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Invoice a director of a limited company.

A customer will not contract with the company but instead wants to contract with the director directly so the services cannot be delegated to another director or employee.

Can the company invoice the director to get this money into the company (take advantage of losses b/fwd etc) and what should the invoice say? How would HMRC view this? Would they say the work was carried out personally by the director, and invoiced in the name of the director and therefore they are self-employed, as it looks to me that they would just say this was done to avoid Class 4 and take advantage of no additional tax on dividends.

Thank you for your help.

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24th Feb 2012 18:01

If he is going to do the work just reassure them that this is the case. If they are so desperate for him to do the work they have more chance of that happening than if they went elsewhere?

Is VAT involved? Would the Director register for VAT?

Unless there is big bucks involved, this just sounds too messy to be bothered.

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25th Feb 2012 11:27

Yes - the director would be self-employed

I agree that the best solution is to persuade the client to contract with the director's company, even though the income may be subject to IR35 if the director is a majority shareholder as the client is clearly not going to accept anyone else to do the work.

The alternative of the director contracting with the client is too messy.  He would have to register as self-employed, register for and pay Class 2 NIC and eventually, file the self-employed pages of the tax return, perhaps for two years, and pay Class 4 NIC, just for this one job.

And no - there are no grounds for the company invoicing the director as the company has not supplied anything.

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By thomas
25th Feb 2012 15:39

I have one like this too...

Customer wont deal with the Ltd Co. ( history with one of the directors who is an ex employee) (Ltd Co has 2 shareholders, 1 director, many customers)

One of the shareholders has performed the work via his sole trade business. Sole trader/shareholder invoices and receives payment from customer.

Ltd company have invoiced the sole trader/shareholder.

Everyone is VAT registered so VAT charged/claimed.

Plan is to put this shareholder on a min wage, make him a FT employee of Ltd Co.  Could we not be sub contracting his time to the sole trade business? Clearly some Related party disclosure would be required.

Is this a big NO NO then?  I see your point Euan about the company not actually supplying anything...

 

Thxs

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By dstickl
26th Feb 2012 16:02

@cadeeley: Could the Ltd Co charge a "finder's fee" & the worker

 Could the Ltd Co charge a "finder's fee", and the specified worker do a one-off exceptionally free-of-charge piece of work, as a marketing exercise for the apparently "picky" customer?

Would potential problems include: liability / insurance / HMRC / ... ??

[Back now to the Scotland France game!]

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