Everyone’s a freelancer?

[chattypattee]

DH has just been offered a job with a great firm and salary 🎉 (he works in finance).
But he’s been told that everyone on the team is hired as a freelancer through their own limited company.

I’ve never heard of this before and it sounds a bit dodgy to me.
Has anyone been in this situation before? What are the benefits to him?

@chattypattee

I see - so any days taken off as sick/holiday would be subtracted from his salary?

He mentioned the company having its own accountant that could help, but he should still seek guidance from an independent accountant right?

He wouldn’t have a salary, he would have to invoice the company and then pay tax through an annual Company and personal tax return. So he would only get paid for the days he worked, not if he was sick or on holiday

@zzzebra

If he goes for it he'll need ensure he has decent insurance because he could potentially be liable for any mistakes he makes at work.

Another really good point, he needs a Company liability insurance and possibly public liability insurance too.

This sounds like a fancy tax avoidance scheme.
I would proceed with caution and yes you need independent advice. Also worth speaking to the company’s accountant for his/her view but I’d be dubious of any accountant that thought this was w food idea

@Hoppinggreen et al this has been stated several times upthread

It must be a small company because from 6 March, for medium sized and large uk companies, the liability for all the unpaid employer NI and tax where IR35 is breached is shifting to the employer - hence the widespread bans being introduced atm on contracting with a personal service company in many mainstream organisations. In your DH’s case, the risk will fall to him. I wouldn’t touch them with a barge pole.

@Frazzled2207

This sounds like a fancy tax avoidance scheme. I would proceed with caution and yes you need independent advice. Also worth speaking to the company’s accountant for his/her view but I’d be dubious of any accountant that thought this was w food idea

Doesn’t sound like a fancy tax avoidance scheme to me.

It sounds like tax evasion, pure and simple, not to mention a breach of employment law.

OP, no accountant other than a dishonest one, is going to tell you that this is ok. As somebody said though, at least from 1 April, it will be the employer picking up the fines and risking prosecution.

[quote CandyLeBonBon]@Hoppinggreen et al this has been stated several times upthread [/quote]
Thank you for your helpful contribution to the thread

OP, no accountant other than a dishonest one, is going to tell you that this is ok. As somebody said though, at least from 1 April, it will be the employer picking up the fines and risking prosecution. that is not strictly true - small businesses will not be liable for fines and costs - liability will remain with the contractor .

But he’s been told that everyone on the team is hired as a freelancer through their own limited company.

A mix of permanent staff and contractors can be perfectly legitimate. I'm struggling to think of a scenario where everyone is working through a limited company without them being disguised employees.

I've worked in teams where the majority are also contractors, but it's been very clearly delineated project work where they're all let go once the project is completed, or part way through when the funding is pulled/project put on hold. And when I say let go I mean told on Thursday that your last day of work is Friday.

@chattypattee

I see - so any days taken off as sick/holiday would be subtracted from his salary?

He mentioned the company having its own accountant that could help, but he should still seek guidance from an independent accountant right?

He won't have a salary. As an individual, he will invoice the company for work done, so if he takes a week off, then when he raises that month's invoice, it would have fewer chargeable hours on it.

Take a good look at the HMRC website, there is a lot of information on there about what makes someone either 'self-employed' or an 'employee'. Go through it carefully, and see into which category he falls.

As others have said, he would be a supplier of services just like the company that provide the stationery. He would invoice for hours worked, there is no salary. He would have to provide his own pension, pay his own National Insurance, do a corporate as well as a personal tax return each year, as well as VAT returns each quarter.

Crucially there would almost certainly be a clause in the contract about no mutual obligation. In other words, the customer is under no obligation to offer him work, and he's under no obligation to accept any which is offered.

Unless he actually wants to become a contractor, I think he should avoid this job.

@tribpot

As others have said, he would be a supplier of services just like the company that provide the stationery. He would invoice for hours worked, there is no salary. He would have to provide his own pension, pay his own National Insurance, do a corporate as well as a personal tax return each year, as well as VAT returns each quarter.

Crucially there would almost certainly be a clause in the contract about no mutual obligation. In other words, the customer is under no obligation to offer him work, and he's under no obligation to accept any which is offered.

Unless he actually wants to become a contractor, I think he should avoid this job.

He doesn't need to register for VAT, or submit VAT returns, unless he earns more than £85k a year. And he doesn't need to pay NI or Income tax - he can receive his income via dividends and pay tax on those. He needs to check out the small business exemption - if his employer has two or more of the following Annual turnover is no more than £10.2 million Balance sheet total is no more than £5.1 million No more than 50 employees.

If so they fall into the small business exemption and it will be your dh who carries the risk.

Absolutely get your husband to speak with an independent accountant for advice before he considers this job offer any further - I say that as someone who is self employed. There is a lot more faff and paperwork related to bring a contractor/freelancer, not to mention absolutely zero protection or employee rights. Your husband will be taking on the majority of commercial risk too should he become a contractor, is he aware of that?

Most definitely do not speak to the company’s accountant who will be biased in favour of the organisation, he must seek sound independent advice.

I agree with the poster up thread who said that usually companies employ a mix of permanent employees and contractors. Is this company reputable, OP? What do current and previous workers say about them on Glassdoor?

• being not bring