From 1 man band to an 'employer'

[ladymuck]

My OH is about to enter the heady world of contracting and we've agreed that he can operate through my Ltd Co. He's pretty risk adverse when it comes to tax matters so wants me to do full PAYE/NI deductions as if IR35 caught.

My only concern is that I'll be acting more like an umbrella company than an employer in that he'll also be paying employers NI and I'll have to do some jiggery pokery with expenses.

I'll be quizzing my accountant about the best way to deal with it all but I was just wondering if anyone has any experience in doing this and what pitfalls I should look out for.

Thanks!

[Stag Cozier]

What's your company setup? Are you both directors? Is he the only worker or are you both workers? Is he the hubster or simply partner?

There's nothing wrong with calculating an IR35 deemed payment every month. In fact, I would say that's the correct way to do it rather than wait until the end of the tax year.

[Alan @ BroomeAffinity]

Best watch that the two incomes don't take you above the VFRS threshold as well.

[northernladuk]

There is a another thread about am month old asking a question about a hub/wife ltd and asking about what to do if income is different and apportioning divis. It will be a very interesting thread as there are lots of warnings about thresholds, income shifting and so on. It would appear that the answer to the problem would have been to run the two completely seperately. I had a quick look but can't remember the title. Worth a search IMO....

[SueEllen]

There is a another thread about am month old asking a question about a hub/wife ltd and asking about what to do if income is different and apportioning divis. It will be a very interesting thread as there are lots of warnings about thresholds, income shifting and so on. It would appear that the answer to the problem would have been to run the two completely seperately. I had a quick look but can't remember the title. Worth a search IMO....

LadyMuck's question is different to the one on that thread.

She has the difficultly that she is suppose to give the hubby holiday pay etc if he is an employee.

If she is acting as an umbrella company then it's a more difficult situation and he is probably better of going through a proper umbrella company.

[ladymuck]

I am the sole director of my Ltd Co, and he doesn't want to be a director. As we're not married, I'm not sure income shifting will apply to us? Another question for the accountant.

I don't mind doing the admin, I just want to make sure I get it right. If it means giving some of his hard-earned away to an umbrella company then so be it, but part of me is reluctant to do so if I can sort it out in a legal and uncomplicated way.

Thanks for the tips, and I'll have a search for that thread to as there could be a couple of gems in there that are relevant.

[zedAccounts]

If I was your OH I would take the umbrella route for the sake of simplicity and peace of mind. I would be reluctant to allow my pay to end up in someone else's company and not have a share or say in that company. It could get messy if the two parties fall out.

ZED.

[ladymuck]

Just in case this is useful...

Well, I had a good chat with my accountant about this. He was bemused that someone was willing to hand over so much to HMRC!

We came up with a plan which is quite logical and simple. There will be a charge-out rate (which the client/agency pays) and a salary rate (which my OH gets paid). The difference would cover employers NI and expenses, etc with any 'profit' payable to him as a bonus at year end.

My accountant mentioned that this would also help shore up the legitimacy of my company. So, this may be a suitable route for anyone else wanting to do the same.

When represented with the facts of the true cost of the non-director/non-divvy route, my OH saw the light and is now willing to concede that I was right all along.

[Sally BFCA]

My accountant mentioned that this would also help shore up the legitimacy of my company. So, this may be a suitable route for anyone else wanting to do the same.

Legitimacy? If this is in reference to IR35 status, then it is each assignment that is assessed uniquely. How many employees or clients your company has will not have an effect if one particular contract was found to be inside IR35.

A limited company is required by law to have Employer's liability insurance if there is more than one employee, so if not already in place you would need to get some. You may also want to check out your policy (if applicable) for professional indemnity.

Lastly, this may be a daft question, but, has your OH had their contract professionally reviewed to say it is caught by IR35? No point paying the tax man more than you have to

[zedAccounts]

Well, I had a good chat with my accountant about this. He was bemused that someone was willing to hand over so much to HMRC!

Did your accountant bring up the subject of IR35? If not, he should have. If he did make sure your OH's contracts & working practices fall outside IR35 before you start paying him dividends.

ZED.