Going from an employer to a director of my own company.

doddsey73

Hi,

I currently work for a company 4 days a week working on their bookkeeping and admin duties. I have been working for them for 6 years.

In that time I have passed various qualifications and now want to branch out on my own with a Ltd company offering bookkeeping and admin services.

I will now invoice the above company for my services but also have a couple of other clients and will be advertising to build the business.

My question is is am I likely to have problems with HMRC doing this as I guess it could look like tax avoidance as still will be working for my previous employer. I really do want to branch out though......

somethingcorporate

If you have multiple clients then no, it will not be an issue.

InsideInsurance

There will always be risks with things like IR35 and these are never black and white.

A bit of googling will identify some of the "tests" they apply and evidently you want to tick as many of those boxes as possible. Whilst you can put certain provisions in your contract with them to help argue the case you are outside of IR35 it only goes so far.

IR35 is somewhat of a bogeyman though to scare contractors and there is very little evidence of HMRC actually ever successfully pursuing anyone outside of public service/ MOD. Of cause the cost of defending can be high but there are insurances you can buy to limit it

Multiple clients, contrary to some peoples missbelief is not an automatic get out clause.

doddsey73

Thank you. Yes, I have just taken a look at one of these questionnaires and it does seem a tad hit and miss. Do you know how much roughly the insurances would be to cover this?? I'm not going to have a huge turnover. probably £35,000 max!!!

PlutoinCapricorn

Could you negotiate different terms with the former employer so that you get paid for a task not a set number of hours? Would you be working for them off site?

Getting paid exactly the same amount each month does look a little suspicious, but if the amounts and payment dates vary it looks more like a genuine contract.

InsideInsurance

doddsey73 wrote: »

Thank you. Yes, I have just taken a look at one of these questionnaires and it does seem a tad hit and miss. Do you know how much roughly the insurances would be to cover this?? I'm not going to have a huge turnover. probably £35,000 max!!!

Google it, there are several levels depending on if you just want to cover the defense costs or also the potential fine/ back dated tax. Also check the terms of the policy as some require you to have your contract pass their review process which carries a separate fee to the premium.

My accountant includes the review and defense costs aspect in their costs and doesnt think its worth buying the fine/tax cover aspect

agrinnall

The simple way to proceed would be to conform to the IR35 rules, and pay yourself just a salary rather than dividends and salary. If you do that then you'll end up paying more tax and NI but you'll be much less likely to be investigated and even less likely to have any penalties assessed.

DigForVictory

Within reason the more clients the better, lest HMRC decide you're actually still an employee.
Best of luck OP!