




******* NEWBIE ALERT ********
I have always been a permie and know very little about contracting
******* NEWBIE ALERT ********
A friend of mine working for an energy company has asked my wife (who is unemployed) to do a small project for his company.
It will be a "fixed price" project to create a web-application with the agreed scope with a fixed manday estimate.
But he says that billing needs to be done by an invoicing company.
Points to note here are:
1. My wife is unemployed.
2. The work will be entirely done from home with the client provided laptop & connectivity.
3. This will be a trial first project and hopefully lead to few more.
4. I am in a permanent job & a high-rate taxpayer.
After reading through http://www.contractoruk.com/first_timers/index.html site i think that there are 2 options available to her:
1. Limited Company
- Form a limited company (Company A).
- Ask an umbrella company (Company B) to do the invoicing for the contract for a fee.
- Company B will bill the client (Company C).
- Company B will pay Company A after deducting their costs.
- Company A will pay my wife after deducting taxes + NIC.
2. Join an Umbrella Company
- Register with an umbrella company (Company B)
- Ask Company B to sign the contract.
- Company B will bill the client (Company C).
- Company B will pay my wife after deducting costs + applicable taxes + NIC.
My questions are:
1. Am I right to think that these are the only options available?
2. Is there a 3rd option where Company A above (her limited company) can directly bill Company C (the client)?
3. Or does there always have to be an intermediary in between (Company B)?
4. Most importantly, what is the most tax efficient way to handle this ensuring maximum returns?
Could anyone with a similar experience please share thoughts and advise the most appropriate path.
Comment