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bigduckontax
bigduckontax, Accountant
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As a micro-SME company I would like to build a software

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As a micro-SME company I would like to build a software project as a colloborative programme with other individuals as confederates, engaging their services and sharing a percentage of the hoped for eventual sales as payment, instead of a stipend?
Does collaborative working have any implications for accountancy, product and company liability, tax or legal implications that need special attention?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Instead of paying a salary as such your company will be paying a lump sum or sums as sales are received. Such payments will be allowable against the company's profits for Corporation Tax (CT) purposes. In the event of a possible liability then this would be the company's and the individual would be protected. You should be careful that these payments do not breach ir35 whose remit is very broad. You can red allabout that here:

https://www.gov.uk/guidance/ir35-find-out-if-it-applies

You may have to operte under PAYE arrangements when making payments to individuals.

It would be adviseable to have contracts for the companys' confedeartes drawn up by a truted, local solicitor.

I do hope that I have shed some light on the possible pitfalls in your company's operational scenario.

Customer: replied 1 year ago.
I should add that it is likely the collaborating workers will be home workers, possibly abroad, via the internet. Does that make a difference?
Expert:  bigduckontax replied 1 year ago.

Yes, it does. These rules are designed to limit tax avoidance or even evasion by persons working in the UK. They do not apply to individuals not so working. Fr UK home workers thay may still apply.

Customer: replied 1 year ago.
I read the IR35 reference you supplied and believe that clause 3 below applies as we are contracting out for professional services as programmers, not engaging as officers of the company nor employees.The IR35 rules don’t apply:simply because you’re a director of your own personal service company
just because your job title refers to you as an ‘officer’ but you don’t actually hold an office
when a company engages another firm to provide services (such as auditor) and there’s no requirement for your personal services
Expert:  bigduckontax replied 1 year ago.

Were you contracting out to corproate entities I would concur with your opinion. If UK individuals are involved then I would advise you to seek HMRC guidance as to whether ir35 applies in specific cases. It is designed to protect against deemed employment in the UK and to ensure that people claiming company-related non-taxable benefits are entitled to these benefits and not simply misusing a tax structure to avoid income tax.

Customer: replied 1 year ago.
Many thanks,
Expert:  bigduckontax replied 1 year ago.

Delighted to have been of assistance.

Please be so kind as to rate me before you leave the Just Answer site.

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Expert:  bigduckontax replied 1 year ago.

Thank you for your support.

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