Making the move from perm to contractor
Discussion
Been offered a role as a contractor that seems great on paper. I've never done contracting before - but this is a role I know inside out and the day rate is pretty good, plus it's a 9 month contract with the option of going perm at the end of it.
I've been looking at the legal and financial side of being a contractor and a couple of specialist accounts have given me illustrations that say I could be taking around 80% of my pay home. This has been reached by taking minimal salary, spending a couple of £k on expenses a month and getting VAT registered. I'd also be outside of IR35.
Is this really possible?
I know many of the "specialist" accountants on the net are dodgy and not necessary fully legal. I'd rather err on the side of caution.
M
I've been looking at the legal and financial side of being a contractor and a couple of specialist accounts have given me illustrations that say I could be taking around 80% of my pay home. This has been reached by taking minimal salary, spending a couple of £k on expenses a month and getting VAT registered. I'd also be outside of IR35.
Is this really possible?
I know many of the "specialist" accountants on the net are dodgy and not necessary fully legal. I'd rather err on the side of caution.
M
sounds about right....anywhere from 75 to 80% retention is fairly normal. Sounds like a typical ltd company set up. Avoid places saying you can retain 85% plus as these are the dodgy schemes where they pay you in "loans" with a view that it doesn't need to be declared as taxable income. HMRC is cracking down on this big time at the moment. The relative increase in return relative to a more vanilla ltd company set up isn't worth the risk.
Stupeo said:
I've been looking at the legal and financial side of being a contractor and a couple of specialist accounts have given me illustrations that say I could be taking around 80% of my pay home. This has been reached by taking minimal salary, spending a couple of £k on expenses a month and getting VAT registered. I'd also be outside of IR35. .. I'd rather err on the side of caution.
M
If you're erring on the side of caution then you won't be taking home 80% M
IR35 is a state of mind, but working practices also trump what the contract says, so considering you haven't started yet how are you so sure you're not IR35 caught?
Stupeo said:
it's a 9 month contract with the option of going perm at the end of it.
Be a little bit wary of this. If they have already identified that there is a need for a perm then who's to say they won't try to "encourage" you to do this after just 3 months. You have to read between the lines with contracting. The fact that they need someone perm could also suggest that this is a "bum on seat" role rather than consultancy or a project - which will usually have implications for IR35. Bikerjon]tupeo]it's a 9 month contract with the option of going perm at the end of it./quote said:
Be a little bit wary of this. If they have already identified that there is a need for a perm then who's to say they won't try to "encourage" you to do this after just 3 months. You have to read between the lines with contracting. The fact that they need someone perm could also suggest that this is a "bum on seat" role rather than consultancy or a project - which will usually have implications for IR35.
Sorry, should've said - the perm role they've offered is not the same role that I will be contracting for, but i appreciate the comments.I applied for the permanent role, but during the recruitment process they asked would I consider taking a contractor role for 9 months first as I have the skills to help them out. It's actually a different part of the organisation.
Stupeo said:
Eric Mc said:
re of the new dividend rules which, on the whole, make dividends less attractive compared to the old rules.
How many customers do you intend to have?
Just the one? How many customers do you intend to have?
Stupeo said:
I applied for the permanent role, but during the recruitment process they asked would I consider taking a contractor role for 9 months first as I have the skills to help them out. It's actually a different part of the organisation.
Applying for a permanent role and only considering contracting when prompted by the client sounds horrible from an IR35 point of view. Get some IR35 advice.OP, having now had the benefit of reading your responses to other's posts, it might be better for you / create fewer headaches to see if you can take the contract role on a straightforward fixed term contract of employment.
You're currently employed, and apparently aspire to be employed on a perm basis in future, considering forming a LtdCo for one project, which may be only 3 months duration.
If you want to form and run a business and enjoy the (recently-reduced) tax efficiency of incorporation, in return for the risks involved with running a business, do so. You sound like you do not, and will struggle to justify doing so if HMRC ever ask.
You're currently employed, and apparently aspire to be employed on a perm basis in future, considering forming a LtdCo for one project, which may be only 3 months duration.
If you want to form and run a business and enjoy the (recently-reduced) tax efficiency of incorporation, in return for the risks involved with running a business, do so. You sound like you do not, and will struggle to justify doing so if HMRC ever ask.
sideways sid said:
OP, having now had the benefit of reading your responses to other's posts, it might be better for you / create fewer headaches to see if you can take the contract role on a straightforward fixed term contract of employment.
You're currently employed, and apparently aspire to be employed on a perm basis in future, considering forming a LtdCo for one project, which may be only 3 months duration.
If you want to form and run a business and enjoy the (recently-reduced) tax efficiency of incorporation, in return for the risks involved with running a business, do so. You sound like you do not, and will struggle to justify doing so if HMRC ever ask.
A very fair point. You're currently employed, and apparently aspire to be employed on a perm basis in future, considering forming a LtdCo for one project, which may be only 3 months duration.
If you want to form and run a business and enjoy the (recently-reduced) tax efficiency of incorporation, in return for the risks involved with running a business, do so. You sound like you do not, and will struggle to justify doing so if HMRC ever ask.
Sounds like the OP would be better off using an Umbrella Company if the intention is only to temporarily dip their toe in the water of Contracting.
Also, as others have said, being outside of IR35 is a state of mind and an ongoing undertaking.
Gassing Station | Business | Top of Page | What's New | My Stuff