Self employed - mortgages

[Guffy]

I've been staff with my current company for 5-years, but may have the opportunity to go day-rating (Oil Company), which would mean setting up my own company, but still working for the same company.

My partner and i have our name down for a new house to be built next year, but i'm concerned i won't be able to re-negotiate a mortgage if i've only got a couple of months wages as a consultant.

The new house would be about 50% LTV and the value of the loan would be about 1.5x my annual income as a day-rater.

Any advice from our resident mortgage experts?

[Eric Mc]

Guffy said:

I've been staff with my current company for 5-years, but may have the opportunity to go day-rating (Oil Company), which would mean setting up my own company, but still working for the same company.

My partner and i have our name down for a new house to be built next year, but i'm concerned i won't be able to re-negotiate a mortgage if i've only got a couple of months wages as a consultant.

The new house would be about 50% LTV and the value of the loan would be about 1.5x my annual income as a day-rater.

Any advice from our resident mortgage experts?

The term IR35 comes screaming at me on this one.

[Steffan]

Eric Mc said:

Guffy said:

I've been staff with my current company for 5-years, but may have the opportunity to go day-rating (Oil Company), which would mean setting up my own company, but still working for the same company.

My partner and i have our name down for a new house to be built next year, but i'm concerned i won't be able to re-negotiate a mortgage if i've only got a couple of months wages as a consultant.

The new house would be about 50% LTV and the value of the loan would be about 1.5x my annual income as a day-rater.

Any advice from our resident mortgage experts?

The term IR35 comes screaming at me on this one.

As usual with Financial matters Eric Mc is spot on.

You need to consult with a practicing Accountant. This is not good.

[Guffy]

Steffan said:

As usual with Financial matters Eric Mc is spot on.

You need to consult with a practicing Accountant. This is not good.

Yes, i'm aware of this, my only defence at the moment is that it would actually be a slightly different role, i.e. i would be working on a West Africa project rather than North Sea.

There are also several people who have retired and come back in the same position, but not sure how that is managed. I do know a couple of people who work elsewhere that have been investigated, not an enjoyable process by all accounts!

[robsti]

I know a few people in the oil industry that are company directors of a company that comprises of themselves and they work for one employer how does that go down with the tax man?

[Guffy]

robsti said:

I know a few people in the oil industry that are company directors of a company that comprises of themselves and they work for one employer how does that go down with the tax man?

Well that describes all the consultants i know that work in the oil industry, 12 in our department alone.

[Sarnie]

Guffy said:

I've been staff with my current company for 5-years, but may have the opportunity to go day-rating (Oil Company), which would mean setting up my own company, but still working for the same company.

My partner and i have our name down for a new house to be built next year, but i'm concerned i won't be able to re-negotiate a mortgage if i've only got a couple of months wages as a consultant.

The new house would be about 50% LTV and the value of the loan would be about 1.5x my annual income as a day-rater.

Any advice from our resident mortgage experts?

You will need two years audited accounts if you go self employed........

[tonym911]

Self-employed not being the same as being the director of your own company of course (in which case you are the employee of the company).

[Guffy]

tonym911 said:

Self-employed not being the same as being the director of your own company of course (in which case you are the employee of the company).

Ah, so maybe i shouldn't have used the term self employed, rather i would be a consultant and be a director of my own company.

Does this make any difference when applying for a mortgage?

[Eric Mc]

robsti said:

I know a few people in the oil industry that are company directors of a company that comprises of themselves and they work for one employer how does that go down with the tax man?

He probably hasn't noticed them - yet.

[Sarnie]

Guffy said:

Ah, so maybe i shouldn't have used the term self employed, rather i would be a consultant and be a director of my own company.

Does this make any difference when applying for a mortgage?

No.

If your the only director and main shareholder, for mortgage purposes, your classed as self employed.

[Eric Mc]

Guffy said:

tonym911 said:

Self-employed not being the same as being the director of your own company of course (in which case you are the employee of the company).

Ah, so maybe i shouldn't have used the term self employed, rather i would be a consultant and be a director of my own company.

Does this make any difference when applying for a mortgage?

No - that is PRECISELY smack bang in the middle of the IR35 target.

IR35 never applies to self employed individuals. It is only aimed at "Personal Service Limited Companies or Partnerships".


Whether you are doing the same job or a completely different job under the new arrangement may not have any bearing on the relationship with the people you are contracted to work for.

Please take professional advice on the FULL implications of IR35 and be absolutely sure that you truely and fully understand what it is all about.

[scotal]

Sarnie said:

Guffy said:

Ah, so maybe i shouldn't have used the term self employed, rather i would be a consultant and be a director of my own company.

Does this make any difference when applying for a mortgage?

No.

If your the only director and main shareholder, for mortgage purposes, your classed as self employed.

Wot Sarnie said. You rock up to a mortgage lender with this scenario and they'll laugh at you.
Contractors can get mortgages, but you won't have the track record next year.

[Guffy]

scotal said:

Wot Sarnie said. You rock up to a mortgage lender with this scenario and they'll laugh at you.
Contractors can get mortgages, but you won't have the track record next year.

Ok thanks Scotal (You’ve arranged a mortgage for me before, a few years ago now).

So, what’s to stop me staying staff until the mortgage is arranged, then go day-rating?

I can guess the response, just a bit annoying when I would double my income as a day-rater, would have a 50% LTV and am fortunate enough to work in an industry where jobs in my particular field and experience are plentiful.

[NorthDave]

Guffy said:

Ok thanks Scotal (You’ve arranged a mortgage for me before, a few years ago now).

So, what’s to stop me staying staff until the mortgage is arranged, then go day-rating?

I can guess the response, just a bit annoying when I would double my income as a day-rater, would have a 50% LTV and am fortunate enough to work in an industry where jobs in my particular field and experience are plentiful.

Nothing to stop you doing that all mate.

[Hyper10]

This could be very good as Eric will tell you, if there is an assessment ,HMRC deem that the payments made are nett after all deductions and actually chase the employing company. I know a guy who was assessed and after review HMRC deemed the payments as salary, he got 70K which should have been taxable as nett pay and the company settled the tax. They did initially threaten to sue him for recovery but gave up as the accountant just wanted it buried. For anyone doubting this it's in the Tax manuals but it's a high risk policy and given HMRC's attitude at the moment probably best not to test them too much

Steffan said:

As usual with Financial matters Eric Mc is spot on.

You need to consult with a practicing Accountant. This is not good.

[bigandclever]

Sometimes there's a bit of hysteria concerning IR35 on here. Yes, it's rubbish, and no, we don't like it, but if you know the contract and working practices are caught then so be it. If I were the OP, I'd be working on the principle that the contract would be caught (under the Friday - Monday premise); I'd then want to work out what am I swapping for in permy employment (take-home plus training? health? holidays? etc) for an increase in post-tax day rate. From the outside looking in, this situation just sounds like an employer wanting to divest themselves of an employee. Which is odd because being a contractor all I ever get is 'Will you convert to perm?' from clients.

[Eric Mc]

bigandclever said:

Sometimes there's a bit of hysteria concerning IR35 on here. Yes, it's rubbish, and no, we don't like it, but if you know the contract and working practices are caught then so be it. If I were the OP, I'd be working on the principle that the contract would be caught (under the Friday - Monday premise); I'd then want to work out what am I swapping for in permy employment (take-home plus training? health? holidays? etc) for an increase in post-tax day rate. From the outside looking in, this situation just sounds like an employer wanting to divest themselves of an employee. Which is odd because being a contractor all I ever get is 'Will you convert to perm?' from clients.

I kind of agree. IR35 is not as disastrous as some people think. If you can hack it, put up with it and carry on.

The main problem is when someone assumes that IR35 didn't apply and then gets caught out 3 or 4 years down the line.


Look up the Dragonfly Ltd case to see what can happen.