Ltd Company Implications

Discussion in 'Jobs (Discussion)' started by Carlos_Sanchez_IX, Aug 14, 2012.

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  1. Could do with some advice from anyone in the know before I start bothering HMRC et al.

    I have 2 guys starting with us at the start of September, one in sales and one as a Contracts Manager. Because we are a relatively new firm I cant offer a lengthy contract so they are signed on for a year with a day rate.

    One has his own Ltd Company and will be invoicing me direct, all checked out, insured correctly and he is legit. The other chap discussed this with the Ltd Company owner, went online and submitted an application, recieved his Ltd Company details, undertook the neccesary insurance, sent all the details to us and we are happy.

    Buuuuuut! He has been knocked back by most main banks for a business account as his credit as abysmal, usual tale, divorced, bird took the lot ect. I havent really operated this way before and guys have either been on strength fully or its been a bit of cash in hand, something that I'm not prepared to do anymore now I'm a grown up :)

    So what can he do? I've been told I cant be invoiced by his 'firm' and then pay him personally, would it be worth him starting from scratch and coming back to me as registered self employed? Someone suggested he use an Umbrella Company but I wouldnt advise him to do that based on a bit of internet research.

    In essence I want to get him sorted as he comes across as the dogs bollocks but I need to keep everything above board.

    Any input appreciated..
  2. Wordsmith

    Wordsmith LE Book Reviewer

    Talk to your local Chambers of Commerce, Business Advisory Service, etc. You'll get a lot of waffle, but sometimes you find a genuine expert. Your initial cost is going to be a couple of phone calls.

  3. You could either employ him properly and that will mean you'll be liable for his tax and NI and then terminate the employment at the end of they year or simply keep him on.

    If you go down the route of getting him to give you an invoice each month you will still be liable for his tax and NI as his only income will come from you - You could always say thay the HMRC will never find out anyway but if you want to be squeaky clean from day one then its not worth doing

    thats as i remember it.
  4. RP578

    RP578 LE Book Reviewer

    As someone who was self-employed for well over a decade, this is what I would recommend as the most expeditious approach for both of you. At least in the short term. I'm not sure how setting up 'umbrella company' would really help in this instance.
  5. Thanks all, got something to work with now.
  6. I think if you are the company's only 'client' there is little if any advantage to him having Limited Liability. Just sole trader status should do him.

    Irrespective of how much you want to help him, keep his financial affairs completely separate from yours. Contractors registering as Limited companies are doing so to reduce their tax burden, and the stupider ones take the piss to point of being illegal!
  7. Not so apparently, as a limited company he will invoice me, everything else is his own responsibility, apparently.
  8. I seem to recall that there were a whole raft of people working in the computer software and hardware business a few years ago who went down this route. The aim is to get a decent accountant to work the oracle with their company expenses etc so they pay as little tax as they can get away with. I thought the HMRC had got on top of that by saying if all the income came from one source, you were employed by that company and they must deduct tax and N.I. etc.

    Some people still go done this route though, obviously not everybody works for just the one firm all the time and of course at the end of the day, who really actually does an audit to check?

    His problem though is that he cannot get a bank account. Some of the agencies that offer to set up a Ltd company for you also offer to open an account for you as well. That may be an option for him? They obviously charge more for doing that though.

    The other option where it still can be difficult but with perserverance can happen is to look around for a basic bank account. These kind of accounts don't offer all the facilities of an ordinary account but from the year 2000, banks are supposed to be required to provide them because in todays world, even bankrupts and bad credit risks need some form of banking service.

    The other think to look at are building societies etc. They provide banking accounts as well as other types of accounts although the waiting periods for your money to clear are usually longer.
  9. BiscuitsAB

    BiscuitsAB LE Moderator

    Until someone throws IR35 at you.
  10. As I said, not directly employed someone this way before but thanks for flagging that little beauty up :)
  11. And as if by magic he has told me he has applied to open a foundation business account with NatWest, all mod cons but no credit available and no credit check, cheers all.
  12. I would stick him on a zero hours contract - same as a your normal contract but when it comes to the section on the 'normal hours worked' you put in zero. That way you are only committed to offer him work as and when you want him and therefore saving you any hassle of employment tribunals if you decide you want rid.

    It's far from a good deal for the employee and stacks the deck in the employers hands (lots of glazing/window firms use these) so it depends on your personal ethics.

    - I'm a director of a few businesses (as an investor) and a new business mentor and have seen these contracts in action and they seem to work pretty well.
  13. I've used an umbrella company in the past had no drama's when I was self employed simple to use and money was in the bank every week they take around £15 per week/pay roll for running it

    Based around your neck of the woods as well might be worth keeping a hold of just incase you get the same problems in the future
    • Like Like x 1
  14. Already do, we've got doors in Leeds and Manchester, construction sites in the North West and 25 commercial sites with 2 well known companies nationwide, 75% of our guys are on zero hours, most are semi retired so are just doing it for beer tokens but it seems to work overall.