IT Contracting
05 April 2001, 02:31 PM
#1
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I've been considering contracting after spending the last 8yrs in permenant jobs.
In the past it seemed an ideal way to make lots of cash, but have things changed? Is it as good as it used to be? Whats this IR35 thing I've been hearing about?
Any help/advice would be greatly appreciated.
Stefan
In the past it seemed an ideal way to make lots of cash, but have things changed? Is it as good as it used to be? Whats this IR35 thing I've been hearing about?
Any help/advice would be greatly appreciated.
Stefan
05 April 2001, 05:02 PM
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<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:<HR>Originally posted by Fosters:
<B>Any less than £40ph isn't worth it. what skills have you got?[/quote]
Ok say you are on 30ph, that's still over £1000 a week and remember that that still works out better than if you were an employee on £1000 per week.
That works out as pretty damn good compared to the average programmer's salary.
IR35 is no problem, if you are in a contract which gets hit be it then it's your own fault. There are hundreds of IR35 friendly contracts out there, no problem getting one.
<B>Any less than £40ph isn't worth it. what skills have you got?[/quote]
Ok say you are on 30ph, that's still over £1000 a week and remember that that still works out better than if you were an employee on £1000 per week.
That works out as pretty damn good compared to the average programmer's salary.
IR35 is no problem, if you are in a contract which gets hit be it then it's your own fault. There are hundreds of IR35 friendly contracts out there, no problem getting one.
05 April 2001, 05:14 PM
#4
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So what's this IR35 thing all about?
It's networking contracts I've been looking at, not programming. Mainly CNE, MCSE and Citrix stuff.
It's central Scotland, nothing south of the border so that's bound to have some effect on the rate and whether it's worth it or not.
Stefan
It's networking contracts I've been looking at, not programming. Mainly CNE, MCSE and Citrix stuff.
It's central Scotland, nothing south of the border so that's bound to have some effect on the rate and whether it's worth it or not.
Stefan
05 April 2001, 10:56 PM
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Important things to consider:
any contract is only as long as the notice period (so don't accept one less than 28 days)
each time the contract runs out, you need to find a new one - are you prepared to travel 1 or 2 hours each way to find work??
do you like getting training? cos you'll probably have to pay for your own!
Are you confident you can get another permanent job easily if it doesn't work out? (ideally, leave your current firm on very good terms - it always pays to have a safety net).
IR35 - see
any contract is only as long as the notice period (so don't accept one less than 28 days)
each time the contract runs out, you need to find a new one - are you prepared to travel 1 or 2 hours each way to find work??
do you like getting training? cos you'll probably have to pay for your own!
Are you confident you can get another permanent job easily if it doesn't work out? (ideally, leave your current firm on very good terms - it always pays to have a safety net).
IR35 - see
06 April 2001, 10:31 AM
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<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:<HR>Originally posted by BT52:
<B>
Ok say you are on 30ph, that's still over £1000 a week and remember that that still works out better than if you were an employee on £1000 per week.[/quote]
Er, no its not really.
At £1,000 per week your turnover is likely to be over the VAT threshhold so you can reduce that £1000 by 17.5%.
Factor in income tax, a pension, all the expenses you would normally reclaim via an employer, and all the other benefits that would come with a £50k per annum salary and you will be WORSE off as a contractor.
Make sure you do ALL the sums and don't just look at the gross.
D
<B>
Ok say you are on 30ph, that's still over £1000 a week and remember that that still works out better than if you were an employee on £1000 per week.[/quote]
Er, no its not really.
At £1,000 per week your turnover is likely to be over the VAT threshhold so you can reduce that £1000 by 17.5%.
Factor in income tax, a pension, all the expenses you would normally reclaim via an employer, and all the other benefits that would come with a £50k per annum salary and you will be WORSE off as a contractor.
Make sure you do ALL the sums and don't just look at the gross.
D
06 April 2001, 10:50 AM
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<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:<HR>Originally posted by Diablo:
<B> Er, no its not really.
At £1,000 per week your turnover is likely to be over the VAT threshhold so you can reduce that £1000 by 17.5%.
D[/quote]
Diablo,
When you are over the VAT threshold do you not add vat to your rate? The clients don't usualy mind as anyone who is paying 30 - 40 ph is probably vat registered and can claim it back anyway
<B> Er, no its not really.
At £1,000 per week your turnover is likely to be over the VAT threshhold so you can reduce that £1000 by 17.5%.
D[/quote]
Diablo,
When you are over the VAT threshold do you not add vat to your rate? The clients don't usualy mind as anyone who is paying 30 - 40 ph is probably vat registered and can claim it back anyway
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06 April 2001, 10:58 AM
#8
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Thanks for all the info so far guys.
Travel shouldn't be a problem since I live about 30mins from Glasgow and Edinburgh where the majority of contacts are.
Guess my real concerns are; will I be financially better off, can I get regular contracts back-to-back.
Stefan
Travel shouldn't be a problem since I live about 30mins from Glasgow and Edinburgh where the majority of contacts are.
Guess my real concerns are; will I be financially better off, can I get regular contracts back-to-back.
Stefan
06 April 2001, 02:24 PM
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<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:<HR>Originally posted by fast bloke:
<B> Diablo,
When you are over the VAT threshold do you not add vat to your rate? The clients don't usualy mind as anyone who is paying 30 - 40 ph is probably vat registered and can claim it back anyway[/quote]
Yes you do. This isn't the rate the client pays anyway as normally there's an agency inbetween who will add 10 to 25% to your rate (b*****ds!) - then VAT goes on top of that.
You'll need to factor in paying for an accountant which will cost £500 to £1500 per year (depending on who it is and whether you do your own VAT/PAYE).
Try
<B> Diablo,
When you are over the VAT threshold do you not add vat to your rate? The clients don't usualy mind as anyone who is paying 30 - 40 ph is probably vat registered and can claim it back anyway[/quote]
Yes you do. This isn't the rate the client pays anyway as normally there's an agency inbetween who will add 10 to 25% to your rate (b*****ds!) - then VAT goes on top of that.
You'll need to factor in paying for an accountant which will cost £500 to £1500 per year (depending on who it is and whether you do your own VAT/PAYE).
Try
06 April 2001, 02:36 PM
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Allowing for everything 1000pw is easily going to to be better off than employment for the same amount mainly due to the NI saving. The whole reason behind IR35 in the first place.
As for back to back contracts, well in the last 5 years I have had 4 weeks between contracts in total. So it shouldn't be a problem.
As someone said though, the market is not brilliant at the moment, but if you are any good I don't believe that will affect you much.
I gave an example of 30ph but typically the rates are much higher than that (depending on which area obviously).
You don't have to go through an agent. for 75% of my contracting time I have gone direct. And you can always push the agencies into taking a smaller cut if you ask them about it.
As for back to back contracts, well in the last 5 years I have had 4 weeks between contracts in total. So it shouldn't be a problem.
As someone said though, the market is not brilliant at the moment, but if you are any good I don't believe that will affect you much.
I gave an example of 30ph but typically the rates are much higher than that (depending on which area obviously).
You don't have to go through an agent. for 75% of my contracting time I have gone direct. And you can always push the agencies into taking a smaller cut if you ask them about it.
06 April 2001, 03:20 PM
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Also remember when contracting that your holidays are unpaid as are your sick days. Sure you can work without both but why bother earning if your killing yourself. Even if only 5 weeks per year its immediately 10% impact.
Also most perm jobs come with pension benefits and life insurance(don't underestimate the cost of these things, speak to a Financial advisor first to get an idea). When I'm hiring perm people for my budget I add 40% over base salary as my actual cost, sure some NI for the company in there but the extras REALLY add up.
Be careful, dont get dragged in by the weekly figure.
Cammy
Also most perm jobs come with pension benefits and life insurance(don't underestimate the cost of these things, speak to a Financial advisor first to get an idea). When I'm hiring perm people for my budget I add 40% over base salary as my actual cost, sure some NI for the company in there but the extras REALLY add up.
Be careful, dont get dragged in by the weekly figure.
Cammy
06 April 2001, 05:18 PM
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<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:<HR>Originally posted by BT52:
<B>Allowing for everything 1000pw is easily going to to be better off than employment for the same amount mainly due to the NI saving. [/quote]
The NI saving will be £53 per week (max)
Big deal...
Usual employee benefits will way exceed that. Take for instance pension at 4% - which most employers paying that kind of money will add (at least). Thats, er,40 per week to start. Add life insurance, car?, holidays, being paid when sick, etc, etc, etc... and you just cannot say that contracting for 1000 per week leaves you better off that PAYE @ 1000 per week.
Not knocking it, far from it, cos chances are as a contractor you will be on MUCH more per hour than as a PAYE employee.
You just can't say contracting for an amount is financially better than being an employee for the same amount.
D
<B>Allowing for everything 1000pw is easily going to to be better off than employment for the same amount mainly due to the NI saving. [/quote]
The NI saving will be £53 per week (max)
Big deal...
Usual employee benefits will way exceed that. Take for instance pension at 4% - which most employers paying that kind of money will add (at least). Thats, er,40 per week to start. Add life insurance, car?, holidays, being paid when sick, etc, etc, etc... and you just cannot say that contracting for 1000 per week leaves you better off that PAYE @ 1000 per week.
Not knocking it, far from it, cos chances are as a contractor you will be on MUCH more per hour than as a PAYE employee.
You just can't say contracting for an amount is financially better than being an employee for the same amount.
D
06 April 2001, 05:28 PM
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<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:<HR>Originally posted by Diablo:
<B> The NI saving will be £53 per week (max) [/quote]
Then why all the fuss over IR35?
Certainly not for the sake of £2500 per year!!
Company car? Are you joking, you get taxed to death on those.
Illness and holidays ok, but according to my accountant the losses I would make by being employed for that amoumt would easily outweigh the benefits you mention. I had the opportunity to go perm for a salary which would give me the same net result.
My accountant provided the figures and the company very quickly changed their minds.
<B> The NI saving will be £53 per week (max) [/quote]
Then why all the fuss over IR35?
Certainly not for the sake of £2500 per year!!
Company car? Are you joking, you get taxed to death on those.
Illness and holidays ok, but according to my accountant the losses I would make by being employed for that amoumt would easily outweigh the benefits you mention. I had the opportunity to go perm for a salary which would give me the same net result.
My accountant provided the figures and the company very quickly changed their minds.
06 April 2001, 06:58 PM
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Erm sorry to put a downer on this but IR35 is impossible to get around, no matter what the contract or the Inland revenue say!
There are lots of friendly contracts but when it comes to your year end then your still gonna have to pay the BIG tax lads. Come this MAY there will be lots of people crying after the IR is planning on investigating all people who are claiming or have signed IR35 friendly contracts.
I have recruited a team of 12 people in the last 2 months and I even looked into offering the contractors an IR35 Friendly contract but when having the Union Bank of Switzerlands and Royal Bank of England talking to the IR, they deemed it possible but the contractor will only have to pay the Tax after a year of being in the contract.
Even if you move around contracts and the paperwork changes, this still doesn't work. The day of claiming mileage and expenses is now all over unless the government change something drasticly which I somehow doubt, so please don't beleive what any Agency says about friendly contracts as later on it will catch you up and bite you very hard.
Harj..(Who went from Contracting to Permy)
There are lots of friendly contracts but when it comes to your year end then your still gonna have to pay the BIG tax lads. Come this MAY there will be lots of people crying after the IR is planning on investigating all people who are claiming or have signed IR35 friendly contracts.
I have recruited a team of 12 people in the last 2 months and I even looked into offering the contractors an IR35 Friendly contract but when having the Union Bank of Switzerlands and Royal Bank of England talking to the IR, they deemed it possible but the contractor will only have to pay the Tax after a year of being in the contract.
Even if you move around contracts and the paperwork changes, this still doesn't work. The day of claiming mileage and expenses is now all over unless the government change something drasticly which I somehow doubt, so please don't beleive what any Agency says about friendly contracts as later on it will catch you up and bite you very hard.
Harj..(Who went from Contracting to Permy)
07 April 2001, 12:09 PM
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<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:<HR>Originally posted by harj:
<B>Erm sorry to put a downer on this but IR35 is impossible to get around, no matter what the contract or the Inland revenue say!
[/quote]
Harj,
I suggest you join the Professional Contractors Group (www.pcgroup.org.uk) for enlightenment.
The PCG are actively engaging the IR over IR35. You may have heard recently that the PCG recently forced a Judicial Review of IR35. The PCG lost on all 3 points, but the Judge issued guidance on how the Inland Robinu (err, I mean, Revenue) MUST apply IR35.
Membership of the PCG is 100 GBP. For that you gain access to closed member-only forums that are an absolute wealth of information on contracting and IR35.
Spiel over!
Join, or don't join, but don't moan when the IR coming knocking for your cash!
C
<B>Erm sorry to put a downer on this but IR35 is impossible to get around, no matter what the contract or the Inland revenue say!
[/quote]
Harj,
I suggest you join the Professional Contractors Group (www.pcgroup.org.uk) for enlightenment.
The PCG are actively engaging the IR over IR35. You may have heard recently that the PCG recently forced a Judicial Review of IR35. The PCG lost on all 3 points, but the Judge issued guidance on how the Inland Robinu (err, I mean, Revenue) MUST apply IR35.
Membership of the PCG is 100 GBP. For that you gain access to closed member-only forums that are an absolute wealth of information on contracting and IR35.
Spiel over!
Join, or don't join, but don't moan when the IR coming knocking for your cash!
C
07 April 2001, 12:23 PM
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Ok, Ozzy, I am in a similar sife of IT to you, and really it depends what sort of money you can earn in a perm job. It is quite hard to find much more than mid £20's ph in the SW at the moment. I could almost be better off in a perm job now with IR35, but prefer being a contrator anyway.
Now is not really a good time to be contracting in PC type jobs, maybe when people have planned how to spend there new budgets there will be more money to spend on us, but currently it is worryingly quiet. Fortunately I am in a very long term contract (1 year), so it is less worrying for me.
Jon
Now is not really a good time to be contracting in PC type jobs, maybe when people have planned how to spend there new budgets there will be more money to spend on us, but currently it is worryingly quiet. Fortunately I am in a very long term contract (1 year), so it is less worrying for me.
Jon
09 April 2001, 08:56 AM
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B52,
Plain and simple, IR35 was designed to close what the inland revenue has described as a "loophole" in the income tax regime in relation to people, who by operating through a personal service company, avoid income tax and national insurance contributions, especially those in the IT and engineering sectors.
THATS what all the fuss is about.
Harj is on the ball, here, and my money says that whatever you may think, the Revenue will win in the end
Plain and simple, IR35 was designed to close what the inland revenue has described as a "loophole" in the income tax regime in relation to people, who by operating through a personal service company, avoid income tax and national insurance contributions, especially those in the IT and engineering sectors.
THATS what all the fuss is about.
Harj is on the ball, here, and my money says that whatever you may think, the Revenue will win in the end
09 April 2001, 10:19 AM
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I think the jury is still out to some extent on the IR35 issue, as there's lots of conflicting information flying around. Whilst on the face of it the PCG lost the judicial review, the judge made a very encouraging statement about how the law should be applied in practise. Take a look at
09 April 2001, 10:54 AM
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<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:<HR>Originally posted by Diablo:
<B>whatever you may think, the Revenue will win in the end
[/quote]
Can argue with that. Only two things and life are certain... Tax and penalty points (I'm still holding out for immortality
)
<B>whatever you may think, the Revenue will win in the end
[/quote]
Can argue with that. Only two things and life are certain... Tax and penalty points (I'm still holding out for immortality
)
09 April 2001, 01:11 PM
#21
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Ok a slight twist on this tale.
I'm not setup as a limited company for contracting purposes, so the agency I've been dealing with suggested that the company take me on as a temp for the contract period.
It makes logical sense, but surely there must be benefits/downsides compared to the traditional contracting method.
Not sure if Scots law differs from English law on this matter; guess the IR won't differentiate.
Any more thoughts?
Stefan
I'm not setup as a limited company for contracting purposes, so the agency I've been dealing with suggested that the company take me on as a temp for the contract period.
It makes logical sense, but surely there must be benefits/downsides compared to the traditional contracting method.
Not sure if Scots law differs from English law on this matter; guess the IR won't differentiate.
Any more thoughts?
Stefan
09 April 2001, 03:19 PM
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Ozzy, if the agency take you on as a temp then you will be paid after they have deducted the Tax & NI so IR35 will have no effect as you will be paid as if you were an employee, though with no benefits...
If you just want to 'try it out' this may be a good idea, but financially, if you plan to be contracting for at least year then you would probably be better off with your own ltd company.
Best speak to an accountant first though as they could provide you with figures for comparison, based on your estimated rates.
Check Freelance Informer for lots of adverts for accountants: JSA and Nymen Linden are two of the biggie contractors accountants.
Also, on the IR35 front a lot depends on whether you really are a 'temporary employee' or run your company as a business, of which a contract is just a part.
If you just want to 'try it out' this may be a good idea, but financially, if you plan to be contracting for at least year then you would probably be better off with your own ltd company.
Best speak to an accountant first though as they could provide you with figures for comparison, based on your estimated rates.
Check Freelance Informer for lots of adverts for accountants: JSA and Nymen Linden are two of the biggie contractors accountants.
Also, on the IR35 front a lot depends on whether you really are a 'temporary employee' or run your company as a business, of which a contract is just a part.
09 April 2001, 04:02 PM
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<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:<HR>Originally posted by BT52:
<B> Then why all the fuss over IR35?
Certainly not for the sake of £2500 per year!![/quote]
Because as a limited company you are liable for both employer's NI contributions at 12.5% and employee's NI contributions at 10%. The difference is the latter is capped (it was £199 a month max last year -- don't know about this year) whereas the former isn't.
<B> Then why all the fuss over IR35?
Certainly not for the sake of £2500 per year!![/quote]
Because as a limited company you are liable for both employer's NI contributions at 12.5% and employee's NI contributions at 10%. The difference is the latter is capped (it was £199 a month max last year -- don't know about this year) whereas the former isn't.
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