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IR35 individual companies join as one.

IR35 individual companies join as one.

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Good morning all

Been approached by a potential client. Mr X is potentially within IR35 within his company. Another 2 of his friends are in a similar situation. He's suggested setting up a company where all three are director/shareholders, but they share their resources among their custom base.

Would this be a potential work around to IR35?

Your thoughts please.

Thanks

Replies (4)

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By Duggimon
07th Feb 2018 11:05

If their customers don't mind which of them show up to do the work, the usual supervision/direction/control tests are met then this might work fine. However, if the three of them are caught by IR35 and just band together but don't change anything else then I think they're still likely to be caught.

One other possible problem will be how to do the income split in a fair and equitable way since any official agreement between them relating the dividends received to the work they've done really opens them up to the dividends being deemed remuneration.

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By mg200
07th Feb 2018 16:57

I think this might be caught by the MSC (managed service company) legislation. Worth a re-read.

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By KungFuKipper
08th Feb 2018 08:41

MSC raised its head again last year I believe (not aware of the specific cases, just hearsay) having been a little quiet for a number of years. This doesn't seem particularly MSCish though assuming they organise themselves as a proper business. I would suggest that the business allocates responsibilities for specialisms and trains its staff, pays salaries, auto-enrols etc?

It is the contract which is assessed under IR35 is it not? So if the contract is IR35 compliant and there is a 'realistic' possibility of substitution amongst the group then why not?

How would you distribute profits? Alphabet shares maybe?

The doom-mongers would have us believe that the public sector IR35 'reforms' are coming the way of the private sector in the not to distant future, so it could all be academic anyway.

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By Matrix
07th Feb 2018 17:49

Can they substitute each other? Would their clients be ok with a clause regarding substitution when any of the 3 employees of the company could be sent to the client?

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