No doubt some of you will be self employed and perhaps be operating through employment agencies...
I've not had much to do with agencies recently, but I am being offered a potentially interesting job in which I must work for the agency for the first three months. The agency are pestering me to be paid via some intermediary, which both agency and the intermediary suggests could save me lots of money in tax, even for a short period. They suggest it is even worthwhile for just a week or two. I have never come across such an intermediary before.
The intermediary rang me a short while ago and is sending me an info pack. They suggest my salary goes to them and is paid into my account with no delay.
Anything 'saving a load of tax' is likely to be an umbrella company and/or offshore.
It will not come as a surprise that the IR are looking closely at this, and that there is some potential financial risk to yourself if you go this route.
Better to have your own limited company and a good accountant.
Two places to look for advice:
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you have your own limited company? If not and you are to be directly employed by the agency, they will have obligations to you as an employer, and have to pay employers NI contributions and put you on their PAYE system. Work and hassle for them.
If you are employed by e.g. an offshore trust the agency just bungs the gross amount to them, but their obligations may not come under UK employment law. However IANAL! Remeber that YOU are liable for the tax, and if the IR decide you have been avoiding tax you can get charged penalties and interest.
Consult a reputable (!) accountant.
If both the agency and the intermediary are very keen for you to go that route, it gives you some idea of who will benefit most from it.
I only ask because I came across a scam^H^Hheme using trusts based in the Isle of Man.
Minimal tax is due on the income the trust distributes to the beneficiary (ie you) due to the non-resident status, but since it has been fully taxed in the IoM the UK's dual-taxation treaty with the IoM means that no more tax is due in the UK.
Whether or not you would want to enter into a scheme like this depends on your stomach for a fight.
Don't confuse "avoiding" tax (perfectly legal), with "evasion" (not!) though - having said that, the IR rather like grey areas in taxation law since they hope that people will pay over the odds just to be on the safe side.
good advice...
It would also be worth joining the PCG to get access to advice, sample contracts, and the bundled professional fees insurance - that way if there ever is a dispute you can afford the sort of expert representation you will need.
True, although to be fair, agencies are forced down this route due to legislation changes made in 1988 which made it almost impossible for a sole trader to work through an agency without the agency standing the risk of being classed as an employer (and hence liable for back Tax and NI that they would then have be obliged to deduct at source)). The traditional solution was for the sole trader to incorporate to eliminate this risk.
Whatever you do, you need to make sure that all parties are clear what you are trying to achieve, then make sure any contracts reflect this, and finally make sure that actual working practices reflect the contractual agreements. Otherwise you are in danger of walking straight into the IR35 minefield (or to be more precise: you are in danger of walking into it whatever you do - but you want to avoid not walking out again!).
If the position really is a "job" (as in employment) then any amount of messing about with brolly companies attempting to reduce the tax liability by framing the agreement as a business to business contract is open to attack by the IR - although if it is only three weeks then it is probably too short a duration for them to be that bothered.
If on the other hand the end user genuinely is looking for a clear B2B relationship (i.e. they need to buy services from a contractor or freelancer - and don't want an employee) setting the relationship up framed in "employee style" contracts and practices will result in undesirable levels of taxation and employment liabilities being foisted on the wrong people. (Needless to say the IR would be unlikely to chase anyone for that!)
I have been asked to join Gabem in the past. I never did myself (yet) but I know lots of people who have and they seem a perfectly reputable organisation
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