Set up LTD company or do PAYE

inferno_2

Hi guys,

I am starting a new 'job' as a contractor with a company paying 540 usd/ day. You can work as much or as little as you like. Many people have set up their own ltd comapny and are paying around 20% tax. They are probably working 3 out of 4 weeks a month with this comapny.

I spoke to an accountant and they questioned whether you are really a contractor or an employee, they kind of have a point, but apparently there are some things you can do to make yourself appear as a contractor to hmrc but it is a hassle.

The company also offered to pay a fixed fee of 10800 USD a month with fixed 20 on 10 off as a 'contractor'. 

My question is, is it worth going through all the hassle of being a contractor to pay 20% or is it easier to accept 10800 USD a month, not set up a limited company and reduce my tax bill by maxing out my SIPP. I can put up to £40K a year into it and get a tax refund.

What are your thoughts? I am waiting to hear back from my accountants on the matter but wanted some other opinions.

Cheers

Cross_Man

Is the company you are dealing with in USA?

You need an Accountant but, if this were me, I'd be going Ltd Co. and the fixed price contracts.

inferno_2

Cross_Man said:

Is the company you are dealing with in USA?

You need an Accountant but, if this were me, I'd be going Ltd Co. and the fixed price contracts.

Yeah it’s an American company, it’s for work abroad but I am domiciled in the uk. Fixed price does seem more convenient.

DoctorStrange

The question of whether you're an employee or a business is a matter of fact, not opinion.

Unless you know, with as close to 100% certainty as possible, that you're operating a genuine business and are prepared to defend that position if/when HMRC open an enquiry, I'd choose the brolly / pension option.

Grumpy_chap

AIUI, the American company will be outside of IR35 and not required to make the determination like a UK-based company would.

If taking fixed value contracts, and established risk, genuine company is likely to be satisfied.

How will the USA company actually accept the contract being set up?

It's a complex case that probably cannot be dealt with in a forum.  The OP needs to engage an Accountant for proper advice.

DoctorStrange

My understanding is that the client being overseas means the new Chapter 10 rules won't apply, but the old Chapter 8 rules do.

Fixed value contracts are sometimes compared to salary by HMRC, and thus can be a negative factor.

I'd recommend a specialist in employment law rather than an accountant to determine the status risk.

An accountant should also be used to consider is there's any tax advantages in used the Ltd, especially given the recent tax rises.

@inferno_2
"Many people have set up their own ltd comapny and are paying around 20% tax"

Bear in mind this is just the Corporation Tax - you still need to pay personal taxes to get the money out of the company. The differences between the two aren't as big as they one were so do please do ensure your accountant shows you both sets of numbers.