How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4414
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

Dear expert I have a client who does social work for

Resolved Question:

Dear expert
I have a client who does social work for Manchester City Council and gets paid via an intermediary, an umbrella company. They take about £30 per week off her for commission etc. therefore she has asked me about the possibility of her missing out the agency and working directly for Manchester City council as a limited company. I have suggested that since she will not be buying goods on credit for large sums of money and she only be making modest profits it would be more cost effective to trade as a sole trader. However, there may be a problem in that all her work will be provided by Manchester City council. The umbrella company finds work from MCC for her, charges the council for providing workers and then deducts a commission from my client for obtaining the work. If she obtained work directly from MCC either as sole trader or a limited company in her own right would HMRC consider that she is really directly employed by MCC and therefore not self employed or able to invoice as a limited company unless she applies IR35?
Would her best option simply to stay in her current situation where if she is paid as a mixture of wages and dividends? Is there anything she could do to improve this situation and remain compliant with HMRC rules.
Thank you
Steve
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.

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

IR35 throws a big spanner in the works these days as an anti avoidance measure forcing many onto PAYE channels. Mark you, this might be the simplest solution anyway. If she invoices as a limited company then the dividend route is available and as you know the first 5K of these are tax free from 16/17. However, they are not allowable against Corporation Tax (CT). Otherwise she must be remunerated from her company through PAYE channels anyway as a director is an employee per se.

I do hope that my reply has been of assistance.

Customer: replied 1 year ago.

There is no box for me to rate your answer so I have to use this method of reply. But since I have to use this box , if I understand you correctly, it is not possible to trade as a sole trader in these circumstances but it would be possible to trade as a limited company. Is this correct?

Thank you

Expert:  bigduckontax replied 1 year ago.

It is possible, but with a big employer like the MCC [I am a Mancunian] then there is always a danger of ir35 kicking in.

As a limited company this could be avoided, but there is always a risk of an ir35 ruling by HMRC even then.

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

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.

Thank you for your excellent support.