Becoming an IT Contractee
Discussion
Hey Guys and Gals
I may very well be given the opportunity to become an IT contract type bod, but I have no idea how it works - apparantly I have to set up a Ltd compnay and then its looked after by an umbrella company?
I've been desparatly looking for IT work in Bristol and this has come my way but I'me unsire how the whole contractor process works?
Can anyone elaborate for me?
I may very well be given the opportunity to become an IT contract type bod, but I have no idea how it works - apparantly I have to set up a Ltd compnay and then its looked after by an umbrella company?
I've been desparatly looking for IT work in Bristol and this has come my way but I'me unsire how the whole contractor process works?
Can anyone elaborate for me?
Speak to an accountant PDQ.
You don't have to have a ltd co. There are pros and cons.
Setting one up and running it as an IT contractor is a doddle. You need to check if your contract would make your IR35 exempt. IR 35 was a nasty piece of legislation aimed at the single man ltd co to tax them on what the company earned and not what the person took out of it.
You don't have to have a ltd co. There are pros and cons.
Setting one up and running it as an IT contractor is a doddle. You need to check if your contract would make your IR35 exempt. IR 35 was a nasty piece of legislation aimed at the single man ltd co to tax them on what the company earned and not what the person took out of it.
The "normal" way to deal with this is for you to set up a Limited Company (i.e. a company registered at Companies House). Your company then bills the organisation you are working for and the payments are made into your limited company's bank account. In order for you to get your own hands on the money sitting in this bank account, you either pay yourself salary (as a director of the company) or pay yourself a dividend (as a shareholder) of the company - or a combination of both.
That's the simple part. Unfortunately, there have been a number of changes to the tax legislation governing th operation of these types of companies which has made them very tricky to operate from a tax liability and tax compliance point of view (you may have heard of the dreaded IR35 provisions, for instance).
However, it is still a feasable thing to do - but you must be prepared for the paperwork and necessary diligence that goes with the territory.
The alternative is to operate through an already established compny (an "umbrella" company). In effect, this company (which is usually owned by other people) acts as kind of agent between you and the actual organisation you are working for. The organisation pays the umbrella company who, in turn, pay you - after deducting their fees/handling charge/commission etc. How they pay you varies - as in the case of your own company, you may get paid as an employee or they may even make you a token shareholder and pay you a dividend. I have even come across situations where they may be registered overseas and therefore pay you from "abroad". All these shenanigans are devices to try and reduce (or even cancel altogether) the necessity to pay to the Inland Revenue Employee's and Employer's National Insurance Contributions. No matter what YOU receive, YOU will always be liable to Income Tax on the sum.
If you go down the route of establishing your own Limited Company - it is absolutely imperative that you get hold of an accountant at the earliest stage possible. Running a company is quite involved with lots of compliance matters to deal with. The vast majority of non-accountants haven't got a clue as to what is involved and can pretty soon find themselves in deep water - I know, I've seen it happen.
>> Edited by Eric Mc on Monday 13th September 17:30
That's the simple part. Unfortunately, there have been a number of changes to the tax legislation governing th operation of these types of companies which has made them very tricky to operate from a tax liability and tax compliance point of view (you may have heard of the dreaded IR35 provisions, for instance).
However, it is still a feasable thing to do - but you must be prepared for the paperwork and necessary diligence that goes with the territory.
The alternative is to operate through an already established compny (an "umbrella" company). In effect, this company (which is usually owned by other people) acts as kind of agent between you and the actual organisation you are working for. The organisation pays the umbrella company who, in turn, pay you - after deducting their fees/handling charge/commission etc. How they pay you varies - as in the case of your own company, you may get paid as an employee or they may even make you a token shareholder and pay you a dividend. I have even come across situations where they may be registered overseas and therefore pay you from "abroad". All these shenanigans are devices to try and reduce (or even cancel altogether) the necessity to pay to the Inland Revenue Employee's and Employer's National Insurance Contributions. No matter what YOU receive, YOU will always be liable to Income Tax on the sum.
If you go down the route of establishing your own Limited Company - it is absolutely imperative that you get hold of an accountant at the earliest stage possible. Running a company is quite involved with lots of compliance matters to deal with. The vast majority of non-accountants haven't got a clue as to what is involved and can pretty soon find themselves in deep water - I know, I've seen it happen.
>> Edited by Eric Mc on Monday 13th September 17:30
I'd agree with Eric, but go further to say that you must make sure that the accountant has experience / expertise in contracting matters.
Incidentally, there is quite a lot of information on PistonHeads to do with contracting matters now so I won't elaborate further at this point, but if you have any specific questions then fire away.
Incidentally, there is quite a lot of information on PistonHeads to do with contracting matters now so I won't elaborate further at this point, but if you have any specific questions then fire away.
Ok cheers guys, I'm starting to get a handle of it all now - the company wanted to go down the Umbrella route which seems fair enough. Although I understand that contracting can be lucrative, I don't think I'm quite ready to go down that route yet.
So how about it everyone (in Bristol), gissa job, go on gissa job (IT support/third line spod, cv on request!)
Sorry Ted!
Gissa job, go on, go on, gissa job!
>> Edited by neil_cardiff on Monday 13th September 19:35
So how about it everyone (in Bristol), gissa job, go on gissa job (IT support/third line spod, cv on request!)
Sorry Ted!
Gissa job, go on, go on, gissa job!
>> Edited by neil_cardiff on Monday 13th September 19:35
If you want any more info take a look at
www.pistonheads.co.uk/gassing/topic.asp?t=115835&f=23&h=0
Asked a similar question a while ago!!
www.pistonheads.co.uk/gassing/topic.asp?t=115835&f=23&h=0
Asked a similar question a while ago!!
www.fpsgroup.co.uk will sort out all the accounts for you for 5% of your weekly fee.
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