Contracting (thread #2939240)
Discussion
Tempted by contracting (again)
How tricky is it to avoid IR35? Are the recruitment agencies usually good at sorting this out? If I have a few other directorships / "contracted" positions does that help avoid it?
If you avoid IR35, then do you get to expense travel, including to and from the place of work?
Do I assume it's better to get an hourly rate than daily, to prevent "oh you might as well stay here till 10pm then"
I'd probably set my own Ltd. Co. because I want to run a few other bits at the same time, all the umbrella companies make it out to be a big hassle but other than invoicing, annual returns, VAT (worth doing flat rate I assume?) and accounts, what else is there to do?
How tricky is it to avoid IR35? Are the recruitment agencies usually good at sorting this out? If I have a few other directorships / "contracted" positions does that help avoid it?
If you avoid IR35, then do you get to expense travel, including to and from the place of work?
Do I assume it's better to get an hourly rate than daily, to prevent "oh you might as well stay here till 10pm then"
I'd probably set my own Ltd. Co. because I want to run a few other bits at the same time, all the umbrella companies make it out to be a big hassle but other than invoicing, annual returns, VAT (worth doing flat rate I assume?) and accounts, what else is there to do?
Did it for a while.
There are 5(?) basic tests that you need to pass, a good tax agent will be able to explain them to you. But yes, having your own equipment, a well worded contract, and very important, billing several companies over a close period ( ideally simultaneously ) is a huge help.
There are 5(?) basic tests that you need to pass, a good tax agent will be able to explain them to you. But yes, having your own equipment, a well worded contract, and very important, billing several companies over a close period ( ideally simultaneously ) is a huge help.
john_p said:
Tempted by contracting (again)
How tricky is it to avoid IR35? Are the recruitment agencies usually good at sorting this out? If I have a few other directorships / "contracted" positions does that help avoid it?
If you avoid IR35, then do you get to expense travel, including to and from the place of work?
Do I assume it's better to get an hourly rate than daily, to prevent "oh you might as well stay here till 10pm then"
I'd probably set my own Ltd. Co. because I want to run a few other bits at the same time, all the umbrella companies make it out to be a big hassle but other than invoicing, annual returns, VAT (worth doing flat rate I assume?) and accounts, what else is there to do?
Have a chat with the Professional Contractors Group (PCG) who fight for contractor rights including IR35
Their website has some good information;-
www.pcg.org.uk
I would say its more luck of the draw to avoid being ir35 investigaetd. Dont forget your accounts dont need to be submitted for over a year with your new ltd company. So long as you dont get silly and try and claim everything back you should keep a nice low profile with the tax man and not get investigated. Worst case you can always appeal as well.
I wouldnt worry about it.
I wouldnt worry about it.
225 said:
I would say its more luck of the draw to avoid being ir35 investigaetd. Dont forget your accounts dont need to be submitted for over a year with your new ltd company. So long as you dont get silly and try and claim everything back you should keep a nice low profile with the tax man and not get investigated. Worst case you can always appeal as well.
I wouldnt worry about it.
Very true, however if you are one of the minority (and it is a very small minority at the moment) then you want a good case to fight back against the Inland Revenue (or HMRC as they're now called). Remember they have deep pockets
I have good visability over the current HMRC projects, and trust me they are going to get a lot better at spotting the 'high risk' candidates for inspection.
Just look at government policy. Our friend Mr Blair has made a commitment not to increase income tax. Our other friend Mr Brown needs extra revenue to finance all of his pet projects. What does he do? Improve his ability to collect more revenue within existing legislation. That translates to shaking down you & me for more hard earned cash. If there is even a slight chance you fall within IR35, he will go after you - have the ammunition (ie a solid contract) to fight back.
PS I know someone that has just been presented with a £120k backdated tax bill, although with 3 classes of shares divided between him, his mother and his wife, I'm not surprised!
UpTheIron said:
PS I know someone that has just been presented with a £120k backdated tax bill, although with 3 classes of shares divided between him, his mother and his wife, I'm not surprised!
Is the basis for the bill S660 or IR35?
They tried to get him on both, however he's got an ex-IR lawyer and it looks like a comprimise deal (very much in his favour) will be done
john_p said:
How tricky is it to avoid IR35?
Not at all if you never get investigated!
In terms of always getting contracts that can't be deemed as being caught by IR35, that's not so easy. Sometimes you'll get a contract that has been written well and you can be happy to sign on that dotted line, other times you'll be presented with an absolute stinker that nigh-on makes you out to be an employee (I've had one of those). Renegotiations under such circumstances are also the same....some places will, some won't. I got one of mine rewritten almost to the specification I wanted, despite being told it was "unlikely" and "difficult to alter" so don't give up too easily, but likewise I'd be wary of making too much of a point (might not help with extensions!).
Check out the following thread, especially the clause references at the end.....here
MarkoTVR said:
Renegotiations under such circumstances are also the same....some places will, some won't. I got one of mine rewritten almost to the specification I wanted, despite being told it was "unlikely" and "difficult to alter" so don't give up too easily, but likewise I'd be wary of making too much of a point (might not help with extensions!).
Yeah that's what I was worried about, if you offer to pay for a solicitor to redraft it for example, can they be persuaded? Seems the implication of being caught by IR35 is a lot worse than a couple of hundred quid (say) to redraft a contract?
It looks like I'm going ahead with this, but have the luxury of drawing up the contract, subject to acceptance by the client of course. I am not using an agency which helps matters.
So, what's the best way to get started, to ensure I minimise potential exposire to IR35?
Should I just start off with an umbrella till I get everything sorted?
So, what's the best way to get started, to ensure I minimise potential exposire to IR35?
Should I just start off with an umbrella till I get everything sorted?
It depends on how you feel about controlling your own affairs. If you don't fancy the hassle of sorting everything out each year, then an umbrella is the way to go. If you want to control matters and don't like paying large "handling" fees, then looking after your own affairs would be the best option. To do that you will need to get an accountant on board BEFORE you initiate matters.
The plus points of going through an umbrella companny is that you don't have the hassles normally associated with running a Ltd Co in terms of NI, tax and so on, however depending on the umbrella you will be paying the equivalent tax and ni as if you were an employee which will negate some of the financial pluses of being a contractor i.e. depending on your rate you could be paying 40% tax couple on NI and your in the 50%+ of your rate disappearing before you see any money! 
As with a Ltd Co you will still have to pay both employees NI and employers NI.
Whereas if you have your own Ltd Co then you you could be looking more towards 25% tax and ni specifically if you have a good IR35 friendly accountant. Taking into account that you would be able to claim back expenses, set up dividends and pay yourself a very small £20K/£30K annual salary and you will reduce your tax and ni accordingly.
Their are some Umbrella's that will allow you to take dividends and pay you a small minimal salary to get around the increased tax if you disclose total earnings but word in the industry says that Blair & Co are due to investigate these umbrella's soon and if so could be risky as you will be then open to investigation yourself!!
The other snag with certain umbrella companies is that they can take a long time to pay your money after deductions. Specifically smaller umbrella's, so if you still decide to go down the umbrella company route I would suggest one of the more well known larger organisations.
Check out www.contractoruk.com and as another member also mentioned the PCG website.
As with a Ltd Co you will still have to pay both employees NI and employers NI. Whereas if you have your own Ltd Co then you you could be looking more towards 25% tax and ni specifically if you have a good IR35 friendly accountant. Taking into account that you would be able to claim back expenses, set up dividends and pay yourself a very small £20K/£30K annual salary and you will reduce your tax and ni accordingly.
Their are some Umbrella's that will allow you to take dividends and pay you a small minimal salary to get around the increased tax if you disclose total earnings but word in the industry says that Blair & Co are due to investigate these umbrella's soon and if so could be risky as you will be then open to investigation yourself!!
The other snag with certain umbrella companies is that they can take a long time to pay your money after deductions. Specifically smaller umbrella's, so if you still decide to go down the umbrella company route I would suggest one of the more well known larger organisations.
Check out www.contractoruk.com and as another member also mentioned the PCG website.
I came across one umbrella company which was remunerating the contractor by paying him AND HIS MOTHER by means of dividends. Now THAT is what gets the industry a bad name and ruins everything for those who try to do the best for their contractors without being so blatantly rash about it.
These are the types of "scams" that Gordon and his mates will be hopping on very soon, I feel.
These are the types of "scams" that Gordon and his mates will be hopping on very soon, I feel.
Whilst I appreciate it may be a how long is a piece of string style question, what is the typical rate umbrella companies charge. Is it done as a monthly fee or a percentage rate of your pay?
I may be entering a contract at £13/hr for a limited company, how would this be affected if using umbrella against your own ltd company. I take it it wouldnt be, just reduced by the umbrella companies fee's?
I may be entering a contract at £13/hr for a limited company, how would this be affected if using umbrella against your own ltd company. I take it it wouldnt be, just reduced by the umbrella companies fee's?
It can vary between the different umbrella companies. Most charge a monthly fee, the company I work for have an inhouse umbrella company which charges £60 per month which I believe is still pretty competitive. So around that figure, I have heard some charge up to £90 per month, some even have tier's depending on what your hourly/daily rate is. Best to shop around I guess.
I would have thought that most umbrella companies would be able to give you an example of how much you'd take home, based upon how much you're expecting to bring in. If they can't, then almost certainly walk away.
I did speak to one of the well known umbrellas once, as I did contemplate going through one once. They reckoned that in my circumstances at the time, I'd be looking at a 61% take home.....so 39% tax in other words.
The phone call ended soon after.
I did speak to one of the well known umbrellas once, as I did contemplate going through one once. They reckoned that in my circumstances at the time, I'd be looking at a 61% take home.....so 39% tax in other words.
The phone call ended soon after.
In most cases, the use of the umbrella puts you right back into the position of a normal employee. In other words, you lose all possibilities of exploiting the potential of operating through your own limited company - and you pay someone else for the priviledge of losing that flexibility. I never really understood their popularity. They are glorified employment agencies at heart although they collect their income directly from you, rather than your "employer".
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