egos® - Executive
Director’s Service Agreement
An individual and
a personal service company are separate legal entities. Thus a formal
contract of employment between an individual and the company can define the
terms of the relationship – rights, responsibilities, and liabilities -
between the two.
The law requires
certain formalities in relation to all employees. These include the
requirement for a Statement of Particulars of Terms of Employment to be issued
under the Employment Rights Act 1996 to each employee – and for a revised
such statement to be issued as and when any of those terms change.
Taking a serious
attitude towards compliance with such formalities is a significant element of
running a company properly, as a genuine independent business – and as
more than just an invoicing vehicle. Being able to show that the company
is indeed properly run and operated as a genuine independent business is a
significant factor in any IR35 assessment – it all helps to build a
picture.
Where one seeks
to maintain a position of remaining outside IR35, it is important to be able to
show that one is indeed running the company properly, as a wholly separate
entity, and with proper respect for the legal formalities and requirements.
And structuring
the contractual employment relationship between individual and company has the
advantage that it’s an IR35-positive step that can be taken by the individual
and the company, without requiring the cooperation of anyone else. The
PCG ‘Audit Trail for Consultancy Status’ includes the existence of such a
formal contract as one of the items on the checklist.
Additionally,
such an agreement may also help to define the parameters of that relationship
(and hence have an effect on the relationship that the company may ‘create’
between individual and end-client), and thus build on certain otherwise
negative points which have emerged from the O’Murphy decision.
It is also designed to optimize the prospects of being able to claim
expenses relating to working at home (taking into account the ‘wholly
necessarily and exclusively’ requirement for an employee’s business expenses to
be tax deductible).
Intended for the
working director of a Personal Service Company, this package includes:
- Director’s Service Agreement
- Statement of Particulars of Terms of Employment under the
Employment Rights Act 1996
The cost is ₤150.00.
NB 1: if you have a split shareholding with a partner
and s660A may be a consideration, then this must be discussed with us, to avoid
risks of a DSA harming your s660A position.
NB 2: if you do set up such an agreement, you will
need to ensure that the company pays you salary of at least National Minimum
Wage for the hours you are seen to work.
To request this
package, mail me, and include
1
your name
2
the company name
3
the company number
4
your address
Note that this
package is not intended for use in the situation where the relationship between
company and individual is wholly ‘arm’s length’ situation, ie where other
parties have at least a majority interest in the company – in that
situation, certain contingencies (such as formal disciplinary procedures and
non-competition restrictions) may adopt a greater importance, and therefore
need to be provided for in more depth than is the case with this product.
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This page was last updated on 8th April
2010.
No liability is accepted for any inaccuracy
in the information in these pages - see full disclaimer
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