VAT/structuring ideas for a cooperative

[Incredulum]

I should like to tap the forum for some thoughts, please.

A company which provided professional services advice is just about to go into administration having failed to pay its staff wages on Friday.

The employees who undertake field work (who are scattered across the country, each with their own patch where they provide advice either to their own locally-obtained clients or to a nationally-obtained clients) believe that the underlying business is viable when overheads are cut (being operated out of spare bedrooms rather than rented offices etc.), and wish to continue it in some form. The company itself never made any profit, so there is no hope of a third party buying the business, I suspect the administrator would sell the goodwill in exchange for writing off all claims by the former employees for last month's (unpaid) expenses, or even less.

Currently there is a head office function which performs research/invoicing/policy/getting national contracts/ensuring the company is a nationally approved supplier for certain customers.

To me a simple (important) solution is for the individual former field-working employees to continue as sole traders (/company/LLP), whilst paying a management fee to a head office function - effectively paying a fee to join a club, but being entirely responsible for getting in their own fee income. A sort of franchise, I suppose. Or a cooperative (whatever one of those is - as Tribune Magazine has announced this weekend, under similar circumstances, it is becoming).

I should be grateful for any thoughts (or, better, experience). TUPE? Would they actually be self-employed? Could it all function under one VAT registration? I point out I am not advising, this is a brainstorming session.

[Lambs]

I,

Sounds like it could very easily be a partership or similar going forwards. The legal aspects of incorporation - with members potentially coming and going very frequently - appears problematic. I think TUPE only in point if the latter?

A single registration would be possible for either a partnership of a company, but in this area I think monitoring incoming and exiting partners would be a headache.

As to the head office function, at first glance it appears proximal to barristers' chambers, or similar as in the dentistry profession, where principals and other self-employed practitioners pool costs to meet office / admin overheads.

I have no qualms about their being self-employed if they are(!) - risking capital, on their own account, stand or fall by reference to their own efforts - lack of mutuality of obligations, etc.

Regards,

Lambs

[Incredulum]

Thank you Lambs. Yes, it sounds just like a barristers' chambers, you are right.

I don't think a partnership would work for the field workers. Just too unnecessarily complicated. They don't really need each other in that way - they would have their own local business for which they would be paid directly by the end users (for all that some contracts are arranged nationally, they are arranged by quango/government, but delivered and paid for locally). Individual VAT registration would be a bit annoying, but presumably not the end of the world.

The irony, of course, is that much of the head office activity is by the current senior employees (who IMO haven't been very clever in managing the business side of things). There would be a delicious irony if they were to be paid for by their former junior staff...

My TUPE/employment concerns arise from knowing very little about it. If the brand name and head office move into a new entity owned by senior management/possibly with the field workers having some sort of share/the current trustees, whose responsibility is it to pay the redundancy payments of the fieldworkers. Presumably the administrator, who will not be able to, and so it will be HMG (through the National Insurance Fund).

[Lambs]

I,

I am a tax person, rather than an accountant, (or solicitor), so am only on nodding terms with TUPE, but as I understand things their eligibility for payment arises out of the cessation of their employment (if I have understood your original post correctly). If they subsequently set up in business on their own account albeit working with the same people, then I think TUPE doesn't apply and they'd be eligible for redundancy / wages from the fund.

But I don't need to tell you to take my opinions with a pinch of salt!

Regards,

Lambs