IT Contracting - anyone here do it?

[DanielJames]

Afternoon all,

While I'm still fairly young and don't have many responsibilities at home I'd like to explore the IT Contracting world.

The main reason for interest is that I've seen first hand just how much can be made, when my company employed the services of 6 contractors last year.

I understand the work is unreliable, and working on a 24h notice period will be interesting, but does anyone on here do this type of work and how does it go?

I'll be looking for mainly service desk/1st/2nd line tech support roles.

Interested to know if anyone does, or did do this.

Thanks
Dan

[ewenm]

Lots of IT Contractors on PH. I started contracting in 2006 and am happy with my decision. The increased flexibility and reduced bureaucracy easily outweigh the increased risks for me.

[Studio117]

i do it.

Remember, no work no pay.

As long as you bare that in mind when you go out on a wednesday night I'm sure you'll be fine.

[ewenm]

Studio117 said:

i do it.

Remember, no work no pay.

As long as you bare that in mind when you go out on a wednesday night I'm sure you'll be fine.

Well, no work and your company earns nothing. If you've prepared for periods out of contract you (the individual) can still get paid by your company until the slush fund runs dry.

OP: IMO the most important thing is to clearly separate you the individual and employee from you the director of the company and from the company itself. Get those straight in your head and the legislative requirements are much easier.

[Bluequay]

You need to have the correct mentality, a lot of people can't cope without the safety of a permanent job if you are a worrier or somebody who can't handle being out of work then it's not for you.

I've not contracted for about 5 years, but recently gave in my notice at a permie job to go back to it(longest 3 months of my life!), but I've never had 24 hours notice it was always at least a week.

First thing you need to do after landing that first contract, and sorting out the legal side, whether to go umbrella or ltd etc is to get your emergency fund sorted, you will want at least 3 months income preferably 6.

[DanielJames]

I think I'll do fine on the mentality side - I don't have many financial commitments at all.

I was speaking to a guy I used to work with about this and he told me to avoid the umbrella companies and just set up my own LTD company.

Do you lot use umbrellas?

[ewenm]

If you're only using contracting as a stop-gap then an umbrella company is an easy and convenient option. If you're switching to contracting as a long-term choice then setting up your own LTD company is the best way to go IMO.

[DanielJames]

Might it be worth going umbrella until I decide if I like it or not then, seems so

[ewenm]

DanielJames said:

Might it be worth going umbrella until I decide if I like it or not then, seems so

That's what I did - I was umbrella for my first 6 month contract while I found my feet then set up my LTD for the next contract.

[Bluequay]

Running your own Ltd company for an IT contractor is a pretty simple task, and if you are not caught by IR35 then it should (I'm NOT offering financial advice btw!!) be the best way to make the most of your earnings. Since I last did it there are lots of online accountants that have popped up that look ideal for keeping the day to day running of the company simple. I will be going with somebody like this http://www.inniaccounts.co.uk/. You may prefer to go with somebody more local who can talk you through things as a first timer.

The hardest thing is finding that first contract, most companies want somebody to start asap and you will have notice with your current employer. I was on 3 months so have had to just resign and will start looking nearer to the end of my notice period.

Good luck

[Freakuk]

I've been contracting since 1997 (apart from 2 years back in a permie role) I've got a mortgage and the usual debts that everyone has.

My last contract was a 24 hour contract and it never bothered me, most are a week I guess. As has been said the main thing to remember is get a good chunk of cash behind you for that rainy day, sometimes they come sometimes they don't.

Also don't forget you'll probably be VAT registered so that will need to be repaid quarterly, plus the biggy - corporation tax once a year, plus your personal tax.

[UpTheIron]

DanielJames said:

Afternoon all,

While I'm still fairly young and don't have many responsibilities at home I'd like to explore the IT Contracting world.

The main reason for interest is that I've seen first hand just how much can be made, when my company employed the services of 6 contractors last year.

I understand the work is unreliable, and working on a 24h notice period will be interesting, but does anyone on here do this type of work and how does it go?

I'll be looking for mainly service desk/1st/2nd line tech support roles.

Interested to know if anyone does, or did do this.

Thanks
Dan

I think you will get largely positive responses on here - most people who make the jump never look back. I made that leap back in 2002 with the helpful bonus of being able to engineer a half decent redundancy package. I was mid-twenties, had a fair chunk in savings and few outgoings - half a manageable mortgage & bills, no car, no dependants. It was a relatively easy decision.

I don't have a crystal ball, but I've probably done better than if I had stuck to permie roles - although having said that I made the jump back earlier this year for various reasons (not least the opportunity for an MVL!). In hindsight though, whilst contracting the money was not the only reward for me, but also the fact that contracting, my ability and a good deal of luck enabled me to work on some great projects and resulting in me gaining some excellent experience.

I didn't at any point find the work unreliable as you put it - in fact I felt more secure in my contract roles than my previous permanent roles - I was there to deliver a particular project/function/outcome, typically with defined start and end dates and usually immune to organisational changes and restructures.

In terms of notice period, be prepared for contracts that effectively have no guarantee to provide you work (i.e. your company can be terminated by your "weeks notice" and be told there is no work to do so you can't invoice for it), and also contracts that your company cannot terminate. I don't see an issue with this - just remember they are your client, not your employer.

The other significant advantage I had that I do not think you do - forgive me for saying - is that I had a good reputation in a relatively small field with a lot of contacts who could prove useful for future work. In my experience the SD/1st/2nd line world is somewhere that you will find it difficult to stand out amongst other contractors, potentially resulting in a race to the bottom in a market judged on hourly rate

Is there anything "specialist" about your skills and experience? A particular technology product that you are "expert" level in? Or an industry sector you have good knowledge of, so can add benefit and stand out that way? What qualifications do you have?

What are your expectations around rate? Where are you prepared to work / travel to? How much do you know about IR35?

[Chest Rockwell]

DanielJames said:

Afternoon all,

While I'm still fairly young and don't have many responsibilities at home I'd like to explore the IT Contracting world.

The main reason for interest is that I've seen first hand just how much can be made, when my company employed the services of 6 contractors last year.

I understand the work is unreliable, and working on a 24h notice period will be interesting, but does anyone on here do this type of work and how does it go?

I'll be looking for mainly service desk/1st/2nd line tech support roles.

Interested to know if anyone does, or did do this.

Thanks
Dan

• London seems to be the contractor centre of the universe (if you have to relocate then living costs will take a chunk out of your winnings).
• SD, 1st & 2nd line will most likely be in the £100 to £200 per day area. A few 2nd liners I know have scored £250 per day gigs.
• Go umbrella for your first gig to see if you like contracting. Setting up a Ltd Co is easy, but closing a Ltd Co is a pain. If you like contracting then set up the Ltd Co and switch at next renewal or for the next Gig. If you don't like contracting then you simply get a P45 from the umbrella and can slide back into permie-land.
• Once Ltd Co, register for the Flat Rate VAT scheme - you collect 20% VAT on your invoices but for IT the VAT man only requires 14.5% meaning you keep the rest.
• Again, once Ltd Co, employ the services of an Accountant such as Nixon Williams to take care of the HMRC side of things, your pay, your divis, expenses etc.
• Agents (pimps) will be the biggest challenge, some are good but some are awful and lie through their teeth. Ignore the 'we need two references before we put you forward' bks.
• ALWAYS get your contract checked out by Qdos for IR35 compliance, if fail insist on contract rewording or just walk away.
• Pimps like to spout 'the client is paying between xyz and xyz'. In reality, the client is paying the pimp a set figure so the pimp is offering you a range below that figure. They like to give the impression that the client will be more favourable to those who accept a lower rate when in fact the client doesn't care. Yes they have to make a profit, but the profit has already been factored in, for instance, client is paying pimp 400 per day but pimp offers role at 300 - 350 so ALWAYS opt for the very highest. Never give away your previous day rate. When asked 'what's your daily rate' always reply 'what's the daily rate on offer?'.
• Go visit Contractor UK - plenty of info on there. The forums are good.
• When you go Ltd Co, join the PCG, get your pro indemnity insurance too.

A good accountancy firm will set you straight on a lot of this stuff, so it's important you get that in check first. But dealing with agents and spotting their games will only come with hard won experience.

Good luck

[MagicalTrevor]

Bluequay said:

Running your own Ltd company for an IT contractor is a pretty simple task, and if you are not caught by IR35 then it should (I'm NOT offering financial advice btw!!) be the best way to make the most of your earnings. Since I last did it there are lots of online accountants that have popped up that look ideal for keeping the day to day running of the company simple. I will be going with somebody like this http://www.inniaccounts.co.uk/. You may prefer to go with somebody more local who can talk you through things as a first timer.

The hardest thing is finding that first contract, most companies want somebody to start asap and you will have notice with your current employer. I was on 3 months so have had to just resign and will start looking nearer to the end of my notice period.

Good luck

I've been with inniAccounts for just over a year now and I'm very pleased with their service. If you use my referral code (CA3693) then you get 10% off (and so do I )

[98elise]

I've been contracting for 3 years now.

The most important thing is to be good with your finances. Remember everything has to come out of your daily rate, pay, sickness, redundancy, holiday, training etc. I pay myself less than I did when I was permie, and the rest stays in the company as a buffer. I'm just getting to the point now where I feel some security!

You also need to ask yourself a few questions...

Can you cope with being unemployed at a moments notice?
Can you cope financially with not getting work for say 3 months?
Do you feel confident you will a job quickly?

In short if you are the sort of person that fears redundancy, then contracting is not for you.

Personally I love contracting a because I'm reasonably good at my job, but hate company politics. I also have no desire to climb the corporate ladder. I should have done this years ago.

[russ_a]

I've handed in my notice to go contracting. So if anyone is looking for a .Net / Developer / Dev Manager in the Midlands let me know.

[Olivera]

Chest Rockwell said:

• Once Ltd Co, register for the Flat Rate VAT scheme - you collect 20% VAT on your invoices but for IT the VAT man only requires 14.5% meaning you keep the rest.

On the flat rate scheme you add 20% VAT to invoices, but pay 14.5% of your TOTAL income (including VAT) to HMRC. A subtle but very important point.

[casbar]

Olivera said:

Chest Rockwell said:

• Once Ltd Co, register for the Flat Rate VAT scheme - you collect 20% VAT on your invoices but for IT the VAT man only requires 14.5% meaning you keep the rest.

On the flat rate scheme you add 20% VAT to invoices, but pay 14.5% of your TOTAL income (including VAT) to HMRC. A subtle but very important point.

Don't know what accountant you have, but you charge VAT at 20% and pay the revenue 14.5% per quarter, only VAT not total income. Total income is used to see if you can stay in the scheme. After the first year you pay 15.5% Look here for full details http://www.hmrc.gov.uk/vat/start/schemes/flat-rate...

[ewenm]

Flat rate VAT. I got a lesson from the HMRC man on this. You charge 20% on your invoices and then pay the flat rate percentage on the GROSS amount. For IT the rate is 14.5%, with a 1% discount on the first year down to 13.5%.

So you don't make the full 5.5% as the VAT is invoiced on the net amount but paid to HMRC on the Gross invoice amount.

[Pit Pony]

ewenm said:

Flat rate VAT. I got a lesson from the HMRC man on this. You charge 20% on your invoices and then pay the flat rate percentage on the GROSS amount. For IT the rate is 14.5%, with a 1% discount on the first year down to 13.5%.

So you don't make the full 5.5% as the VAT is invoiced on the net amount but paid to HMRC on the Gross invoice amount.

I do Engineering Contracting and my rate is 14%, which works out well as my cost usually don't have much Vat (the vat element of 45p a mile, is negligible). Mind you it adds to the profit, so you pay more Corporation Tax .

My wife can't get her head around the 'downtime' between contracts. My max is 5 weeks, which included 3 weeks of being promised a contract, and 1 week of waiting for the security clearance. Despite the fact that my business account has a substantial buffer, she panics when my contract has 1 month left to run.