Potential full-time contract (inside IR35)

[TheCyclingProgrammer]

Thoughts about mortgages and other life situations has made me explore a potential full time opportunity with a particular US-based company that I've always been interested in working for. Nothing might come of it but just in case, I thought I'd find out some more information.

I've had the opportunity to talk with another UK-based employee of said company and I was asking him what the salary/tax arrangement was with for UK-based employees and he said that all non-US workers were treated as contractors and they invoice each month rather than going on the payroll.

Now despite this payment arrangement, and without a contract in front of me to look at, this still seems like the sort of gig that, if I invoiced through my current UK Ltd, would be inside IR35. That's fine, I just invoice as normal and put the whole lot through the payroll and for all intents on purposes it would be like I was full-time employed on a normal salary over here.

OTOH, as I mentioned in my recent dividends thread, I have a reasonable amount of retained profit in the company and it seems like I would be better of shutting down the company, doing an MVL and extracting the profit as a capital distribution, then registering as self-employed and invoicing US-based employer myself.

I presume if I went down that route, there would be no risk of securities legislation am I right? Does the legislation affect somebody who goes from running a Ltd company to being self-employed? Would I be crazy to keep invoicing through my Ltd (inside IR35) and missing the opportunity to do the MVL, or is there some benefit to keeping the company going?

[Craig at Nixon Williams]

The transactions in securities legislation has not been tested like this, and until it is applied to a similar situation, nobody will be able to give you a definitive answer.

I would suggest (and some may argue that I’m wrong) that if you continue to carry out the same type of work then you are carrying on the same trade (irrespective of the vehicle through which you carry out that trade). If you gain a tax advantage as a result of making this change then the transactions in securities legislation may apply. Going self-employed is not as aggressive as opening up another company but a tax advantage will still be gained by taking the funds as capital.

Hope this helps!
Craig

[DirtyDog]

You shut the company down with the reasonable expectation that you were looking for permanent employment.

You later found out that the only way that this company does it would be for you to work in a similar vein. Since this is the exception rather than the rule, I'd suggest that you would have a reasonable defence.

IANAA

[jamesbrown]

In addition to Craig's advice, which I agree with:

1. Don't make any assumptions about IR35. Have the contract and WPs checked. A transatlantic working arrangement, 100% from home, implies a lack of D&C, but you'd need to have your contract and WPs checked.
2. You don't want to be working self employed with a US client (or, arguably, any client). North America is highly litigous. It's difficult and expensive enough to secure insurance through a Ltd. company for a North American client and you ultimately have the protection of limited liability.

Edit: by the way, check the jurisdiction and governing law in the contract. You want both to be England & Wales, ideally.

[GazCol]

Thoughts about mortgages and other life situations has made me explore a potential full time opportunity with a particular US-based company that I've always been interested in working for. Nothing might come of it but just in case, I thought I'd find out some more information.

I've had the opportunity to talk with another UK-based employee of said company and I was asking him what the salary/tax arrangement was with for UK-based employees and he said that all non-US workers were treated as contractors and they invoice each month rather than going on the payroll.

Now despite this payment arrangement, and without a contract in front of me to look at, this still seems like the sort of gig that, if I invoiced through my current UK Ltd, would be inside IR35. That's fine, I just invoice as normal and put the whole lot through the payroll and for all intents on purposes it would be like I was full-time employed on a normal salary over here.

OTOH, as I mentioned in my recent dividends thread, I have a reasonable amount of retained profit in the company and it seems like I would be better of shutting down the company, doing an MVL and extracting the profit as a capital distribution, then registering as self-employed and invoicing US-based employer myself.

I presume if I went down that route, there would be no risk of securities legislation am I right? Does the legislation affect somebody who goes from running a Ltd company to being self-employed? Would I be crazy to keep invoicing through my Ltd (inside IR35) and missing the opportunity to do the MVL, or is there some benefit to keeping the company going?

If it's the US company I think it is, do they not prefer for you to invoice direct as a sole trader rather than a Ltd?

[TheCyclingProgrammer]

In addition to Craig's advice, which I agree with:

1. Don't make any assumptions about IR35. Have the contract and WPs checked. A transatlantic working arrangement, 100% from home, implies a lack of D&C, but you'd need to have your contract and WPs checked.
2. You don't want to be working self employed with a US client (or, arguably, any client). North America is highly litigous. It's difficult and expensive enough to secure insurance through a Ltd. company for a North American client and you ultimately have the protection of limited liability.

Edit: by the way, check the jurisdiction and governing law in the contract. You want both to be England & Wales, ideally.

Fair point about IR35. I hadn't even considered that it would be anything other than inside.

To me it was a given but having said that, said company is well known for being extremely hands off with their employees; you can choose what you work on, on your on terms, in whatever hours suit you with very little D&C.

I imagine the contract would fail on MOO and probably RoS too so relying one just one factor (D&C) might be risky.

Should anything come of this I will definitely get it reviewed.

[Craig at Nixon Williams]

Don't make any assumptions about IR35. Have the contract and WPs checked. A transatlantic working arrangement, 100% from home, implies a lack of D&C, but you'd need to have your contract and WPs checked.

Good point about IR35...don't make assumptions about it without getting it checked, you might be surprised!

Craig

[TheCyclingProgrammer]

If it's the US company I think it is, do they not prefer for you to invoice direct as a sole trader rather than a Ltd?

No idea. Would rather not discuss who it is on here but feel free to PM me as I'd be interested to know.

[jamesbrown]

Fair point about IR35. I hadn't even considered that it would be anything other than inside.

To me it was a given but having said that, said company is well known for being extremely hands off with their employees; you can choose what you work on, on your on terms, in whatever hours suit you with very little D&C.

I imagine the contract would fail on MOO and probably RoS too so relying one just one factor (D&C) might be risky.

Should anything come of this I will definitely get it reviewed.

Not really, providing the contract is strong on lack of D&C and this is backed-up by working practices (remember, it's what, where, when and how). Lack of D&C is particularly important and defensible (having only lack of MOO might be a little riskier, for example).

Do remember to check out the insurance angle too, as you'll be pretty stunned at insurance costs/difficulty for NA (and you really want Ltd. liability, as I mentioned). Check out the PCG forums for more info. on insurance options.

[d000hg]

I would have thought this is outside IR35. If you're using your own equipment & location and able to specify your own working hours (?) then you're on to a good start.

If they want you to be an employee but find it easier to do the paperwork as a contractor, you might as well go the whole hog and ask about holidays, insurance, etc.