Going contract from a permanent role

Going contract from a permanent role

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Bartlett

Original Poster:

21,535 posts

241 months

Wednesday 25th February 2015
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Later this year I will be going freelance. I have the backing of my current employer, and it's likely they'll become one of my main clients once I leave.

There are a few commitments I'd like to see out here and it will probably take three or four months for them to find someone to take over my role.

So the question is: Should I give them a month's notice and switch to working on a monthly contract for the remainder of the time they need me in the office or should I carry on as a salaried employee right 'till the point I leave?

By the end of that period I will be working from home with (hopefully) a fairly diverse range of clients. But for the handover period - if I did go straight to contract - most of my time would be spent with the one company, working on-site.

Any thoughts?

CRB14

1,493 posts

151 months

Wednesday 25th February 2015
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I expect most people would advise that in doing this you are likely to encounter problems with IR35. Have you read up on this?

CRB14

1,493 posts

151 months

Wednesday 25th February 2015
quotequote all
I expect most people would advise that in doing this you are likely to encounter problems with IR35. Have you read up on this?

Moonhawk

10,730 posts

218 months

Wednesday 25th February 2015
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Bartlett said:
So the question is: Should I give them a month's notice and switch to working on a monthly contract for the remainder of the time they need me in the office or should I carry on as a salaried employee right 'till the point I leave?
You might want to clarify with your employer that you can do that.

A few of the companies I have worked for over the past few years (and I believe it's becoming more and more common) have clauses which state that if you leave the company by resigning or through redundancy - you can't work back there as either a permanent employee or contractor for at least 12 months.

Autopilot

1,298 posts

183 months

Thursday 26th February 2015
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Loads to consider, but the above responses summarise well.

I'm no expert, but when I first started contracting, IR35 was described to me as the mechanism to stop me finishing at my place of work as a permanent employee on a Friday and turning up on a Monday as a contractor but with reduced tax liabilities. It is obviously more than this, but due to your current position, it would be hard to prove you're not a disguised employee.

I'm sure people in the know will be able to advise, but I think you can declare parts of your income as being inside IR35 and some out, so if you have multiple clients, at worse you'd just be required to pay the appropriate taxes on this part of your income....or take the risk of course!

If your current role was your only 'contract' and only to last for a few months, then there isn't any real benefit of doing the last bit as a contractor. No sick pay, holiday to use up etc etc, no real financial gain and no employee rights. Seems to me like it would be the worst of both worlds.

If you were deemed outside of IR35, then you would benefit from the usual ltd (presuming you'd go ltd) facilities!

Bartlett

Original Poster:

21,535 posts

241 months

Thursday 26th February 2015
quotequote all
I'm vaguely aware of IR35 having worked as a contractor (through an umbrella company) in a previous career. I think things were a lot less lenient then, however.

With regards my current situation, I work for a very small company and I'm on good terms with the directors. I don't think they'd object to me moving to a contract basis if it was legal and prudent.

One downside of my current situation is that I have a pretty minimal holiday entitlement and I'm usually too busy to use it, so being able to claim mileage for my lengthy commute trip to the client's premises could potentially outweigh that if I was only doing it for a reasonably short time. I believe three months is usually the cut off and that should give them time to sort out a replacement. It's also arguable as to whether I will be doing the same job when I supply to them in the future - someone else will be doing my role and I will be doing something related.

That said, it does sound like I might be better off remaining a salaried employee until I go fully freelance.

Edited by Bartlett on Thursday 26th February 15:30