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Newbie, seeks honest advise.

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    Newbie, seeks honest advise.

    I know this a break in tradition from this site but I seek some serious advice and information from you regarding going contracting. My particular situation is for the past x months I’ve been winding up my sole trader operations, though just recently an agency approached me with a possibility of going contracting. To be honest its was not something I was even considering and was actually gearing up for a permanent job.

    Now I have a problem, an interview for a contract role and not a real clue how to be a contractor, if I should succeed. I did a bit of research online and came up with more questions than answers. Firstly, I do not want my own limited company, so does this mean I HAVE to use the services of an Umbrella company?

    One of the major things I do not understand is if you have an umbrella company that assigns a salary of £800's and then the remainder is paid in dividends, how can that be legal? To me isn’t that just evading tax? And b) on payment day will i just get the salary amount or will i get the salary and dividend together? And c) Can the dividend be lost or diminished in anyway and so when withdrawn can I lose out?

    Typically, in the real world how long does it actually take to get paid if the agency will only pay by the month? I have heard stories of agencies taking forever to pay and of course Umbrella companies pass on this delay. Are agencies that bad?

    I've could across a company called RMS that claims to pay your salary portion before they received payment from the agency, though there’s no dividends, still expenses but therefore more tax (less net). Does anyone have any experiences of RMS Consults? Is such an arrangement less risky that going the dividend route?

    Can someone please recommend a good Umbrella company for First Timers like me that provides the complete service, with honest advice, good support, Bullet proof insurance cover (PI, Liability and the other one), and acceptable fees? What is an acceptable fee per week anyway?

    In this day and age, unbiased honesty seems to be a rare quality. Ultimately if I cant find a Umbrella that doesn’t **ss me about or doesn’t behave like double glazing salesmen then I’m not going to take the plunge, nor will other first timers either. Is there any one out there???

    I really would appreciate your advice.
    Thank you.

    Ps. is “parasol” any good?

    #2
    It's too early on Sunday for me but I'll try to answer a few of your questions.

    Normal Umbrella operation pays all money out to you as salary with no dividend. I think you are talking about the total managed package that some offer where they effectively run a company on your behalf. This method of operation usually costs at least 3% of your turnover rather than around 1% for an accountant/ltd or normal Umbrella operation. If your contract is outside IR35 or is likely to run for at least six months we recommend the accountancy/ltd route.

    If you are determined to use an Umbrella company rather than your own limited, Parasol are the one we recommend - they are very honest with their advice on expenses and one of the cheapest around.

    What is the problem with a limited company - it's the preferred method of operation for a contractor and will be the best option financially, assuming your contract is outside of IR35 or in any event if you stay contracting for six months or more. Our accountant will set up a limited company for you free of charge, as do a number of other accountants who advertise on this forum.

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      #3
      I am in a similar position having been a permie all my life have recently accepted a contract post through an agency. My contract is for an initial 6 month period with a good liklehood of being extended. From the basic rules of IR35 I have seen I believe I would be IR35 caught though... which is the best option in this case. It is all very confusing for the first timer!!!!!

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        #4
        Just remember that 90% of contractors would appear to be caught by IR35 if working practices were anything to judge. Unfortunately for the Revenue they have to usually rely on what you say and the contractor/agency contract, which is the only contract applicable to you as a contractor in an investigation. If you can draw up an IR35 friendly contract with your agent, you will be in the same position as most who claim to work outside of IR35.

        Clients are usually unwilling to get involved in IR35 disputes and cannot be subpoenaed. The all important Client/agent contract cannot be used as the contractor has no part in it and has in theory not seen it.

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          #5
          Re: Parasol

          I did try to use parasol last night, though it crashed on the screen where you put in your personal information. There appears to be some 'holes' in whatever test procedure was used on Parasols key server application. I found errors within 60 seconds of logging in. "Internal Server Errors" and I wasn't looking for them either... well not much. 8o

          Is parasol just an online billing solution? Do they actually chase payments etc or is all that left to the contractor themselves?

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            #6
            Re: Parasol

            In a normal umbrella arrangement with Parasol the client contracts would be with Parasol and you are an employee of Parasol. This being the case Parasol would be bound to chase overdue payments to protect their own interests as well as yours.

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              #7
              parasol are fine.

              I used them for my first few months - they are very efficient. But you lose a hell of a lot of tax - i reckon i was paying out around 46% in tax.

              Go LTD.
              Get a good accountant (SJD Accountancy are good - IMHO)
              Make a good impression with boss - and look forward to an ever renewing contract.

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                #8
                Re: parasol are fine.

                Tax through a normal umbrella arrangement is paid at the same rate as an IR35 contract through a limited company. All gross money less certain expenses is treated as salary and you obviously have to pay full national insurance and high rate income tax where appropriate. You are able to claim up to 5% of gross turnover as expenses in addition to travel and subsistence through a limited company but not through the umbrella.

                Anyone with a contract that operates outside of IR35 would be financially better off using a limited company and accountant.

                Comment


                  #9
                  Ltd Co

                  Download the PCG Guide to Freelancing.

                  www.pcg.org.uk/capture.ph...ancing.zip

                  If you decide to go Ltd Co, join the PCG & take out Route35 IR35 tax investigation insurance.

                  Comment


                    #10
                    Re: SJD Accountancy

                    Thanks underscore, though they appear to be rather expensive in my opinion. Very professionally looking, I'm just not interested in going Ltd at this stage. I'm edging towards parasol at the moment despite the software glitch.

                    I did look at JSA briefly (Chorus) and went through their documents with a highlighter pen - hidden charges. I soon gave up, shreaded the pages and now the hamster is using them. :lol

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