IT Contracting - how do I begin?
Discussion
gh0st said:
Don't forget to build yourself a simple web site. I've had a number of enquiries from companies through mine... and it helps show you are 'in business on your own account'
Good Luck
I actually have my name as a .com address. might get ti sorteed out soon :d
Unless your company is called the same, I wouldn't recommend that. You're supposed to be advertising a company, not yourself. When the company is set up it may well only have one active revenue generating employee but if you advertise yourself rather than the company it will not due your IR35 status any good whatsoever.
D
Also bear in that that (as someone else said already) the grass is not necessarily greener on the other side, just different. A couple of things that I found most difficult to get used to when I went contracting:
1. Some people won't like you. Same job, more money = dislike. Grow a thick skin and get used to it. If you don't, you'll never last.
2. No work = No pay. This is really only relevant if you're on a daily/hourly rate contract rather than a fixed length. I was on hourly (common in my field, but not all fields). Off sick, no pay. On holiday, no pay. Bank Holiday, no pay. Take that into account. That two grand holiday you took last week didn't cost you two grand. It cost you two grand plus whatever it cost you to take a week off work.
3. Be flexible. To a large extent this depends on what field you're in. For me, there were only really two companies in the UK I could work, and I'd just left one of them! You might have to commute, move house or even emigrate to keep the contracts coming in. Bear in mind you could be moving house every year...
4. Pensions, NI, sick pay, training costs, all the sorts of things you take for granted as an employee, you won't get anymore. Your own company will have to pay them, which effectively comes out of your own pocket.
There's lots more, I am sure others will chip in.
But there are also some good benefits...Buying PC stuff and writing it off against the company. Organising an AGM in Paris and demanding all the Directors (ie me and my mum) attend.
The key (as others have said) is to be realistic about your skills and expectations. The more 'niche' your skills are, the harder it might be to find a job, but the better chance you have of getting/keeping it once you find it.
1. Some people won't like you. Same job, more money = dislike. Grow a thick skin and get used to it. If you don't, you'll never last.
2. No work = No pay. This is really only relevant if you're on a daily/hourly rate contract rather than a fixed length. I was on hourly (common in my field, but not all fields). Off sick, no pay. On holiday, no pay. Bank Holiday, no pay. Take that into account. That two grand holiday you took last week didn't cost you two grand. It cost you two grand plus whatever it cost you to take a week off work.
3. Be flexible. To a large extent this depends on what field you're in. For me, there were only really two companies in the UK I could work, and I'd just left one of them! You might have to commute, move house or even emigrate to keep the contracts coming in. Bear in mind you could be moving house every year...
4. Pensions, NI, sick pay, training costs, all the sorts of things you take for granted as an employee, you won't get anymore. Your own company will have to pay them, which effectively comes out of your own pocket.
There's lots more, I am sure others will chip in.
But there are also some good benefits...Buying PC stuff and writing it off against the company. Organising an AGM in Paris and demanding all the Directors (ie me and my mum) attend.
The key (as others have said) is to be realistic about your skills and expectations. The more 'niche' your skills are, the harder it might be to find a job, but the better chance you have of getting/keeping it once you find it.
Sniff said:
But there are also some good benefits... Organising an AGM in Paris and demanding all the Directors (ie me and my mum) attend.
Hmmm,... I'd be interested to know how you got this past the tax man. I was told by my accountant when I started contracting that things like this were a no-no .....and in todays climate, where the government is trying to shaft contractors at every opportunity, I would always try not to give them any ammunitionStepej - you are correct. Deliberately holding an AGM overseas just so that you can get some tax relief for a holiday is definitely a big "No No". Obviously, if you can feel you can justify the claim to the tax man, all well and good, but you had better have your arguments well and truly thought out.
If these expenses were deemed disallowable, not only could you be asked to pay arrears of Corporation Tax, but you might find the Inland Revenue claiming for unpaid Income Tax and National Insurance on Benefits in Kind and also trying for penalties on incorrect P11ds, not to mention a Section 419 assessment plus interest.
Thread very carefully.
>> Edited by Eric Mc on Friday 15th October 10:05
If these expenses were deemed disallowable, not only could you be asked to pay arrears of Corporation Tax, but you might find the Inland Revenue claiming for unpaid Income Tax and National Insurance on Benefits in Kind and also trying for penalties on incorrect P11ds, not to mention a Section 419 assessment plus interest.
Thread very carefully.
>> Edited by Eric Mc on Friday 15th October 10:05
Indeed. My accountant has always told me I can't even claim for a packet of biscuits at an AGM.
It is also very difficult to justify "entertaining" type expenses. I've never bothered in the 5+ years I've been contracting.
About the only food / subsistence / etc. claim I've ever put in is on the rare occasions where I've had to work away, and even then you can't claim for meals per se but rather a £5 per day subsitence allowance, plus the cost of the accomodation of course.
However, capital purchases like computer equipment, software, office supplies, etc. are far more easy to justify.
At the end of the day, ask yourself this of any expense claim you make - if a tax man looked you in the eye and said "you're taking the piss, aren't you?", would your response start "of course not, because...." or "err...."
It is also very difficult to justify "entertaining" type expenses. I've never bothered in the 5+ years I've been contracting.
About the only food / subsistence / etc. claim I've ever put in is on the rare occasions where I've had to work away, and even then you can't claim for meals per se but rather a £5 per day subsitence allowance, plus the cost of the accomodation of course.
However, capital purchases like computer equipment, software, office supplies, etc. are far more easy to justify.
At the end of the day, ask yourself this of any expense claim you make - if a tax man looked you in the eye and said "you're taking the piss, aren't you?", would your response start "of course not, because...." or "err...."
No - it depends on YOU.
Companies pay tax under a form of Self Assessment. YOU make the expense claims and YOU carry the can (or your company) if the tax man decides that what you claimed for was excessive. This is the case even if you are following an accountant's advice or even if you allow the accountant to put through expenses he/she has decided are appropriate!
>> Edited by Eric Mc on Friday 15th October 17:27
Companies pay tax under a form of Self Assessment. YOU make the expense claims and YOU carry the can (or your company) if the tax man decides that what you claimed for was excessive. This is the case even if you are following an accountant's advice or even if you allow the accountant to put through expenses he/she has decided are appropriate!
>> Edited by Eric Mc on Friday 15th October 17:27
Eric, you are right of course...I am ultimately responsible for any tax returns and/or claims made on behalf of my company.
What I meant was, it depends on the advice you receive from your accountant as to whether you risk claiming for things like this or not. I got the advice that it was OK, I claimed accordingly, and (so far touch wood) I have not had any come back from IR.
What I meant was, it depends on the advice you receive from your accountant as to whether you risk claiming for things like this or not. I got the advice that it was OK, I claimed accordingly, and (so far touch wood) I have not had any come back from IR.
The real danger with the "Self Assessment" method of returning details to the Inland Revbenue is that the tax man does far less checking at his end compared to the what he did in the pre-Self Assessment era. So, it can look like you are "getting away" with a particular claim when you might not be entitled to it.
Under Self Assessment, the Inland Revenue do not "agree" accounts in the way they used to - so they don't raise the casual "query" points on submitted accounts that were quite common in the "old days". Now, it is a full tax enquiry or nothing.
Once they start an "enquiry", they can probe quite deeply and if they order that an item in the accounts needs to be redressed for a period of (say) six years, it could work out very expensive - especially if they levy interest and penalties on the Corporation Tax shortfall.
So, just because accounts have not been queried in the past does not mean that you are in the clear.
Under Self Assessment, the Inland Revenue do not "agree" accounts in the way they used to - so they don't raise the casual "query" points on submitted accounts that were quite common in the "old days". Now, it is a full tax enquiry or nothing.
Once they start an "enquiry", they can probe quite deeply and if they order that an item in the accounts needs to be redressed for a period of (say) six years, it could work out very expensive - especially if they levy interest and penalties on the Corporation Tax shortfall.
So, just because accounts have not been queried in the past does not mean that you are in the clear.
How do I begin?
First of all, a CV!! Get all your skills and experience down on there and keep it up to date.
Once you've set up a Ltd. Company (although IR35 has been mentioned here, so read up on it!) Ltd, in the sense that liability is limited, just in case. Then again IR60 or whatever it's called is also a current issue as well.. the pcg (professional contractors group is a good source of informatio as well)
Second try and limit the agencies that you look for work through, they'll hound you for a CV, but I would try and ensure that they don't send the CV out without your express permission. Once they've got your number they'll phone you a lot, until they've got your CV and depending on your skillset, they'll probably be in touch a lot trying to organise interviews and get you to agree to positions - at the end of the day, they'll offer you the best opportunity for them... Bear that in mind. Don't be afraid to ask about their rate/cut that they take. If they 'annoy' you ask them to remove you from their system, but beware that bridges burnt may take a long time to rebuild.. Try to limit the number of agencies you're in contact with and hence limit the number of your CVs out there, this will also limit the chance of your CV ending up with a client from two or more different agencies... (again, impress upon them that they should only send your CV out to clients with your prior approval).
I currently work with two agents, they're small, but specialised for my area of work, I've known them for at least 8 years, and can guarantee that they won't send my CV out before contacting me. I've gone through larger agencies before, but a lot of the time they don't understand the skill that I've got or the work I do.. Luckily the two smaller agents have all the work covered in the UK and also in some of the continent. Ideal
Get yourself a 'good' accountant, ideally someone who's been recommended or has experience of computer contractors and the pecularities surrounding their work..
Oh, and don't under-sell yourself either
hth
First of all, a CV!! Get all your skills and experience down on there and keep it up to date.
Once you've set up a Ltd. Company (although IR35 has been mentioned here, so read up on it!) Ltd, in the sense that liability is limited, just in case. Then again IR60 or whatever it's called is also a current issue as well.. the pcg (professional contractors group is a good source of informatio as well)
Second try and limit the agencies that you look for work through, they'll hound you for a CV, but I would try and ensure that they don't send the CV out without your express permission. Once they've got your number they'll phone you a lot, until they've got your CV and depending on your skillset, they'll probably be in touch a lot trying to organise interviews and get you to agree to positions - at the end of the day, they'll offer you the best opportunity for them... Bear that in mind. Don't be afraid to ask about their rate/cut that they take. If they 'annoy' you ask them to remove you from their system, but beware that bridges burnt may take a long time to rebuild.. Try to limit the number of agencies you're in contact with and hence limit the number of your CVs out there, this will also limit the chance of your CV ending up with a client from two or more different agencies... (again, impress upon them that they should only send your CV out to clients with your prior approval).
I currently work with two agents, they're small, but specialised for my area of work, I've known them for at least 8 years, and can guarantee that they won't send my CV out before contacting me. I've gone through larger agencies before, but a lot of the time they don't understand the skill that I've got or the work I do.. Luckily the two smaller agents have all the work covered in the UK and also in some of the continent. Ideal
Get yourself a 'good' accountant, ideally someone who's been recommended or has experience of computer contractors and the pecularities surrounding their work..
Oh, and don't under-sell yourself either
hth
Most of the good advice is already in this thread, but just to reiterate it from my experience......
1)Get a good accountant.
2)Start the preparations early, like sorting out a company name, company set-up, business bank accounts, etc.
3)Get PI insurance, etc. (mail me if you want some names).
4)Avoiding contracts that will get caught by IR35 may not be that easy, you can't always "just do ones that aren't". If you do have to, try and get the contract renegotiated. There are also other things you can do to make you less IR35-liable outside of contract wording (mail me again if you want!).
5)Make sure you have reliable transport if you have to commute! I've spent thousands on hire cars, and it's not fun.
6)If you're registering for VAT, but don't want the hassle of VAT calculations, try the Flat Rate VAT scheme. My VAT returns take about 10mins now. But look into it first to see if it benefits you (Details on the HMC&E website).
7)Get personal accounts with the best interest rate possible. When you take the tax off the dividends you pay yourself (if you do things that way), stick in a high interest account until you have to part with the tax payment!
8)A quote from another contractor - "Keep about 25% in the company, 25% for tax...and enjoy the other 50%!" Treat that how you will, it is a very general guide. Decide how you are comfortable allocating money.
9)Get your CV professionally rewritten. Some people don't bother, but I don't regret doing it. Then distribute it to as many agencies as you can.
10)There are others I can't remember now, will post them if I remember.
>> Edited by MarkoTVR on Friday 29th October 16:57
1)Get a good accountant.
2)Start the preparations early, like sorting out a company name, company set-up, business bank accounts, etc.
3)Get PI insurance, etc. (mail me if you want some names).
4)Avoiding contracts that will get caught by IR35 may not be that easy, you can't always "just do ones that aren't". If you do have to, try and get the contract renegotiated. There are also other things you can do to make you less IR35-liable outside of contract wording (mail me again if you want!).
5)Make sure you have reliable transport if you have to commute! I've spent thousands on hire cars, and it's not fun.
6)If you're registering for VAT, but don't want the hassle of VAT calculations, try the Flat Rate VAT scheme. My VAT returns take about 10mins now. But look into it first to see if it benefits you (Details on the HMC&E website).
7)Get personal accounts with the best interest rate possible. When you take the tax off the dividends you pay yourself (if you do things that way), stick in a high interest account until you have to part with the tax payment!
8)A quote from another contractor - "Keep about 25% in the company, 25% for tax...and enjoy the other 50%!" Treat that how you will, it is a very general guide. Decide how you are comfortable allocating money.
9)Get your CV professionally rewritten. Some people don't bother, but I don't regret doing it. Then distribute it to as many agencies as you can.
10)There are others I can't remember now, will post them if I remember.
>> Edited by MarkoTVR on Friday 29th October 16:57
Best thing I ever did, Ive been lucky with contracts though both have been 6months minimum. I went down my own company route as it means I can do other work (obviously not at the same time 
) and invoice people. Plus you can claim VAT back etc.
As for IR35 then yes be careful but if you use your own company then you dont submit accounts for something like 18months and it is unlikey you will get investigated unless you call it "contractorsRUS" and claim for everything.
Keep a low profile with the tax man and you shouldn't get IR35 audited.
) and invoice people. Plus you can claim VAT back etc. As for IR35 then yes be careful but if you use your own company then you dont submit accounts for something like 18months and it is unlikey you will get investigated unless you call it "contractorsRUS" and claim for everything.
Keep a low profile with the tax man and you shouldn't get IR35 audited.
emicen said:My 2p...the fact you say "been offered a job as a contractor" makes me think you might be better off going via an umbrella company. Contracting / Consulting should be viewed as being in business in your own right, not as a way for the end user to offer you a "job" IYKWIM.
Bump so I can find this thread again later. Been offered a job as a contractor, cant help but wonder about setting up myself instead of going via an umbrella.
If you are seriously considering making a go of contracting then I would consider:
- how long is the initial engagement likely to be (that may be project length rather than your initial contract)
- if / when it ends, do you see yourself pursuing other contract roles?
- how much of a risk is IR35 to you?
- is the rate relatively high - the higher your rate the less of an overall impact general company running costs have (accountant, insurances, etc)
- do you personal circumstances dictate you may need a mortgage etc in the near future?
UpTheIron said:
the fact you say "been offered a job as a contractor" makes me think you might be better off going via an umbrella company. Contracting / Consulting should be viewed as being in business in your own right, not as a way for the end user to offer you a "job" IYKWIM.
Indeed. It is all an attitude of mind. If you do not firmly believe that you are in business on your own account, as opposed to a disguised employee, then how can you expect the Inland Revenue to?Gassing Station | Business | Top of Page | What's New | My Stuff