Question

mc25

Hi, all. Just a quick confirmation really. I have got a client who runs a management company (Ltd). Her husband lost his job working as an engineer in feb. Now he has been offered a job but on contract basis (4 weeks contract), and the agency offering him the job can only pay him through Ltd company or umbrella company. The question is, can he request the Agency to pay him through his wife Ltd company since the contract will only last 4 weeks rather than going through the process of forming a ltd company for that duration of time. He doesn't want to go through an umbrella company due to past bad experience.Also, if he is paid through his wife business, does he have to be added as a director to his wife company for him to be in a position to withdrawal wages/dividends. Any ideas will be appreciated.

thanks

Monsoon

No major problems with running it through the wife's Ltd but if he is not a director or shareholder it wont be tax efficient as he would have to have a salary; need to look at his and hers circumstances and see if you can come up with an arrangement that is suitable.

Remember- director entitled to wages, shareholder entitled to dividends in equal proportion across the shareholding.

mc25

Thanks

Monsoon, thanks for your reply. Might go for the idea of appointing him as a new director for his wife company (from what they have told me currently he is the secretary of his wife company) and working it through that way as this is ok with both of them if it helps them the hassle of opening another company.

Monsoon

Remember its the shareholding that's more important in terms of remuneration. Don't forget possible stamp duty on transfer of shares and an exit srategy and/ or the wife wanting her sole company back again. There is possibly the option of her just taking payment and giving [tvking theory and gigging!!! wth?!] it to him but that would depend on her personal arrangements and their own tax bands etc.....

Part of me thinks it might be easier and possibly cheaper just to have his own company! The advice alone in structuring it as above would pay for the set up and the CT return and closing the company again, surely?

Bluewednesday

Also I would check out the possibilities of being caught by IR35. We always recommend that contractors being paid this way join the PCG (professional contractors group) as they help with contract checks etc

mc25

Thanks

Monsoon and Bluewednesday thanks for your reply once again. @ Bluewednesday I know you mentioned the been caught on IR35, unfortunately from what they have told me the place he will be working at are only dealing with contractors due to the recent redundancy done.
Anyway, something just came up this morning. Now he's mentioned to me he is worried about dealing with CSA (child maintenance from his ex), since the contract is supposedly meant to last only for 4 weeks and if he get paid a high wage they might take most of this. I think the idea of forming his Ltd Company is appealing. But now the CSA issue has arise how does he pay them if he formed the Ltd Company with no PAYE at the moment he is on JSA so they have been deducting £5 per week from his pay (sad really but what can you do….). Any idea again will be appreciated.

Bluewednesday

I appreciate what you are saying but the onus is on him to make the correct call on IR35, regardless of how anyone else employs him.

If he doesn't get it checked and it is decided he falls within it he would be the one paying - not the company he is working for.

That is why the agencies etc insist on ltd companies, it pushes the responsibility on the next one down the line!!!

mc25

Thanks

Bluewednesday, thanks for your reply, I will take that on board and get him to recheck his contract. Much appreciated.

mrods

I realise that this post was written a while ago, but as I still look over old posts for answers, I thought I would comment.

One thing you have to consider is whether contracting is a long term plan or not? If you are intending to contract for less than a year, then setting up your own limited company may not be cost effective at all, using an umbrella company may make it easier and slightly more hassle free in the short term. If you decide that it is the best way forward you can always set up the limited company at a later date.
I had considered the best way forward for me between using an umbrella company and setting up a limited company, and decided as a short term option I would use an umbrella, nearly 2 years on and to be honest they are making my life easier so I am still working with them. If you want to find out any more info take a look at this page on the choosing between limited or umbrella.
Hope this helps.

mrods

Sorry last link didn't seem to work, will try again! If you want to find out any more info take a look at this page on the choosing between limited or umbrella.