Staff to Contract - Making the jump.

[Silverbullet767]

Hello PH. My whole working life up to this point has been in staff positions. But I've just accepted a contract role.

It'll be in the Oil & Gas sector in Aberdeen. And it will be a very substantial increase in my pay packet!

I'm in the process of setting up my own company, getting a business bank account and getting VAT registered.

I'm excited to say the least! But has anyone else made the jump, and if so. What would you pass on for a contract newbie like myself?

So far I have, an accountant, my ltd. company name and certificates, business bank account requested.

Thanks.

[98elise]

I made the change 18 months ago. The only bit of advice is to make sure you keep your finances in order, and keep a financial buffer in the company for when you are not in work.

I'm currently working with a contactor who uses his business account like his own, doesn't have an accountant, and isn't registered for VAT. HMRC and going to have a field day with him!

[malks222]

I have recently started a contract in the oil and gas industry in grangemouth! as said before the best thing to do is keep records. keep receipts for everything, its easier to have them and throw them out if they're not needed than try and find some/make them up at the end of the financial year!

another thing i've found helpful is speaking to other contractors and speak to them find out how they do things, what sort of things they are able to claim, speak to your accountant about the same. i found it better to have an accountant you can speak to and go and meet as opposed to some 'online' or remote services where you dont have anyone specifically to look after you.

try and keep some money behind, dont go daft thinking all the cahs in the account can be spent, you need to make sure the money is there to pay the tax bill and the vat bill on time!

[ewenm]

Flat Rate VAT scheme is good if you're eligible.
Find an accountant through personal recommendation that deals with contractors often.
Consider joining the PCG.

[Silverbullet767]

Thanks for the replies, yes I have been told that due to the nature of my business I can go flat rate VAT at 14.5% (while charging 20%)

My accountant has been really helpful so far and has taken the stress out of everything, I even get the first 2 months free which is a bonus.

I'm hoping everything goes smoothly before my start date of the 22nd of April, I'm currently working my months notice at my current employer and I can't wait to get started in the granite city! I have 2 friends up there that I have worked with previously who will help me along the way, they also work in the same business albeit for a different company. So hopefully they will already have faced the same questions I'm about to ask them.

Bonus, It's 3 years to the day that I got caught speeding. I now have a clean licence again!

[ewenm]

Silverbullet767 said:

Thanks for the replies, yes I have been told that due to the nature of my business I can go flat rate VAT at 14.5% (while charging 20%)

Note that you charge 20% VAT to find your gross invoice amount but you pay the 14.5% on that GROSS amount, not on the net amount.

[Silverbullet767]

ewenm said:

Silverbullet767 said:

Thanks for the replies, yes I have been told that due to the nature of my business I can go flat rate VAT at 14.5% (while charging 20%)

Note that you charge 20% VAT to find your gross invoice amount but you pay the 14.5% on that GROSS amount, not on the net amount.

They way I understand it.

Say I get paid £100 I charge 20%, I receive £120

I pay 14.5% tax on £120, I receive £102.60 is that correct?

[StevieBee]

98elise said:

The only bit of advice is to make sure you keep your finances in order, and keep a financial buffer in the company for when you are not in work.

Print the above and keep it somewhere you can see it everyday.

Live your life as a contractor the same as you do as staff. Don't be tempted to trade up on anything, if anything, trade down for a while. Build that cushion and you'll enjoy the spoils of your toils soon enough.

I've seen all too many contractors make the jump and start doing the 'boys toys' thing only to find their contract ends with several months no income to pay the rent.

[ewenm]

Silverbullet767 said:

They way I understand it.

Say I get paid £100 I charge 20%, I receive £120

I pay 14.5% tax on £120, I receive £102.60 is that correct?

I got it wrong at first and had the VATman phone me to tell me off

[Silverbullet767]

It'll be hard to keep a financial buffer, I want to pay off some debts!

[CRB14]

I did it for a short while but found it difficult to get my head into the self employed / contractor frame of mind and was uncomfortable with the temporary nature of the work. You also generally get the s**t that nobody else wants to do.

I like to fit in and settle in my work so it just didn't really suit me. I'm probably also a bit young at 28 and needed more experience. I'm not ruling it out for the future though as the money was FAR better.

[pboyd]

CRB14 said:

I did it for a short while but found it difficult to get my head into the self employed / contractor frame of mind and was uncomfortable with the temporary nature of the work. You also generally get the s**t that nobody else wants to do.

I like to fit in and settle in my work so it just didn't really suit me. I'm probably also a bit young at 28 and needed more experience. I'm not ruling it out for the future though as the money was FAR better.

That is job to job basis

Advice. Save a third as a minimum ... Build that buffer

[Frio3535]

Montitor the job market - Set up email alerts for contracts in your particular field to see whats going on, what jobs come up, any trends, what employers require. I like to look one contract ahead.

Enjoy Aberdeen - hope you've got a nice car to exploit the Cairngorms and Highlands!

[98elise]

CRB14 said:

I did it for a short while but found it difficult to get my head into the self employed / contractor frame of mind and was uncomfortable with the temporary nature of the work. You also generally get the s**t that nobody else wants to do.

I like to fit in and settle in my work so it just didn't really suit me. I'm probably also a bit young at 28 and needed more experience. I'm not ruling it out for the future though as the money was FAR better.

All reasons why I went contracting.

I was in my last permeanant job for over a decade when I went contracting. I hated being in a comfortable predictable life.

Now I don't do politics, I don't have to deal with the day to day corporate crap. I just come in, do a decent job, and go home. In a few months I'll be working somewhere else. All for good money.....whats not to like!

It is a different frame of mind to permie work, and not for everyone but its definately easier when you're older.