK (http://www.contractoruk.com/news/0012197ipse_revives_freelancer_limited_company_pla n.html)

2015 document - https://www.ipse.co.uk/sites/default/files/media/downloads/The%20Freelancer%20Limited%20Company.pdf

It's his standard modus operandi. Get a little bit of knowledge, apply it badly without understanding and then re-gurgitate it on to the forum an option/fact but really it's just flailing about in the dark.

MrMarkyMark
23rd February 2017, 12:05
It's his standard modus operandi. Get a little bit of knowledge, apply it badly without understanding and then re-gurgitate it on to the forum an option/fact but really it's just flailing about in the dark.

Then wonders why everyone is disagreeing, then starts suggesting they fellate the mods etc...

northernladuk
23rd February 2017, 12:14
Then wonders why everyone is disagreeing, then starts suggesting they fellate the mods etc...

To be fair that's the best suggestion he's made and has more merits and is more likely to happen than anything else he's posted.

MrMarkyMark
23rd February 2017, 12:20
To be fair that's the best suggestion he's made and has more merits and is more likely to happen than anything else he's posted.


You've decided to take one for the team then, or did you draw the short straw :laugh

northernladuk
23rd February 2017, 12:21
You've decided to take one for the team then, or did you draw the short straw :laugh

F**k the team. I'm in it purely for my own benefit!!

breaktwister
23rd February 2017, 12:44
I'll just stop posting for awhile and not dilute a useful and highly topical thread

This forum would be much more useful if you took your own advice.

breaktwister
23rd February 2017, 12:45
It's a ridiculous idea, trying to work around IR35. IR35 has been around for 17 years. If your idea was remotely workable, everyone would have done it - so why don't you talk to a company that works in the way you describe and see what their problems to date have been?

It hasn't been needed until now as it has been easy for a PSC to make an "outside" determination. I don't know of any company that has tried this model - you seem to know everything so why you don't point me in the direction?

breaktwister
23rd February 2017, 13:07
Share ownership based on daily rate is never going to work out.



Fair enough. I knew that there would be huge challenges on the dividend side but thought that there might have been a way to contract around some of it.

eek
23rd February 2017, 13:14
Here is my idea: Something similar to an umbrella company where contractors team together to form a consultancy/services firm. No individual is allowed to own more than 5% of the firm. The firm handles invoicing etc and everyone is paid a basic minimal salary. Each contractors daily rate determines his percentage of ownership so that dividends can be paid proportionally. IR35 cannot be applied to these individuals regardless of "end-client SDC" as they do not meet the criteria of s51 ITEPA 2003. The firm can rightly bill out to the end-client or agency and expect to receive the full amount without the "deemed employee" deductions. Operating under this structure can be sold to end-clients as an "IR35 free" solution where they are not required to determine SDC.


The name of that idea is a Managed Service Company - it was Brookson's (firm of accountants) original business model and was banned in the early 2000s.

Can I be honest here you are going over old ideas that have already either been done and then banned or already discussed to death. Stop posting schemes as they come into your head and read a bit....

RonBW
23rd February 2017, 14:33
It hasn't been needed until now as it has been easy for a PSC to make an "outside" determination.

If your idea was workable, then every PSC would be working this way so that there is no risk of an IR35 investigation. It has been "easy" to make the declaration, yes, but there has ALWAYS been a risk that the declaration would be challenged - so if there was a loophole in the way you suggest then many, many contractors would work that way because it would immediately remove the risk of there being any challenge to the IR35 status declared by the contractor.

The fact that there aren't huge groups of people working this way should give you some kind of indicator about whether your idea has any merit or not - if it was workable then most contractors would operate this way and remove the risk of an investigation. Why wouldn't you work that way if it was viable?


I don't know of any company that has tried this model

And there's a good reason for that. You just don't seem to want to hear it.

breaktwister
23rd February 2017, 15:47
The name of that idea is a Managed Service Company - it was Brookson's (firm of accountants) original business model and was banned in the early 2000s.

Can I be honest here you are going over old ideas that have already either been done and then banned or already discussed to death. Stop posting schemes as they come into your head and read a bit....

Fair enough, I've obviously annoyed quite a few of the long-time posters by asking so many questions and putting my ideas up for discussion. Its easier to ask questions in a forum where someone can quickly put you right rather than try to become an expert in everything via your own research overnight. I have been spending every hour I can reading up on this - it is a lot of research.

northernladuk
23rd February 2017, 16:08
Fair enough, I've obviously annoyed quite a few of the long-time posters by asking so many questions and putting my ideas up for discussion. Its easier to ask questions in a forum where someone can quickly put you right rather than try to become an expert in everything via your own research overnight. I have been spending every hour I can reading up on this - it is a lot of research.

Which is fair enough but you aren't asking questions. You are getting snippets of information and then regurgitating them as fact and making up failed scenarios based on that little bit of information you've found. It's then taking us ages to explain why your posts are so incorrect taking over the forum/thread with pointless posts. Ask a point, get an answer, go away and digest but make sure what you ask is relevant and useful.

RonBW
23rd February 2017, 16:11
The name of that idea is a Managed Service Company - it was Brookson's (firm of accountants) original business model and was banned in the early 2000s.

Late 2000s - legislation announced December 2006, introduced 2007.

administrator
23rd February 2017, 16:29
Late 2000s - legislation announced December 2006, introduced 2007.

Heck, that really was 10 years ago!
Managed Service Companies - MSC Legislation, Rules and Guides (http://www.contractoruk.com/managed_service_companies/)

RonBW
23rd February 2017, 16:37
Heck, that really was 10 years ago!
Managed Service Companies - MSC Legislation, Rules and Guides (http://www.contractoruk.com/managed_service_companies/)

Time flies and all that :ohwell

b r
28th February 2017, 08:25
I guess that would be somewhere in Wales would it?

Scotland?

The T&E is a big problem IMO for those of us that don't live within commute of the large urban conurbations.

eek
28th February 2017, 08:30
Scotland?

The T&E is a big problem IMO for those of us that don't live within commute of the large urban conurbations.

Travel and Expenses is going to be a killer virtually everywhere except for those who both live and work in London....

IR35 Avoider
20th March 2017, 13:36
Here is my idea: Something similar to an umbrella company where contractors team together to form a consultancy/services firm. No individual is allowed to own more than 5% of the firm. The firm handles invoicing etc and everyone is paid a basic minimal salary. Each contractors daily rate determines his percentage of ownership so that dividends can be paid proportionally. IR35 cannot be applied to these individuals regardless of "end-client SDC" as they do not meet the criteria of s51 ITEPA 2003. The firm can rightly bill out to the end-client or agency and expect to receive the full amount without the "deemed employee" deductions. Operating under this structure can be sold to end-clients as an "IR35 free" solution where they are not required to determine SDC.

The advantages of this structure over a typical umbrella company are obvious; the full range of business expenses can be deducted before tax. This structure would be particularly useful for contractors who need to stay away from home.

Disadvantages are likely to be a larger administrative burden, dealing with contractors who want to leave the group as an immediate replacement would need to be found to transfer the share ownership; potential legal complications or disputes if a contractor refuses to give up ownership or dies (meaning his shares will pass to his estate). This would need to all be accounted for in the legal contract between the share owners of the firm. I guess there will be other challenges that need to be ironed out.

I expect to be abused for this idea but I'll put it out for discussion anyway.

I've only skimmed your proposal, but I I think I've understood the gist of it. I feel qualified to comment as I joined a company set up on a (in some but not all respects) similar basis when IR35 was first introduced. (Hence my user-name, which is no longer apt.)

I think what you are missing is that it is not enough for each contractor to own less than 5% of the company. In order to satisfy a criterion that dividends can not reasonably be taken to be remuneration for individual contracts, you cannot have a direct mechanical link between what contractors bring in, and what they take out. Instead they would effectively have to hand over "their" contract income to the consultancy and trust it to see them right, on average over time. And the consultancy would have to actively avoid "seeing them right" in a transparent and straight-forward way, as if HMRC could prove there was a direct link between money brought in and benefits taken out, the contracts that generated that money would become caught.

The "consultancy" I joined abandoned this approach after about six months, because it was impossible to find sufficient contractors willing to place that level of trust in it. (As the idea was abandoned, no dividends were ever paid.)

Had they continued, the general idea was to remunerate people in a variety of ways, including via a company share ownership scheme where shares were awarded as performance-related bonuses. The shares would have paid a consistent dividend related to overall profits. The dividends received by an individual would not have been directly related to fees they generated for the company.

It's possible that an idea like this could be made to fly in the near future. If contractors do turn out to be "cornered" by new rules then more of them might be willing to resort to something that wasn't sufficiently attractive back in 2000. Also, IPSE exists, and could lend credibility by creating such a company themselves.

Guvernator
9th November 2017, 17:30
Hello, long time lurker but just registered. I've been following developments with interest and just wanted to add my 2 pennies worth.

I am a little surprised at the hostility on here sometimes, OK the OP may be posting stuff that long term posters know about but many contractors including myself have been working under a Ltd company happily for years (9 years and counting for me) so really had no need to investigate other avenues until the government decided to go on their crusade.

I too have been investigating all possible avenues but only came across the MSC legislation ban a few days ago. Until then I and many other contractors friends where happily talking about banding together to form a company so I don't think it can be taken for granted that everyone knows you can't do that anymore, in fact when I mentioned it to my contractor friends they were all taken aback.

I will also add that one of the guys who used to work here seems to be operating in just that fashion, multiple contractors renumerated via different class shares and has been for about 2-3 years. He isn't a close friend so was naturally reluctant to discuss full details about it but he did give me the details of his account who apparently says it is all above board?

BR14
9th November 2017, 20:25
Travel and Expenses is going to be a killer virtually everywhere except for those who both live and work in London....

unless you can work remotely.
it's getting more common in my field over the last five years, thank feck

northernladuk
9th November 2017, 20:30
. He isn't a close friend so was naturally reluctant to discuss full details about it but he did give me the details of his account who apparently says it is all above board?

We had a guy on last week who's accountant recommended he buy advertising in return for cash on some gift card or something.... Don't always trust what someone else's accountant says unless you have seen, in detail, the offering yourself.

SueEllen
9th November 2017, 20:39
Hello, long time lurker but just registered. I've been following developments with interest and just wanted to add my 2 pennies worth.

I am a little surprised at the hostility on here sometimes, OK the OP may be posting stuff that long term posters know about but many contractors including myself have been working under a Ltd company happily for years (9 years and counting for me) so really had no need to investigate other avenues until the government decided to go on their crusade.

I too have been investigating all possible avenues but only came across the MSC legislation ban a few days ago. Until then I and many other contractors friends where happily talking about banding together to form a company so I don't think it can be taken for granted that everyone knows you can't do that anymore, in fact when I mentioned it to my contractor friends they were all taken aback.

I will also add that one of the guys who used to work here seems to be operating in just that fashion, multiple contractors renumerated via different class shares and has been for about 2-3 years. He isn't a close friend so was naturally reluctant to discuss full details about it but he did give me the details of his account who apparently says it is all above board?

One thing that is worth making all your family, friends and acquaintances aware of is that the term "accountant" is not a protected profession and name in England and Wales.

So anyone can set up an accountancy business and call themselves an accountant. However those with scruples do not say they are an accountant unless they are registered with one of the accountancy bodies.

The standard advice is to ask ask any "accountant" you want to do do business with their professional body, then go online and confirm that they are registered and what their level of qualification is.

Guvernator
10th November 2017, 00:26
Well the accountants are MKL, they look legit to be honest, they have a proper website and don't look like some fly-by-night operation. I'll be giving them a call tomorrow to find out what the deal is.

I'd be very surprised if they aren't aware of the MSC legislation but from what this colleague was describing, that's exactly what they were running.

My worry is not only the increased tax implications but the fact that you can't hold money back in the company to build up a war chest for bench time, time off etc. At the moment if I've worked 11 months,I tend to take at least a month off a year because I've earned enough and can afford to take some time off with the surplus I have sitting in the company. Not only will I not have a surplus to be able to afford to do this, I still won't get holiday pay.

I still think the most effective way to fight this is through the employee rights. If they want to treat us as employees and tax us accordingly then we should also get the same rights as employees. I'd love to see my clients still forced to pay me my day rate while I sit on a beach sipping cocktails somewhere. :D

Fred Bloggs
15th November 2017, 08:17
One thing that is worth making all your family, friends and acquaintances aware of is that the term "accountant" is not a protected profession and name in England and Wales.

So anyone can set up an accountancy business and call themselves an accountant. However those with scruples do not say they are an accountant unless they are registered with one of the accountancy bodies.

The standard advice is to ask ask any "accountant" you want to do do business with their professional body, then go online and confirm that they are registered and what their level of qualification is.
Very wise words. Same with Engineers. Always engage a Chartered Accountant, that way you can check the credentials and they have a code of practice (except if your name is Darren, apparently).

Fred Bloggs
15th November 2017, 08:19
Ahhhh, the good old composite company structure........... Latterly known as a managed service company. What comes around goes around. For ever more, it seems.

mccark
30th November 2017, 21:32
does multiple income streams make a difference?

NotAllThere
4th December 2017, 11:23
does multiple income streams make a difference?

No.

Next!