Advice needed

[sweetpeanuts]

Hi everbody.

First time poster so please be gentle lol.

I'd just like some advice. Up until 18 months ago I was a contractor (for 10 years) but then bit the bullet and became permie.

Recently an opportunity has arisen for me to go back to contracting - something I was thinking of doing anyway once the market improved.

Question really is twofold. Firstly, I would be going direct to the client (no agency) so can anyone tell me of any pitfalls I should be weary of. I know the one about some clients not paying invoices for 90 days but are there any other things I should be careful of?

Secondly, and this may or may not affect the reply to the first question. A very good contractor friend of mine already has his own ltd company. I trust the guy (known him 30 years) and he has suggested I could join his company as an 'employee'. So the same question applies, any advice or pitfalls that I should be aware of?

Many thanks in advance for the advice.

[Sockpuppet]

Secondly, and this may or may not affect the reply to the first question. A very good contractor friend of mine already has his own ltd company. I trust the guy (known him 30 years) and he has suggested I could join his company as an 'employee'. So the same question applies, any advice or pitfalls that I should be aware of?

Assuming that you are outside IR35 you'll pay a feck load more tax than you mean to. Depends what you want really how long the contract is for an if its worth running your own Ltd.

Also I would never mix friends and business. Just not worth it. Money does strange things to people.

[Alan @ BroomeAffinity]

1.) There's no point in contracting as employee of your mate's company. You'd be taxed as an employee so no benefit.

2.) Your mate might also lose his eligibility for flat rate VAT by virtue of your turnover taking it over the threshold.

3.) Keep your friend as a friend because as sure as can be he won't be your friend long when you work for him.

[sweetpeanuts]

Well, the contract is for 6 months initially then probably another 12 months after that.

I don't see how I would be paying more tax than I need to if I become an 'employee' of my mate's company? I would be paying Tax & NI (Employers & Employees) the same as I would for my own Ltd company. Equally I will be drawing the same 'expenses'.

[miffy]

I agree with SP. Keep things seperate all the way.

As an example, an old permie manager from a few years back setup in business with a good friend. Even with everything supposedly water tight he somehow managed to rip him off to the tune of 250k and disappear.

Money makes people do crazy sh*t.

[Alan @ BroomeAffinity]

Miffy's right. I could give you some cracking examples from my files but the best one was 2 (non-contractor) clients went in to business together building houses. One was the other's best man. 6 months later they were in the high court as one had bilked the other out of £500 per week for six months - claiming he was paying labour on the QT which he wasn't. There was also a finance guarantee signed and witnessed fraudulently.

The solicitors are making a fortune, so at least someone's smiling. Shame its an oily court rat!

[TheFaQQer]

1.) There's no point in contracting as employee of your mate's company. You'd be taxed as an employee so no benefit.

2.) Your mate might also lose his eligibility for flat rate VAT by virtue of your turnover taking it over the threshold.

3.) Keep your friend as a friend because as sure as can be he won't be your friend long when you work for him.

WHS.

Plus, get hold of a standard contract from PCG for use with the client.

[HYpno27]

Ditto all the above

Friends and business generally don't mix.

Other than payment terms possibly being longer, check your liability clause in the contract when going direct and make sure you have insurance to cover it. Probably nothing to worry about, but you don't want to be on the receiving end of a £1m law suit with no insurance

[MrRobin]

All good advice here... don't mix friends and money, it will get ugly.

Here's another tip:

When starting a thread in an internet forum, create a meaningful title that introduces the content of what you are asking / stating, not just an arbitrary 'Advice needed' or 'I have a question' etc etc.

Ta.

[Alan @ BroomeAffinity]

I don't see how I would be paying more tax than I need to if I become an 'employee' of my mate's company? I would be paying Tax & NI (Employers & Employees) the same as I would for my own Ltd company. Equally I will be drawing the same 'expenses'.

If you are outside IR35, you won;t pay NI and PAYE on your earnings as you will be able to declate dividends. Its the main financial advantage of contracting. There's a lot of info on here about this.