Contractor subcontracting? Contractor subcontracting?
Posts 1 to 10 of 10
  1. #1

    Still gathering requirements...


    Join Date
    Apr 2019
    Posts
    39

    Default Contractor subcontracting?

    Just wondering how I need to go about getting work done for me without getting stung legally. One of my former colleagues is a dev. However, he's a perm and I'm a contractor. What I want to be able to do is send him requirements / specs for scripts that I need and then for me / my business to pay him for his efforts. I would then invoice my client for this work plus say a commission?

    In terms of his working arrangements, he's a perm of course but he would be doing the work in his own personal capacity rather than through his place of work. Should he really have a proper limited company as well in order to make this legal? Just so there's a proper paper trail of invoices rather than just a single invoice from me to my client.

    Then there's VAT....
    Last edited by ApeShape; 22nd October 2020 at 08:46.

  2. #2

    Double Godlike!

    ladymuck's Avatar
    Join Date
    Sep 2005
    Location
    London
    Posts
    12,103

    Default

    Your friend can register with HMRC as self-employed and complete a SATR each year for their permie and SE income. This will allow them to also claim back some costs incurred in delivering the SE work. They ought to take out professional indemnity insurance against producing duff code.

    They will invoice you for their work and don't need to add VAT unless they exceed the VAT registration threshold.

    You add your markup and VAT to their invoice and issue your own invoice your client.

    You will need to ensure that the contract you have with your client allows you to sub-contract work. They may have supply chain checks, etc that you'll need to comply with. You also need to ensure that you agree payment terms with your sub such that you are not left financially exposed should your client not pay you.

    Especially important is having a clear line of responsibility for disputes. For example, I'm assuming you're gathering the requirements and your friend is doing the development work. Therefore, if your friend develops something the client doesn't want would that be their fault for not following the requirements, your fault for not properly capturing / explaining the requirements, or the client's fault for not providing (or changing) the requirements?

    Finally, never mix friendship and business. It's going to end in tears.

  3. #3

    My post count is Majestic

    northernladuk's Avatar
    Join Date
    Mar 2009
    Posts
    44,664

    Default

    Having a LTD doesn't make anything legal or illegal. Its just about how he gets paid. Why not ask your accountant?

    Sounds a nice earner but have you picked the right person for the job or a mate you know. Is him doing it in his own time going to impact your delivery. If there is a chance you might be better going for someone else that can deliver when you need it, not when they can?
    'CUK forum personality of 2011 - Winner - Yes really!!!!

  4. #4

    More time posting than coding

    MasterBait's Avatar
    Join Date
    Jul 2019
    Location
    Путін Хуйло
    Posts
    295

    Default

    Legal options are

    -You can make him a employee of your ltd company on a zero hours contract and pay a salary. There is no law that forbids anyone to work at more than one place at the same time
    -He can be a sole trader who invoices you
    -he can start his own ltd company which invoices you

    If he stays under roughly 80k turnover per year he doesn't need to add VAT, if he does have to and you're VAT registered, not sure what the problem is
    Слава Україні! Героям слава!

  5. #5

    bored now

    eek's Avatar
    Join Date
    Jun 2010
    Location
    😂
    Posts
    26,494

    Default

    Quote Originally Posted by MasterBait View Post
    Legal options are

    -You can make him a employee of your ltd company on a zero hours contract and pay a salary. There is no law that forbids anyone to work at more than one place at the same time
    His employment contract may however forbid it - ours does...
    merely at clientco for the entertainment

  6. #6

    I live on CUK

    Old Greg's Avatar
    Join Date
    Mar 2007
    Location
    The Tombliboo Bush
    Posts
    27,784

    Default

    Quote Originally Posted by MasterBait View Post
    Legal options are

    -You can make him a employee of your ltd company on a zero hours contract and pay a salary. There is no law that forbids anyone to work at more than one place at the same time
    -He can be a sole trader who invoices you
    -he can start his own ltd company which invoices you

    If he stays under roughly 80k turnover per year he doesn't need to add VAT, if he does have to and you're VAT registered, not sure what the problem is
    Or he can use a brolly. Might work financially for him if he's happy to stick it in a pension.
    Quote Originally Posted by Bean
    I admit that I'm a lazy lying cretin, but so what?
    25 June 2018

  7. #7

    Contractor Among Contractors


    Join Date
    Jul 2019
    Posts
    1,702

    Default

    Is the work he'll do for you in any way relate to the work he does from his employer - not just that it's software development, but could there be any IP implications? His contract might actually forbid him from doing similar work outside of that employment.

    What you don't want is this person developing something for you, and that something is covered by that person's employment contract as belonging to the employer (eg falling foul of some pre-existing IP rights) and that employer making a claim against you/your client...

    Unlikely, but best ensure there's no issues.

  8. #8

    bored now

    eek's Avatar
    Join Date
    Jun 2010
    Location
    😂
    Posts
    26,494

    Default

    Quote Originally Posted by Old Greg View Post
    Or he can use a brolly. Might work financially for him if he's happy to stick it in a pension.
    Brollys still need to pay national minimum wage for the hours worked.
    merely at clientco for the entertainment

  9. #9

    Super poster


    Join Date
    Dec 2013
    Location
    Midlands
    Posts
    3,241

    Default

    Quote Originally Posted by eek View Post
    His employment contract may however forbid it - ours does...
    I always wonder if such blanket bans would stand up against something like the Unfair Contract Terms Act. I know they're common clauses, but then so are signs saying "We take no liability" and we know what they're worth!

    I just wonder if anybody has actually pursued it - it'd be interesting to see some case law around it. I think there's an argument that it would be an overreach and an unfair restriction for most normal jobs, and personally, I wouldn't sign such a contract.
    Last edited by vwdan; 22nd October 2020 at 09:06.

  10. #10

    bored now

    eek's Avatar
    Join Date
    Jun 2010
    Location
    😂
    Posts
    26,494

    Default

    Quote Originally Posted by vwdan View Post
    I always wonder if such blanket bans would stand up against something like the Unfair Contract Terms Act. I know they're common clauses, but then so are signs saying "We take no liability" and we know what they're worth!

    I just wonder if anybody has actually pursued it - it'd be interesting to see some case law around it. I think there's an argument that it would be an overreach and an unfair restriction for most normal jobs, and personally, I wouldn't sign such a contract.
    It doesn't matter - what I suspect would happen would be (at a minimum) the loss of any bonuses and depending on the work relative to what the person does in his contract anything from nothing at all to gross misconduct to a expensive copyright case.

    A lot of the time the best approach is do it and ask for forgiveness later, in this case it's read your contract and then decide what to do...
    merely at clientco for the entertainment

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •