molko

Ok. I'm gonna get offered a 6months contract tomorrow, i had an interview a week ago, it all went well etc. The agency told me i am in, just awaiting the official 'nod' tomorrow.

Now.....I have done nothing in terms of setting up an LTD company etc, i know nothing about this. I have been told to watch out for IR35 - i dont know what it is, so i certainly dont know how to avoid it.

What i do no is that i can get more 'take-home' money if i set up a limitied company. I have been told that AccountsNet - Online Chartered Accountants For Professional Freelancers can sort out all my accounting issue for a reasonable fee.

Can someone tell me in laymens terms what IR35 means, how i can avoid it etc....
Is there anything else i need to be aware of ?

Thanks

RichB

contracting for the same company for long periods of time is my very basic understanding of what it is.

Nobbie

If you are employed by the company and are put on PAYE, you shouldn't need to set-up a ltd company.
It can have its benefits, but you'd need to get the company to pay your company, then you can have fun reclaiming VAT, etc.

Your effectively a temp, so either the agency will employ you an pay you, or the company will.
Main thing to keep in mind is tax, you may need to consult with a accountant about what you can claim, and specifically what would be classed as a benefit.

molko

Its only a 6 month contract initially. I need to suss out how to make the contract IR35 proof otherwise its not worth me taking it on.

HankScorpio

Who's paying your wages and are you having to invoice them?

ScoobyJawa

Have a look here mate:

welcome to giant group

I used them, becoming a contractor and getting a co set up was effortless!

molko

Well this is it, i dont really know. The deal is, i was sent to the client from an Employemnt Agency, i gave a good interview - the client liked me, i liked them. I will get the offer of a 6month contract tomorrow.

Other than that, i have no more info.

I've been told that LTD company is the way to go.
As far as invoicing, i'm guessing i invoice the Agency and then they pay me ?
I was told to have a look at AccountsNet - Online Chartered Accountants For Professional Freelancers as they can set up a compnayname, do the accounts etc for a small monthly fee. I can submit time sheets, petrol, expense etc to them and they will do all the calculations and pay me a dividend......

Like i say i am really naive about all this and could do with some easy to understand advice.
thanks

molko

Well this is it, i dont really know. The deal is, i was sent to the client from an Employemnt Agency, i gave a good interview - the client liked me, i liked them. I will get the offer of a 6month contract tomorrow.

Other than that, i have no more info.

I've been told that LTD company is the way to go.
As far as invoicing, i'm guessing i invoice the Agency and then they pay me ?
I was told to have a look at AccountsNet - Online Chartered Accountants For Professional Freelancers as they can set up a compnayname, do the accounts etc for a small monthly fee. I can submit time sheets, petrol, expense etc to them and they will do all the calculations and pay me a dividend......

Like i say i am really naive about all this and could do with some easy to understand advice.
thanks

KiwiGTI

IR35 is a grey area and even the HMRC cannot give a definitive answer which is part of the problem.

In short if they think you are performing a job that you should be performing as an employee rather than as a company then they will try and make you pay the PAYE and NIC that an employee would. A blatantly obvious one would be if you walked out of a company on Friday as a permie and walked into the exact same job on Monday as a contractor through a Ltd company. (Think they can go back 7 years) But basically any company operating with it's director as the sole income generator through single revenue streams are the main targets.

It's not only the contract that has to be IR35 compliant, there is substantial other evidence they will take into account - do you provide all you own tools (laptop), is your pass different from permanent staff, do you get the same benefits as permanent staff, can you choose your location, is their really a right of substitution in the contract etc.

NorthDave

Personally I wouldn't bother with a limited company but would work through an umberella company instead. At least whilst you find your feet. They wont charge much, can guarantee you are IR35 exempt and you get your money in your hand every month. A good mate of mine has been using brooksons for a good few years and has had no problems.

Least hassle way in my opinion. Enjoy contracting mate!

molko

I thought going through an Umbrella company made a massive difference to the take home money ?

KiwiGTI

Here's a good starting point :

Contractor UK - for UK IT Contractors, IT Contracting and Computer Freelancers

For accountants SJD are the best.

KiwiGTI

I'm pretty sure the government are cracking down on umbrella companies. Ltd company is the best way these days. But you have to be aware of the risks to you personally.

ChefDude

the two ways that contracting made you money operating through a limited company, pre IR35, were;

1. You could choose a low salary and pay little or no income tax and NI. At the time there was a cap on Employee's NI, but no cap on Employers. Also, dividends from the company were subject to income tax, but not NI.

2. A superb advantage was that you could have another shareholder, ie; your spouse, so that your dividend income split 50/50 and would minimise the higher rate tax exposure.

As a contractor for 10 years, I took a salary of £250 a month, so very little tax and no NI and the rest of the profit came from dividends. split with my spouse, we only just went into higher rate tax. I was netting 78% of my gross wage.

ChefDude

ps, i quit contracting just after IR35 came in because this legitimate tax avoidance scheme was no longer available

Dazza's-STi

Don't see why you need a Ltd company, with it comes all sorts of other commitments... and costs... like you MUST use a chartered accountant to file your returns to comapanioes house etc... The only benefit i'd see is that as a company you ara an employee... so that would make you the director, although you need to allocate a company secretary, this can be you accountant. More $$... then as a director you can be paid the minimum wage and take dividends from the company... Problem is you would then have a comapny car! more money...
I'd simply go as self employed, you can earn a certain amount each year and still be ok, and you can claim for all your car use and not pay tax as such...
Sole trader and some other arrangment like that would be fine, either way you don't have to be VAt registered, and self employed or Ltd you still have to be vat reg after i think 70k wiorth of turnover...
Self employed mate, if you ask me... lot less hassle...
Found this out over the last year as I setup an IT company myself and made it ltd... although it is a propper company as such, we needant have made it ltd.
Daz

molko

I did a calculation with an IR35 tax calculator, if i operate within IR35 i am only getting £400 per month more than i do now as a permie, if i am outside IR35 then i get about £1300 more than i do now.

ChefDude

if you used one of those IR35 calculators from the accountancy sites, they factor in your maximum expense allowance; travel, subsistence, etc.

Take that away and, within IR35 you'll earn the same or be potentially worse off (you will be paying Employer's NI)

Hanley

See here for advice on the Chancellors crackdown on Managed Service and Composite Companies.

Seems the safest bet is now to use a Ltd copmany.

PayStream - Chancellor's Pre-Budget Statement

GaryK

I use brookson as well and they've been very good. As above they will set the limited co (its a composite - pretty much the same as an umbrella) and handle all your expense claims and invoice the agency (and the agency invoice the client).

Yes the rules are about to change and Brookson are up with it, it basically means the composites (several contractors being shareholders of one ltd co) have to go so it will be 1 man 1 ltd. company.

I think you'll find you cannot actually bill the agency unless you are a ltd co, this is the way its always been (Ive been a cont on and off for 13 years).

Gary

molko

SO is this the best way for me to procede then ?

molko

I've just been talking to Brookson (and Giant), Brookson on the surface seem decent enough, however they said i could not claim 'expenses' for stuff like accomodation, food etc as i was a first time contractor, Giant didn't seem to mind.

So its like £35 per week difference in the two, Brookson paying less.

Can anyone confirm the expense thing is correct ?

Thanks

GaryK

molko,

what they are saying is you wont be able to claim expenses from your *first* assignment straight away, they are held in 'pending' status until your next assignment (either different contract not renewal unless the renewal is for a different dept in the same company) when they will be released. This is in strict accordance with the guidelines published on the HMRC so whilst other umbrella's *will* pay you expenses technically that is not allowed.

Gary

molko

So if i go with the Umbrella who *will* pay me expenses am i likely to have to pay these back at some stage ?

Thanks for your help - its a minefield out there

GaryK

molko,

its a good question and one I cant answer. I am in exactly that position myself, I went back contracting last feb after a 2 year absence, joined an umbrella (CAPS) who paid ex's for me from day one. They were pretty poor so I switched to brookson and then found out the right way to claim ex's. What happens with ones I have already had at this very stage Im not sure!

Also be aware the legislation has now changed (brookson are up with it all) regarding composites/umbrellas anyway.

Gary

molko

Thanks, yeah both Brookson and Giant told me about the legislation change, so its just a toss up between them two now.
The Agency recommend Giant, a lot of people recommend Brookson, both seem ok to me, its just the expense issue, the difference is around £150 a month, which is a fair bit. I suppose i could go with Giant, save the £150 in a seperate account and just wait and see what happens.....

ScoobyJawa

I've had no probs with Giant here - went seemless and they keep you updated on your account and whats going on that effect you pretty well

John Catlin

Have a read here and most of yourbquestions will be answered.


http://www.pcg.org.uk

Bakerman

molko, what did you do in the end. Nudge nudge I am in the same boat where I will get a contract offer but never done contracting before. From checking out the huge amount of stuff on the web the easiest to me seems like an umbrella arrangement with one of the well reputed companies but would be interested in what you did.

Thanks

KiwiGTI

You can't operate under umbrella companies anymore as far as I am aware.

You have to have your own company and be a director of that company. I'm through Hays IT and they will only sign a contract with my company once I've proved I'm a director.