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Setting myself up as a "contractor"?

Discussion in 'Careers, Employment and Professional Development' started by R.O.S.S.I, 20 Aug 2021.

  1. R.O.S.S.I

    Capodecina

    Joined: 16 Nov 2002

    Posts: 10,405

    Location: The Moon

    Hi all, I'm a British citizen living and working in Australia for the past 4 years looking for a bit of advice. A month ago I made the decision to return back to the UK in October and handed my notice in at my current employer, who are a 20 head-count agency based solely out of Sydney.

    My Director is sad to see me go, so they have made a counter-offer for me to stay on with the company when I go back to the UK and basically oversee and develop a UK side to the business. They've been wanting to expand internationally and think that now would be a good time to give it a try. They've outlined what the new role would look like (a mix of some of my current AU duties, then more partnership and business development duties to grow a UK team) and we've had a bit of back and forth about salary and expectations and i'm pretty happy with where we're at.

    The only thing they want to do a bit differently as they don't currently have a UK operation, is effectively pay me as if I was a contractor in the UK for the first few months whilst they/me get things set up.

    They are still going to give me all the same rights as an AU company employee, so annual leave, sick leave etc but don't want to set up payroll until we've basically proven the concept and i've got the business operating at a level that we know warrants it - which I totally get.

    Having never worked as a contractor before, I was hoping the fine folk of OCUK can offer some advice and guidance on what the best way to go about doing that is and any considerations I should be aware of in setting myself up in this way.

    They have already said they will pay me what the pension contribution would be as extra on top of the salary so I won't be losing out there, but is there anything else i should be across? I assume there are going to be tax efficient ways of setting myself up and things which I should be claiming and not claiming etc?
     
  2. peterwalkley

    Mobster

    Joined: 23 Feb 2009

    Posts: 4,022

    Location: South Wirral

    What you're describing doesn't sound like a contractor relationship, but more of an standard employee. You have a single "client" and they are paying pension, holiday pay etc. My understanding is that for it to come outside IR35 you need much more of an arms length relationship, multiple clients, right of substitution and so on.
     
  3. Martynt74

    Capodecina

    Joined: 20 Feb 2004

    Posts: 17,279

    Location: Higher Walton

    Yeah, that's the very definition of inside IR35.

    I wouldn't have actually thought it was too difficult to setup a PAYE scheme, my wife does it often for small businesses (she does Payroll as a job) and setting up a business will presumably already be done. Plus saves the whole hassle around inside/outside IR35.
     
  4. R.O.S.S.I

    Capodecina

    Joined: 16 Nov 2002

    Posts: 10,405

    Location: The Moon

    Yeh, clearly I don't understand any of this :cry:
    OK so to set myself up as a standard employee for them how do I do that? I'm assuming they will need to have a UK business entity set up for that to happen. They won't have PAYE/payroll set up though which is why they think setting me up as a contractor is the best way to go until payroll is set up in a couple of months.
    Would I just invoice them every month and then pay my tax, NI, pension separately?
     
  5. Martynt74

    Capodecina

    Joined: 20 Feb 2004

    Posts: 17,279

    Location: Higher Walton

    Yeah so the steps would be

    Set Up a UK Business - I assume you'd be doing this anyway - It's a straight forward 15 minute job really.
    Set up and get a PAYE number - I believe this is fairly straight forward and similar to setting up a business
    Run payroll and submit information to HMRC each month

    Presumably you'd also benefit from a UK business bank account, but again i'd have thought this would be part of the plan anyway as part of the initial setup.


    As a contractor, i assume you'd need an accountant to supply you with Tax/NI information etc and so yeah, you'd need the company to pay you an "all in" figure.


    I'm sure people could advise better from a contractor point of view, but from a payroll side my wife charges around £40 for a single person each month and gets involved in setting up PAYE/Pension etc so don't think it's an expensive process. I'm sure your accountants would likely also have a payroll department and just add it in as part of a package.
     
  6. R.O.S.S.I

    Capodecina

    Joined: 16 Nov 2002

    Posts: 10,405

    Location: The Moon

    Yeh, so I am not really a part of business operations in Australia from that side of things, but it looks like I will be more across it for the UK.
    • So they need to set up the UK Business - is this possible without an address? I guess we just set up a "virtual" address with someone as we will be office-less for a good while.
    • Set up a PAYE number - hopefully fairly straight forward
    • Set up a Payroll system that submits to HMRC every month - we use Xero atm, i'm sure there must be a bolt on for it to manage payroll for another country, I know it can do multiple country invoicing.
    • Set up a UK Business Bank Account - very good point.
    I think I need to do some more reading on how is best to set myself up, I shouldn't be "contracting" for more than 3 or so, so I'd prefer the easiest and and least hassle way (unless it ends up costing me more in tax etc).
     
  7. Maccy

    Commissario

    Joined: 23 Nov 2004

    Posts: 38,721

    Location: Herts

    I think in this instance I would actually advise going with an umbrella if it's for such a short space of time, and as it's international I'd recommend Liberty Bishop - https://www.libertybishopinternational.co.uk/

    If you're getting employee benefits, you're going to be deemed inside IR35!
     
  8. Martynt74

    Capodecina

    Joined: 20 Feb 2004

    Posts: 17,279

    Location: Higher Walton

    You would likely need an address, not sure whether you can just use wherever you'll be living or there are "virtual" address places which you can use and they offer mail forwarding services quite cheaply.

    Xero do have Payroll options. I assume it'll be easy enough to setup for a UK entity. Alternatively a free version is called Payroo, it's not brilliant but for a single person it should be easy enough.



    It would probably be worthwhile having a call with a UK based accountant re the whole setup, if it's something which will be setup long term there's probably a lot to think about, especially as it'll be a subsidiary of an Australian business and there'll likely be various tax implications there.
    Getting it done right up front will likely save a lot of pain down the line.
     
  9. delta0

    Sgarrista

    Joined: 21 Oct 2012

    Posts: 7,788

    Location: London/S Korea

    Just stating the obvious here but (assuming you have a UK passport) why can’t you just come to the UK whilst still employed by the Australian company for the 3 months? Then after that switch the contract over to a UK one once the business is established. Do a tax return at the end of the year just to make sure it all adds up (I assume we have a tax sharing agreement with Australia so that should make it more straight forward)
     
  10. R.O.S.S.I

    Capodecina

    Joined: 16 Nov 2002

    Posts: 10,405

    Location: The Moon

    I do have a British Passport. Im relocating back to the UK permanently so this will be my permanent full time job when I come back. I'm not sure I follow what you mean exactly. The company will still be employing me throughout this time (albeit under a slightly new job title)
     
  11. Martynt74

    Capodecina

    Joined: 20 Feb 2004

    Posts: 17,279

    Location: Higher Walton

    Yeah, but he means you could still just be employed in Australia, i.e processed through Australian payroll.

    That way you could operate within the UK for UK clients but presumably not have to setup a UK office until it's established.
     
  12. R.O.S.S.I

    Capodecina

    Joined: 16 Nov 2002

    Posts: 10,405

    Location: The Moon

    So by this do you mean I would still work directly for the AU side of the business, paying Tax and Superannuation (pension) as if I was in AU still? And they just continue paying me as normal into my AU bank account as an AU employee until they have UK business entity, UK PAYE and UK Payroll set up? Would they be able to pay me into a UK bank account? Would I have any tax obligations in the UK?
     
  13. englishpremier

    Sgarrista

    Joined: 15 Feb 2003

    Posts: 8,635

    Location: Europe

    Does IR35 even apply if your client is based outside the UK and thus not subject to UK laws
     
  14. R.O.S.S.I

    Capodecina

    Joined: 16 Nov 2002

    Posts: 10,405

    Location: The Moon

    I've just been Googling and it turns out IR35 doesn't apply as my employer is overseas - but it will do once they set up shop in the UK officially.
    If IR35 doesn't apply to me do I just set myself up as a sole trader and just go from there?
     
  15. englishpremier

    Sgarrista

    Joined: 15 Feb 2003

    Posts: 8,635

    Location: Europe

    I can't advise on that. Would seem to make sense to me to setup an LTD, then invoice the company in NZ for the work you do for them. Also to have them pay you an additional amount in lieu of the benefits you would normally receive.

    Once they are all setup in the UK they could just buy your company, or you dissolve it and become an employee.

    If it is just a short amount of time and the sums involved aren't huge, then self employed/ sole trader could work too.

    You would need to seek professional advice.
     
  16. randomshenans

    Capodecina

    Joined: 11 Sep 2009

    Posts: 12,774

    Location: France, Alsace

    Yes, it completely depends on these factors really. If it could be 2-3yrs and over 2-300k it'll be better as a UK Ltd. but if it's short term and smaller amounts sole trader would be easier. Really depends though.
     
  17. R.O.S.S.I

    Capodecina

    Joined: 16 Nov 2002

    Posts: 10,405

    Location: The Moon

    No it should be 2-3 months max, money involved isn't mega cash either so i'm thinking it would be easiest to go self employed/sole trader route.
     
  18. HangTime

    Man of Honour

    Joined: 25 Oct 2002

    Posts: 29,400

    Location: Hampshire

    Bear in mind if you are getting paid in AUD you'll be 'exposed' to currency fluctuations which can be good or bad depending on which way it goes. A friend of mind did the opposite, moved to Australia whilst still employed out of the UK getting paid GBP and the exchange rate dropped under 1.6 which effectively meant he had a 'pay cut' in terms of paying for things in dollars out there. It's not really a problem if you can handle your income being random/volatile which I assume it might be anyway if you are involved in business development.
     
  19. R.O.S.S.I

    Capodecina

    Joined: 16 Nov 2002

    Posts: 10,405

    Location: The Moon

    Yeh i'd rather avoid that as i'll then have to convert it back to GBP one way or another so i'd rather just be paid in GBP I think.