Legal employment status

InsideInsurance

Just wondered the consensus of opinion on someone's "official" employment status for the purposes of things like a loan application in the following scenario (basically a contractor with a ltd)

Mr A is the company director of ABC Ltd
Mr A owns 80% of the shares of ABC Ltd
ABC Ltd pays Mr A both a salary and dividends
ABC Ltd has a contract with XYZ Plc to supply Mr A as a consultant to 123 Plc for 3 months
ABC Ltd has one other worker who is part time book keeper

Snakeeyes21

Employee of ABC Ltd

quite simply he is an employee of the ltd company.
what the ltd compny chooses to do with their employee is up to them,
they can contract him out or fly him to the moon if they so wish..
Whatever they do with him it doesnt change the fact he is their employee.

Pennywise

Employee of ABC Ltd

Legally he is an "office holder" of ABC Limited - for tax purposes that's the same as being an employee. He isn't legally self employed nor is he employed by XYZ.

However, many banks etc regard someone who is a director of their own limited company as being self-employed for their own credit scoring processes etc - that's just an internal decision made by the bank and each bank will have it's own rules etc.

Similarly, other organisations will also regard him as self employed, again, according to their own rules/procedures.

But, as I say, the strict legal position is that he's an office holder, which to all intents and purposes, means an employee as opposed to being self employed.

If you give us more information as to why you're asking the question and why you think it matters, then I'm sure you'll get more enlightening answers/advice.

InsideInsurance

Pennywise wrote: »

If you give us more information as to why you're asking the question and why you think it matters, then I'm sure you'll get more enlightening answers/advice.

Just because I have been doing a lot of form filling recently from buying car insurance to opening new bank accounts via applying for a temporary home and most the organisations didn't know how to classify Mr A (aka me) and in many cases wanted me to make the decision, but half the time then challenged me when I said employee.

At the end of the day don't care what they want to classify me as but the hurdles to jump through change significantly depending on which box you tick - for an employee you then had to give your line manager as a reference whereas for self employed you gave 6 months personal bank statements plus accountant for reference (if applicable)

Pennywise

Employee of ABC Ltd

InsideInsurance wrote: »

for an employee you then had to give your line manager as a reference

Who, of course, is you when wearing your "director" cap. That's one of the reasons why they regard you as self employed, as any confirmation they get from your "employer", i.e. you, is meaningless, whereas the reality if they want some independent confirmation as to your position and earnings, etc., then yes, it's your accountant who is the only person who can do that!

InsideInsurance

I realise the rational and have no issues with either the personal bank statements or accountants reference - was a bit stupid having to explain that Bob's Wedding Photographers Ltd, Jills Wedding Cakes Ltd etc were all one off transactions though and not something I do frequently - the annoyance comes from the debate over which box to tick each time.

Premier_2

InsideInsurance wrote: »

Just wondered the consensus of opinion on someone's "official" employment status for the purposes of things like a loan application in the following scenario (basically a contractor with a ltd)

Mr A is the company director of ABC Ltd
Mr A owns 80% of the shares of ABC Ltd
ABC Ltd pays Mr A both a salary and dividends
ABC Ltd has a contract with XYZ Plc to supply Mr A as a consultant to 123 Plc for 3 months
ABC Ltd has one other worker who is part time book keeper

For the purposes of getting a loan, he is officially an employee of ABC Ltd. If the lender wishes to contact the employer (ABC Ltd) to confirm that so be it. As ABC Ltd employs a bookkeeper, perhaps the bookeeper could provide the confirmation (especially if that bookkeeper is also responsible for payroll)

Alternatively, if the director speaks with the lender, they may accept other proof of regular income (such as his last 3 years, tax returns, etc ) such as a self employed person may do.

Usually it's best just to be open and honest about the real situation, and the lender will usually find a way to lend (as long as they can verify the details provided)