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2nd contractor through LTD company

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    2nd contractor through LTD company

    Hi,

    I'm currently contracting at a client and it's looking likely they will need further contract resource for 3-6 months in the same portfolio as I'm working due to business pressures and priorities changing (technical business analysis). I'm thinking of suggesting to them that my LTD company provide a 2nd contractor through the existing terms of business currently established within the recruitment agency so effectively the relationship is client - rec agency - my ltd - 2nd contractor, I can get a 2nd contractor onsite immediately who can fill this role.

    I was wondering if aside from the financial benefits of doing this, if anybody had any views on if this would be seen positively in the event of an future IR35 investigation? (I believe my current LTD contract and working practices are outside - but I'm sure my opinion and assessment will count little if facing HMRC)

    And aside from needing to source some legal docs for the sub contracting whether you foresaw any issues in doing this?

    Thanks

    #2
    First of all.. What are the financial benefits you perceive? I assume you are going to cream some of the rate? This will only be low 10's a day I expect so there is actually very little benefit for what could be time consuming and messy for you.

    I know it all looks very appealing and I'd be willing to be every single contractor on earth has toyed with the idea of trying to get a bit of cash this way but it rarely works out for one reason and another.

    For a start the new contractor isn't going to be best pleased when he finds out he's through and you are pocketing some of the rate so he's doing the same work for less. Depends on how much you are taking of course but still, they may cause waves and it's all on you.

    What if he pisses off with no notice, what if the agency/client are late paying? You'll have to factor the payments and pay the subbie even if you've not had the money. You'll have to manage timesheets and the like, all of which you'll have to do on your time. Get caught doing the admin work on clients time and you'll be in hot water. Loads of hidden gotchas.

    There is then the general attitude of your subbie. Anything goes wrong and again it's all on you. If you truly want to be responsible for him then your gig is potentially on the line if he does something serious. You've got to take the rough with the smooth.

    We haven't even gotten to whether or not you can really do this. Are you absolutely certain the client and the agent will go for it. It's not unheard of but I'd be very surprised if they all agree. If the client is paying an agent to do this to remove the risk though contracted agreements, why would the let you do it instead, same for the agent. If I was a client I'd not touch this setup when I've got a perfectly good mechanism in place. If it's all above board and then there is nothing wrong with speaking to the agency and then the client about the exact nature of the engagement. If you are shying away from doing this and trying to get them in the back door quietly then something's wrong.

    Personally I'd just ask the agent if they'll pay you a referral fee and then put your contractor on to them.

    Work through all that first then think about the IR35 situation. Don't let the tax details dictate the reality of the situation.
    Last edited by northernladuk; 3 May 2019, 13:20.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

    Comment


      #3
      Firstly thanks for your response northernladuk,

      The contractor is somebody I know well, is a safe pair of hands and I know would be content with the available rate.

      The financial benefits are about £50 a day, so circa £5k over the 6 months. I'm not too fussed about the admin burden as the wife would do all that, the kids are growing up so she has a few extra hours a week she could do this in.

      The agent will go for it for sure, the client im not sure - it's 50/50 maybe, but before suggesting anything I thought I'd seek opinion, I didn't want to suggest anything that would be a terrible idea for me - your response has helped me realise it's not as simple as I was thinking though.....

      The referral fee does sound appealing, were you meaning a one off fee?

      Thanks again

      Comment


        #4
        Originally posted by BAPM View Post
        The financial benefits are about £50 a day, so circa £5k over the 6 months. I'm not too fussed about the admin burden as the wife would do all that, the kids are growing up so she has a few extra hours a week she could do this in.
        So you'd be taking around 10% of his rate. I'd go ****** ballistic if I found that out further down the line. That's a lot IMO. Is this guy a newbie contractor? I don't think any experienced contractor would be happy with that chain and doing the same work for 10% less.
        The referral fee does sound appealing, were you meaning a one off fee?

        Thanks again
        Yeah cause the agent doesn't have to do any work to find him, save on advert etc but I wouldn't expect it to be anything more than mid to low 3 figures to be honest.

        Thinking a little more about this it may not be quite as I described as the agent would appear to be the responsible party to the client, you aren't putting the new guy direct, which makes me more surprised the agent would go for this. They are potentially fronting a contractor they have no direct control over and is being paid less than the rest so has a risk attached to him. Bearing in mind their job is finding candidates I doesn't seem right they would expose themselves to more risk for something that is their bread and butter.

        Interesting one.
        Last edited by northernladuk; 3 May 2019, 13:47.
        'CUK forum personality of 2011 - Winner - Yes really!!!!

        Comment


          #5
          Originally posted by BAPM View Post
          Firstly thanks for your response northernladuk,

          The contractor is somebody I know well, is a safe pair of hands and I know would be content with the available rate.

          The financial benefits are about £50 a day, so circa £5k over the 6 months. I'm not too fussed about the admin burden as the wife would do all that, the kids are growing up so she has a few extra hours a week she could do this in.

          The agent will go for it for sure, the client im not sure - it's 50/50 maybe, but before suggesting anything I thought I'd seek opinion, I didn't want to suggest anything that would be a terrible idea for me - your response has helped me realise it's not as simple as I was thinking though.....

          The referral fee does sound appealing, were you meaning a one off fee?

          Thanks again
          That sounds like a good idea. I think charging less than 10% isn't worth the hassle. Why would you take on a contractor for the sake of a few hundred pounds.

          This is something you point out to the contractor if it comes up, i.e. 10% or no contract, take it or leave it.

          My experience in contracting that the percentage of commission taken by the agent had no bearing on my rate, in fact my highest rate was from a consultancy that charged a considerable amount, but without them I would have never have got the contract, and it was a great contract.
          Last edited by BlasterBates; 3 May 2019, 15:51.
          I'm alright Jack

          Comment


            #6
            Originally posted by northernladuk View Post
            So you'd be taking around 10% of his rate. I'd go ****** ballistic if I found that out further down the line. That's a lot IMO. Is this guy a newbie contractor? I don't think any experienced contractor would be happy with that chain and doing the same work for 10% less.


            Yeah cause the agent doesn't have to do any work to find him, save on advert etc but I wouldn't expect it to be anything more than mid to low 3 figures to be honest.

            Thinking a little more about this it may not be quite as I described as the agent would appear to be the responsible party to the client, you aren't putting the new guy direct, which makes me more surprised the agent would go for this. They are potentially fronting a contractor they have no direct control over and is being paid less than the rest so has a risk attached to him. Bearing in mind their job is finding candidates I doesn't seem right they would expose themselves to more risk for something that is their bread and butter.

            Interesting one.
            The contractor is a new contractor, only 1 contract prior, currently not working and bored/losing money, but a good ba, it could be win win.

            I get what you are saying about the agency, with this client they are working with 6 contractors, 5 of which they simply processed as the client had them recommended (they will only deal with agencies) so they seem risk friendly.

            It is an interesting one for sure....

            Comment


              #7
              Originally posted by BlasterBates View Post
              That sounds like a good idea. I think charging less than 10% isn't worth the hassle. Why would you take on a contractor for the sake of a few hundred pounds.

              This is something you point out to the contractor if it comes up, i.e. 10% or no contract, take it or leave it.

              My experience in contracting that the percentage of commission taken by the agent had no bearing on my rate, in fact my highest rate was from a consultancy that charged a considerable amount, but without them I would have never have got the contract, and it was a great contract.
              Thanks for the response, I think it could work, but need to think it through fully.

              Comment


                #8
                So as this could possibly be viable, does anyone have any ideas on any ir35/ tax benefits or drawbacks?

                Most interested on how this could impact my ltd co ir35 position on the contract by supplying a second contractor?

                Comment


                  #9
                  Originally posted by BAPM View Post
                  So as this could possibly be viable, does anyone have any ideas on any ir35/ tax benefits or drawbacks?

                  Most interested on how this could impact my ltd co ir35 position on the contract by supplying a second contractor?
                  If the person you are putting in is a 'substitute' then you are IR35 proof.
                  Just make sure that it's worded like 'as the workload increases I cannot do all of it so I need to use the substitute clause in my contract to deliver'.

                  Having said that. Providing a sub-contractor is running a real business so you're risk is low anyway. IMO. IANAL.
                  See You Next Tuesday

                  Comment


                    #10
                    Originally posted by northernladuk View Post
                    So you'd be taking around 10% of his rate. I'd go ****** ballistic if I found that out further down the line. That's a lot IMO. Is this guy a newbie contractor? I don't think any experienced contractor would be happy with that chain and doing the same work for 10% less.


                    Interesting one.
                    why should anyone go ballistic? They are paid what they agreed for? I have done this succesfully in the past. You will need to consider intermediary reporting implications. Your accountant should be able to do this for you. There's not really much more admin.

                    Just make sure you are confident about being paid on time.

                    Comment

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