Working as a contractor (UK)
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I have been working as a full time employee so far. I am planning to work as a contractor now. Which route would you advice - going with an umbrella company or register a Ltd company + hire an accountant? Do you have any recommendation for an umbrella company and/or accountant? Cheers
It is not a bad idea to go the Ltd Company route, because it does what it says on the tin. However it is not always the best way for everybody. Being a Sole Trader works for lots of people. The best way to decide is probably to find a good accountant (don't ask me how you do that though, I've c*cked up on that front more than once) and get his/her advice. You can describe how you envisage working, your current and future clients etc. If you know a Contractor or two who are doing reasonably well, ask them who their accountant is, and contact them about a one off initial session/interview.
Henry Minute Do not read medical books! You could die of a misprint. - Mark Twain Girl: (staring) "Why do you need an icy cucumber?" “I want to report a fraud. The government is lying to us all.”
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It is not a bad idea to go the Ltd Company route, because it does what it says on the tin. However it is not always the best way for everybody. Being a Sole Trader works for lots of people. The best way to decide is probably to find a good accountant (don't ask me how you do that though, I've c*cked up on that front more than once) and get his/her advice. You can describe how you envisage working, your current and future clients etc. If you know a Contractor or two who are doing reasonably well, ask them who their accountant is, and contact them about a one off initial session/interview.
Henry Minute Do not read medical books! You could die of a misprint. - Mark Twain Girl: (staring) "Why do you need an icy cucumber?" “I want to report a fraud. The government is lying to us all.”
Henry, Thank you for the prompt reply. This is the first time I would be working as a contractor so I would appreciate if you have any specific advice for someone just starting in this field. What are your views about an umbrella company or an agency?
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I have been working as a full time employee so far. I am planning to work as a contractor now. Which route would you advice - going with an umbrella company or register a Ltd company + hire an accountant? Do you have any recommendation for an umbrella company and/or accountant? Cheers
Further to what Henry said, a good accountant should be able to save you a lot of money in the long run but they can be quite hard to find so ask about for recommendations. I couldn't recommend mine as he's crap and is soon to be my ex-accountant but it is taking me a while to find a good replacement. Also, if you are still working full time, don't give up your job until you have a contract secured. Having a 4 week (presumably) notice period will put some contract employers off but the market isn't good at the minute.
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I have been working as a full time employee so far. I am planning to work as a contractor now. Which route would you advice - going with an umbrella company or register a Ltd company + hire an accountant? Do you have any recommendation for an umbrella company and/or accountant? Cheers
I have been using Parasol as my umbrella company for the last one month or so and I am quite happy with their service. Setting up an account was easy. I submitted one invoice through them and it took a week for the money to show up in my bank account. They were also very prompt in responding to all my questions. Here's a link to their website if you'd like to check them out: http://www.parasolgroup.co.uk/[^]
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Henry, Thank you for the prompt reply. This is the first time I would be working as a contractor so I would appreciate if you have any specific advice for someone just starting in this field. What are your views about an umbrella company or an agency?
Personally I avoided them. But that is me. For the most part I had enough work without needing one, but those were very different times, work was easier to come by. I did from time to time form loose partnerships with contractors of all types to form multi-disciplinary synergies, and that went well every time I did it.
Henry Minute Do not read medical books! You could die of a misprint. - Mark Twain Girl: (staring) "Why do you need an icy cucumber?" “I want to report a fraud. The government is lying to us all.”
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I have been working as a full time employee so far. I am planning to work as a contractor now. Which route would you advice - going with an umbrella company or register a Ltd company + hire an accountant? Do you have any recommendation for an umbrella company and/or accountant? Cheers
You want to partner and start up the next Google? :laugh: I've also just decided to go contracting, but I prefer the warmer climes of South Africa.
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Further to what Henry said, a good accountant should be able to save you a lot of money in the long run but they can be quite hard to find so ask about for recommendations. I couldn't recommend mine as he's crap and is soon to be my ex-accountant but it is taking me a while to find a good replacement. Also, if you are still working full time, don't give up your job until you have a contract secured. Having a 4 week (presumably) notice period will put some contract employers off but the market isn't good at the minute.
DoctorMick wrote:
a good accountant should be able to save you a lot of money in the long run but they can be quite hard to find so ask about for recommendations.
Our very own Dalek Dave? :-\
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Further to what Henry said, a good accountant should be able to save you a lot of money in the long run but they can be quite hard to find so ask about for recommendations. I couldn't recommend mine as he's crap and is soon to be my ex-accountant but it is taking me a while to find a good replacement. Also, if you are still working full time, don't give up your job until you have a contract secured. Having a 4 week (presumably) notice period will put some contract employers off but the market isn't good at the minute.
Thank you, I understand that a good accountant is a blessing in long run. To start with would you recommend first going under an umbrella company and then move to a limited company in future? Would starting with an umbrella company (e.g.; Parasol mentioned in the post below) be a PITA? I have a possible contract with people I have worked before. The contract would be fine until Jan-Feb next year with possibility of extension. I hope the market improves by then.
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I have been working as a full time employee so far. I am planning to work as a contractor now. Which route would you advice - going with an umbrella company or register a Ltd company + hire an accountant? Do you have any recommendation for an umbrella company and/or accountant? Cheers
If you go the Ltd company route make sure you have adequate IR35 insurance (FO35[^] or similar) and understand the implications of and current interpretation of the legislation by HMRC (which basically seems to amount to "if we can find a way to retrospectively screw you over, we will" I'm afraid). The umbrella route is safer, but has far lower returns (so you need a much higher rate to match the amount you can earn via the Ltd route). Beware though that HMRC have been rumbling about going after umbrellas over travelling expenses for a while. When they finally move on that, the amount you can earn through an umbrella is likely to be even further restricted. Bottom line: unless you are serious about running as a true commercial business (multiple simultaneous clients, direct contracts with clients, named deliverables and no 9am-5pm bums on seat engagements) the Ltd company roue is probably more hassle than it's worth in the UK right now. Keeping an eye on Shout 99[^] will give you an idea of what's going on. I do warn you that it's rather depressing, I'm afraid - and rates are generally nowhere near as high as you'd expect (particularly where agencies are involved). Good luck!
Anna :rose: Having a bad bug day? Tech Blog | Anna's Place | Tears and Laughter "If mushy peas are the food of the devil, the stotty cake is the frisbee of God"
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You want to partner and start up the next Google? :laugh: I've also just decided to go contracting, but I prefer the warmer climes of South Africa.
Brad, sure why not :) BTW I would love visiting South Africa.
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Personally I avoided them. But that is me. For the most part I had enough work without needing one, but those were very different times, work was easier to come by. I did from time to time form loose partnerships with contractors of all types to form multi-disciplinary synergies, and that went well every time I did it.
Henry Minute Do not read medical books! You could die of a misprint. - Mark Twain Girl: (staring) "Why do you need an icy cucumber?" “I want to report a fraud. The government is lying to us all.”
Thanks Henry
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If you go the Ltd company route make sure you have adequate IR35 insurance (FO35[^] or similar) and understand the implications of and current interpretation of the legislation by HMRC (which basically seems to amount to "if we can find a way to retrospectively screw you over, we will" I'm afraid). The umbrella route is safer, but has far lower returns (so you need a much higher rate to match the amount you can earn via the Ltd route). Beware though that HMRC have been rumbling about going after umbrellas over travelling expenses for a while. When they finally move on that, the amount you can earn through an umbrella is likely to be even further restricted. Bottom line: unless you are serious about running as a true commercial business (multiple simultaneous clients, direct contracts with clients, named deliverables and no 9am-5pm bums on seat engagements) the Ltd company roue is probably more hassle than it's worth in the UK right now. Keeping an eye on Shout 99[^] will give you an idea of what's going on. I do warn you that it's rather depressing, I'm afraid - and rates are generally nowhere near as high as you'd expect (particularly where agencies are involved). Good luck!
Anna :rose: Having a bad bug day? Tech Blog | Anna's Place | Tears and Laughter "If mushy peas are the food of the devil, the stotty cake is the frisbee of God"
Anna, thank you for the detailed reply. my 5. Based on what you have said, to start with, I find Ltd route a bit of a hassle now. Primary reason being I am not yet prepared to deal with all the finer details to handle a Ltd. I would prefer going this route once I am used to being a contractor and learn the art. Umbrella company looks a better option to me for now. I would appreciate if you have any other advice.
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I have been working as a full time employee so far. I am planning to work as a contractor now. Which route would you advice - going with an umbrella company or register a Ltd company + hire an accountant? Do you have any recommendation for an umbrella company and/or accountant? Cheers
Limited company is fairly straight forward if you have an Accountant, which I prefer as I am in total control of all finances. All recruitment agencies have contract wording that covers you from IR35 although how this plays out in court I have no idea. Keep in mind other managed companies eg Parasol take their cut which may work out more than having a good accountant. Another option I have heard of is to setup a company via Isle of Mann etc and pay even lower tax rates, all the rich do it so why not us.
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I have been using Parasol as my umbrella company for the last one month or so and I am quite happy with their service. Setting up an account was easy. I submitted one invoice through them and it took a week for the money to show up in my bank account. They were also very prompt in responding to all my questions. Here's a link to their website if you'd like to check them out: http://www.parasolgroup.co.uk/[^]
tufkap, thank you for the recommendation. I did visit their site and they seem reasonable to work with considering you have a good experience. To get started, all I need to do is register with them and find a contract to work on, is that correct? Or do I need to know any specific details? modified on Monday, July 13, 2009 1:21 PM I see Parasol has association with PCG.
modified on Monday, July 13, 2009 1:21 PM
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Limited company is fairly straight forward if you have an Accountant, which I prefer as I am in total control of all finances. All recruitment agencies have contract wording that covers you from IR35 although how this plays out in court I have no idea. Keep in mind other managed companies eg Parasol take their cut which may work out more than having a good accountant. Another option I have heard of is to setup a company via Isle of Mann etc and pay even lower tax rates, all the rich do it so why not us.
David, thank you for the details. Finding a good accountant is a pain, I guess, unless someone recommends his/her accountant.
David Wong wrote:
Keep in mind other managed companies eg Parasol take their cut which may work out more than having a good accountant.
Based on the replies above, I am OK if managed companies, like Parasol etc, take a fair pre-decided share and not be a leech. I say this because I am just starting off and am in no condition to handle a c*ckup on my side:(. As time goes by I could learn the trade and then move to a Ltd company. I just want to play safe being a novice in contracting field. I have a contract materializing and am short on time (to a degree) that's another reason.
David Wong wrote:
Another option I have heard of is to setup a company via Isle of Mann etc and pay even lower tax rates, all the rich do it so why not us.
Is that like saving on VAT when buying items online from Jersey?
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DoctorMick wrote:
a good accountant should be able to save you a lot of money in the long run but they can be quite hard to find so ask about for recommendations.
Our very own Dalek Dave? :-\
He is too busy with CCC :cool:
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Anna, thank you for the detailed reply. my 5. Based on what you have said, to start with, I find Ltd route a bit of a hassle now. Primary reason being I am not yet prepared to deal with all the finer details to handle a Ltd. I would prefer going this route once I am used to being a contractor and learn the art. Umbrella company looks a better option to me for now. I would appreciate if you have any other advice.
Anytime. Using an umbrella is the safest route, but please keep an eye on how the umbrella in question handles expenses (which means you need to learn about HMRC Benefits & Expenses rules, I'm afraid) so you can have some confidence they are doing everything properly and that you are not exposed to unexpected liability. The most important other pieces of advice I can offer are to a) treat the vast majority of agencies with the contempt they invariably deserve and b) don't let the client treat you as a permie. If it doesn't say so in the contract, you don't have any obligation to work their hours, fill in timesheets, holiday forms instead. If they want a replacement permie, charge them extra for the privilege. It goes without saying that you are going to have to learn how to read and check the fine print in contracts. ;) Good luck!
Anna :rose: Having a bad bug day? Tech Blog | Anna's Place | Tears and Laughter "If mushy peas are the food of the devil, the stotty cake is the frisbee of God"
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You want to partner and start up the next Google? :laugh: I've also just decided to go contracting, but I prefer the warmer climes of South Africa.
Any ideas brewing in your mind yet? :-D
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Limited company is fairly straight forward if you have an Accountant, which I prefer as I am in total control of all finances. All recruitment agencies have contract wording that covers you from IR35 although how this plays out in court I have no idea. Keep in mind other managed companies eg Parasol take their cut which may work out more than having a good accountant. Another option I have heard of is to setup a company via Isle of Mann etc and pay even lower tax rates, all the rich do it so why not us.
David Wong wrote:
All recruitment agencies have contract wording that covers you from IR35 although how this plays out in court I have no idea.
Since the Dragonfly case in 2007 this has been useless in principle. The best ways to ensure safety are now to understand that : 1) Get appropriate insurance (both investigation and penalies - PCG membership includes the former, but not the latter). 2) The upper (if any) and lower contracts must be consistant (which means they both have to be independently vetted - something most agencies are likely to to reluctant to do). Use PCG standard contracts for both if you can. 3) It is essential that working practices reflect the contract (so get a written letter of engagement signed by the client which accepts your terms and conditions. This document must also make it clear to them that they cannot treat you as a permie - so no rolling projects, core hours, timesheets or holiday forms). 4) Contract schedules which name an invididual to carry out the work are a bad idea. Ideally you should be free to supply any member of your own staff, subject to security clearances etc. 5) Make sure that the client understands that in the event of HMRC making a verbal approach to them, that they should not respond to them, but contact you immediately so that appropriate professional representation can be arranged for both client and contractor. This is doubly important after the Dragonfly case - ill advised comments by a client representative in response to a leading question can cause serious problems in an IR35 investigation. Mad, isn't it? I now understand what they mean when they say the red tape is killing small businesses... :((
Anna :rose: Having a bad bug day? Tech Blog | Anna's Place | Tears and Laughter "If mushy peas are the food of the devil, the stotty cake is the frisbee of God"
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I have been working as a full time employee so far. I am planning to work as a contractor now. Which route would you advice - going with an umbrella company or register a Ltd company + hire an accountant? Do you have any recommendation for an umbrella company and/or accountant? Cheers
If you haven't already done so, check out http://www.contractoruk.com/[^] It has loads of useful information. I've used a limited company and umbrella companies. I always found umbrella companies to be a pain in the arse. You only speak to idiots on the end of a phone who have no real idea what you're asking them - they're normally not proper accountants themselves at the end of the day. I found that a ltd. company and a decent accountant to be a much better way of doing things. Because at the end of the day, you know where your money is going and why. It gives you much more flexibility. :)
"...great scott!" Dilbert: Aren't all meetings like this... Richard Dawkins: "What if you're wrong?"