Does he need a ltd Company?

Suejw

I have been approached by a potential client, he is a consultant engineer that is going to go freelance. He was told by the company he will be freelancing for that he needs to set up a limited company. Is that right or is he ok just as a self employed sole trader?

Suejw

I have had a look at IR35 and I can see that you are quite correct he will need to be ltd. I am assuming that I can help him with all of this and look after accounts etc. Is there anything I should be aware of?

BIG WAL

It could be necessary to register for VAT, as the company engaging him may well expect him to do so. Often it will be beneficial to operate the flat rate scheme in these circumstances.

Suejw

Yes I read that somewhere yesterday and it is something I will discuss with him on our first meeting, thanks though!!

LynWest

I have a couple of clients that have done this. Make sure you advise them of the IR35 scheme thoroughly and recommend that they get their contract checked by a specialist. Also advise them that even a contract that gets given the go ahead can be challenged by HMRC as they can look at what happens in real life in the fulfilling of that contract than what is merely written in the contract. e.g. your client being in control not their client. Are they allowed to pick their working hours? Are they using their own equipment? These things can be added to their contract easily but then if HMRC see that this isn't actually happening in practice they may decide to investigate. Having said this I love these two clients that I now have in this category as they are so organised. VAT is a doddle because they are both under the flat rate scheme. Just make sure that your client is clearly aware that this decision on whether or not he is caught by IR35 or not is his and his alone. Good luck with your meeting

Suejw

thanks for the advice Lyn, I will make him aware of all the pitfalls etc. One other thing is how much to charge, as yet I don't know how much he wants me to do but costing jobs is not my strong point so any advice on that prickly subject would be useful.:001_smile:

reader

Suejw wrote: »

thanks for the advice Lyn, I will make him aware of all the pitfalls etc. One other thing is how much to charge, as yet I don't know how much he wants me to do but costing jobs is not my strong point so any advice on that prickly subject would be useful.:001_smile:

Contractor accounts and tax affairs tend to be relatively minimal, e.g. 1 sales invoice per month, 1 bank statement per month + 1 expense claim form per month + 1 payslip per month. Consequently these guys will typically be your lowest fee clients. Although there is money to be made in contractor accountancy if you get enough of them.

You may want to familiarize yourself with the settlements legislation (ICTA 1988 and ITTOIA 2005) in case the contractor asks about bringing in a non-fee earner (e.g. wife) into the company as a shareholder in order to shift dividend income from him to her.

Get the IR35 status confirmed as soon as possible because if your client is inside IR35 there will be very little after tax profits available as dividends (as 95% of income will be NICable and taxable).

apple

i will take on an IT consultant with similar issues, he's just resigned from his old job and is about to incorporate his company. would it be also beneficial to give himself as director a nice salary? more than the usual £7755

thanks

deanshepherd

reader wrote: »

Consequently these guys will typically be your lowest fee clients.

If IR35 risk clients are your lowest fee-earners then you are doing something very wrong. There is a high level of technical knowledge required to navigate them through IR35 (if that is even possible for this particular client) and there is a massive PI risk if you balls it up and 5 years later your client gets assessed for PAYE, interest and penalties.

These type of clients have always been at the higher end of my fee scale.

JodieR

I agree with Dean. I may be overly cautious but I actually turn away clients with IR35 implications as I'm too worried about getting it wrong.