Permanent today contractor tomorrow

**Chugnut** · 12 June 2007, 13:29

Originally posted by Chris

I am seriously thinking of starting as a Java contractor and am really only waiting to be kicked hard enough to take the plunge.

The company I work for are about to start a project for which they are taking on contractors and if I was one I would be perfect for the role.

Are there any legal/tax issues around quitting as a permanent employee one week and coming back as a contractor the next?

If it is possible to do such a thing, I'm sure I'd be a prime IR35 Target for the tax man. Is that correct?

Thanks in advance

Chris

Yes, you can do it but you'll be fully within IR35, bang to rights. The next contract might not though.

**Euro-commuter** · 12 June 2007, 13:35

Originally posted by Chugnut

Yes, you can do it but you'll be fully within IR35, bang to rights.

But you should really go contracting because it's the working life that you want, or because it pays more, not because it might allow you not to pay some NICs.

**VectraMan** · 12 June 2007, 13:36

You'd be taxed like an employee, so the money would have to be good enough to make up for your lack of benefits and security. And don't forget the 13% employers NI when you work that out.

**DaveB** · 12 June 2007, 13:53

Not to mention HMRC would start taking a closer interest in the client as well since they would be seen as dodging Employers NI as well.

**malvolio** · 12 June 2007, 13:58

Originally posted by VectraMan

You'd be taxed like an employee, so the money would have to be good enough to make up for your lack of benefits and security. And don't forget the 13% employers NI when you work that out.

Agree with all the above. Money shouldn't be the motivator (actually it never is, it's a comfort factor, but lets not get technical...).

Nevertheless, take your current total gross renumeration, divide by 1000 and that is your minimum hourly rate to break even. And for that you're giving up paid holidays, paid sick leave, pensions (OK, perhaps not so much pensions these days), career progression, paid notice periods, free training and the possibility of only working 9 months a year. Does it still look like a good idea?

You contract for the lifestyle; the rewards, while very welcome, are actually incidental.

**Chris** · 12 June 2007, 14:27

Thanks for all of that.

It's not just the money that is the motivator (although it helps).

Thanks again

Chris

**max** · 12 June 2007, 14:42

Originally posted by Chugnut

Yes, you can do it but you'll be fully within IR35, bang to rights. The next contract might not though.

That is not necessarily true...certainly not a sure thing.

I reakon go for it...get your hand in contracting to help you get the next contract, in 6/12 months.

It used to be pretty rare to get investigated....and with all the new contractors joining the gold rush this year, the changes are even less.

Won't last forever...and you'll kick yourself if you miss out!

**VectraMan** · 12 June 2007, 14:45

I do know of somebody who managed to pay no more than his rightful amount of tax in this situation. He was investigated, but HMRC gave up in the end.

**malvolio** · 12 June 2007, 17:20

Originally posted by VectraMan

I do know of somebody who got away with this. He was investigated, but HMRC gave up in the end.

Wrong, wrong wrong... Nobody got away with anything, the taxman was prevented from taking tax that was not due. Let's get the focus straight, please!

Permanent today contractor tomorrow