Something for you all to shoot down in flames :)

[meanttobeworking]

A friend of mine is considering dipping his toe in the contracting market. I have a ltd company. Would there be a simple(ish) way of me acting as an umbrella company for him, rather than him setting his own up? Things I'm assuming:

- he will have to be an employee of my ltd, and therefore pay full tax/ni via PAYE
- I will have to pay employers NI
- I will have to charge him a fee to cover this, and a little more to cover admin costs/time
- I may need to get additional insurance cover
- When he is not working, I can lay him off with no salary

Advantages for him:

- He can try contracting without setting up ltd
- My admin fees will likely be lower than an umbrella

Advantages for me:

- My company makes a small margin on the fees
- It shows that I have a plan b / other business use of the company, which in some way should reduce my risk from an ir35 perspective

I appreciate anyone's time taken to respond, if there are a million reasons why not to do this, feel free to just say that, rather than taking it apart a piece at a time - I'm just mulling the idea at the moment and want to establish if it's a non-starter.

[rd409]

Do you have an accountant? My guess would be that your accountant would charge more to do extra work. You can also make some money off VAT FRS if you are registered, and the contract falls in same criteria.
IANAL, but I think you cannot lay off someone just because s/he is not getting a client, unless you explicitly mention in the employment contract. I am not sure, if considering the extra insurance you need to get, and increased cost of the accountant, you will still be able to quote competitive rate as compared to other umbrella.

[Pondlife]

Will you be paying him whilst he's on holiday/sick etc?

Will his contract value + yours push you outside of FRVS?

Will you pay him before you get paid by the agency/client?

[Clare@InTouch]

You can do it, and many accountants will include 2 employees on the payroll as part of their fee so you might be OK there, but you need to ensure you're fully up to date with employment law just in case anything goes wrong. There's some good information here:

Employment terms and conditions : Directgov - Employment

[meanttobeworking]

Thanks for all your replies, I think I'll file this one under "it seemed like a good idea at the time".

Thanks again.