Mungo

What's the best way to go about working as a contractor, from a tax efficiency point of view?
1. Sole trader. This is unlikely to cut much mustard with the Inland Revenue as the person in question would only work for 1 "customer" (i.e. employer) although only 3 days per week.
2. Limited Company. Not sure how this reduces the tax bill by much - can cut NI payments by paying a low salary and taking the rest as dividends, and also by offsetting a lot of the costs you can't as an employee.
Any experiences/recommendations, especially from all you IT bods?
P.S. It's got to be legal!!

Oakers

I have been contracting for a few years now. I have done it as a ltd company but that was mainly due to me having more than one customer.

However, if I was doing just one contract I would do it under an umbrella company. There are a few out there, it's just a case of finding a good one. Have a look at the website www.contractoruk.co.uk there is a few links there for umbrella companies.

MarkO

I've been contracting through a Ltd company for nearly 10 years.

Bear in mind that if you do this, you'll almost certainly qualify to be taxed under the IR35 rules. Talk to your accountant if you don't know what this is. On the other hand, if you're working for several companies at the same time (i.e., you're a real consultant, and not just a disguised employee) it shouldn't be a problem.

Eldar

I've been contracting for a few years. Was great until 2 things happened. 1 is IR35, so nearly all your income (95%) is treated as earnings, and taxed & NI'd accordingly. 2 the contract market is sick, so contracts are few and rates low. You will almost certainly need to be Ltd. Co. as the pimps insist on it. Also no holiday pay, sick pay or security, and the overhead of running the company Blame Dawn Primarolo, the thinking mans mad cow.

I've given up contracting, had my brain replaced with a pork pie and become a permie....

Colin.

TurboKitty

I've been contracting for 3 years and I am about to go permie for a bit. I really wouldn't recommend anyone start up as a contractor at the moment.

rawsy

Yep, agree with all the above. If you want to be treated like **** and have no-one take any notice of you, but get paid extremely well for it, then contracting is the game !!

However you will be constantly thinking about the end of the contract, and worrying about where you will work next - which is what I'm doing now......4 weeks to find new job !!

Cheers,

G

Scooby_Loo

go to www.businesslink.org everything you ever need to know is in there.

Also, the small business service which is run by the Department of trade and industry (where I work although I deal with the financing of a business) is worth a try, i will edit the post for you with lots of helpful numbers in the morning when I get to work

[Edited by Scooby_Loo - 4/22/2003 8:53:22 PM]

Bajie

4 weeks to find a new job.
I got a days notice yesterday [img]images/smilies/mad.gif[/img]

Contracting in this country has been a total waste of time since IR35.

Edited angry comment. Sorry.

[Edited by Bajie - 4/23/2003 8:00:58 AM]

Foot_Tapper

Hi Mungo, we dont know your current situation or what your
skillset is. But if you are currently in a permanent role, it may be wise to stick with it for the summer.
According to some sources , like www.contractoruk.co.uk the tide is turning. But also look at the skillsets currently in demand
and those that may be required soon.
If you dont have a job anyway then why not go for it.
You have to be increasingly flexible in locations , ie be prepared to work away from home, which gives you added expense.
I have seen agencies offering £10-12 per hour for jobs requiring
MSCE's; that IMHO is a joke, after taxes/expenses/paying accountants its gotta be below minimum wage, especially as a lot
of those jobs are classed by the government as not self-employed.
But sometimes (although it doesnt do yourself or others any favours), it is better to take a badly paid job just to bring something in. The agencies have you over a barrel.
Saying that, i have been in work through all this period;
and managed to avoid those £10-12/hour jobs.
Cheers
Glenn

Mungo

Cheers for all your replies.
I know I mentioned IT (there's so many of you on here), but it's actually to contract as an accountant.
It's for my wife who only wants to work 3 days a week, as she's fed up with managing people. She can do 3 days of what she enjoys at work and then have a 4 day weekend.
The alternative was to be a housewife, so it's more of a lifestyle decision.

TurboKitty

Maybe we need a thread to discuss what the next big skill sets will be.

At the moment many companies seem to be trying to combine several roles and are looking for one person to cover what would normally be 2 or 3 distinct jobs. That means a lot of the jobs advertised at the moment require a very unrealistic set of skills. Companies are looking for people with server experience, network experience, security experience AND some database/development/citrix/random specialist knowledge too; and they want in-depth knowledge of all of these, not just a general grounding in a wide range of skills. Because it's unusal to pick up all the skills now required in one line of IT, it makes it very difficult. Last year there were hundreds of jobs matching my skill set on Jobserve every day. Now it's difficult to find more than a few that don't require at least one skill I don't have, (and I have a pretty broad range of experience). Annoyingly, of the ones I am an absolute match for, many will say I don't have enough depth of knowledge in each area!

Anyway, as for skills of future importance, I'd have to say .NET is going to be a biggie, both in terms of development within the environment and management of the environment.

What do the rest of you think?

krankyd

.net might be a biggie, but all the big projects will probally be farmed out to some sweat shop in asia for 5 quid an hour.

Why bother to pay for a UK developer at 20 quid an hour, when they can pay some guy in channi 5 quid an hour, and get 13-14 hour days out of him?

TurboKitty

Some of the articles I have read are predicting another boom in the contractor market in around 5 years time, and they are saying the next will be bigger than the last, although not by much.

Of course, for every article saying things will pick up again, there is another one saying contracting is dead and buried.

We shall see.

TurboKitty

And regardless of where the projects are, people will be needed to implement and maintain the UK infrastructure. Worldwide collaboration is good for us server and network types because it means more of a need for secure systems.

krankyd

>>good for us server and network types because it means more of a need for secure systems.

You'd think so, but not before the company you work for ships your department to the jobcenter by replacing you "lock-stock" with cheap imports. I've seen it done before.

Call me a cynic....

TurboKitty

Yes it's happened before, but Fast Track Visas are expected to have much less of an effect in the future than they have to date.

See this article for details.

krankyd

FTV's being removed is still only half the battle.

The inter-company transfer system is the latest one to start to be abused.

Internation bank wants to start cutting costs, by outsourcing abroad, but can't just ship the staff over wholesale because of FTV issues (or lack of FTV's..).

So they buy up the company really cheap, and therefore all the development staff are employee's of the company. A few inter-company transfers later, and you've got all the staff over here quick smart..