Hello,
I'm a consultant with my own limited company. My new client wants to offer me a business to business contract - where I'm paid a daily rate and I raise invoices at the end of the month. However as part of the contract, after 6 months of service they would like to offer me 0.05% stake in their business. This is of utmost importance to me and one of the prime reasons I want to render my services to this client. I believe in their product and think the company will grow tremendously. However I'm not sure if having a stake in their business makes it an Employee Related Security and brings me under the IR35 regulation. I am definitely not an employee of their business. We definitely want to have a business to business relationship. How can the stake part of the contract be achieved? Could it be worded such that my limited company (and not me personally) can have stake in the client's business after 6 months? If so what are the tax implications (e.g. capital gains tax if the company valuation increased at a later date) and tax reporting implications?
My current accountants can't seem to help. Any inputs will be greatly appreciated.
Many thanks in advance
Replies (6)
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Hint re Employment Related Securities
Is your company an employee?
IR35 status will be what it will be, regardless of the proposed shareholding.
If your current accountants are unable to advise on this, I suggest that you switch - pronto.
Way round what?
Yes of course your company can take shares if you decide it is in the company's interests to do so. What you need is advice so that you understand the tax and other consequences of doing so, which it is good to see you are looking for other accountants to help with.
You do not seem to be seeking advice on whether acquiring shares in the company in question is a good investment. If you want such advice you won't get it from accountants.
Did you miss this?
IR35 status will be what it will be, regardless of the proposed shareholding.
ERS is a red herring anyway as your company will pay tax on the value of the shares in any event won't it?