Newbie - letter of intent

**northernladuk** · 23 March 2010, 23:43

Are you going to go straight in to an LTD??? You are going to have a bit of a complex time if you are starting a role with no LTD, which leads me to think you have no business bank account and no FR Vat set up, no accountant or anything? How are they going to pay you? etc etc....

Sounds to me like you need to get yourself an Umbrella quick for an easy first few months. While you are with them you wont get as good a return as in a LTD but you can get on with working and deal with all the company formation/tax/vat/IR35/ad infinitum that comes with setting LTD up.

We seem a bit split on here as to whether to go LTD or Brolly. I went brolly first while i got the hang of contracting so not to take it on all at once. Others will say LTD..

In this case it sounds like you need the fastest option possible....

Can't help with letter sorry, just wanted to mention this in case.

**northernladuk** · 23 March 2010, 23:48

Originally posted by king132 View Post

Guys/ Girls new on here so please take it easy, i have searched the forums and couldn't find anything.

Completely new to contracting and my current employers have agreed(ish) for me to go direct - they are asking for a letter from me stating rates, duration etc (basically a letter of intent). I haven't set-up a LTD yet which means i don't have a business name, should i wait until after Ive set that up and send a letter with my company name etc or just send a letter from myself?

If someone can point me in the direction to a sample/ template of some sort i would really appreciate it.

Thanks....

Couple of things confuse me as I read this though. What is this about current employers? Are these the guys you are starting your first contract with? At worst you mean 'prospective employers'? There is then the mind set you need to pick up VERY quickly which is you LTD employs you. The people that pay your LTD are your client. Very very important to get this right

What they are asking for sounds more like a contract. I haven't heard a LoI being used for a long time but then I always go through agents and if it exists they deal with it. How have they agreed to go direct? Have you negotiated this? Going direct on your first contract when you have no idea is going to be difficult won't it? You are entering in to a B2B contract with a client. Can you do that?

Tell us a bit more.

**cojak** · 24 March 2010, 08:37

You might as well go Brolly as this sounds like it's well within IR35-land.

Moving from perm to contracting with the same employer is not the way to go, in my book. What have they got to gain and you got to lose in this change of circumstance?

Look at your current T's & C's very carefully my friend, and ask them what they would expect to see in the LoI.

I would talk to specialists in this such as QDOS or Bauer and Cottrell before you do anything rash. They'll be able to guide through this.

It'll cost a bit of dosh but it'll be worth it in the long run.

**The Wikir Man** · 24 March 2010, 09:06

Originally posted by cojak View Post

You might as well go Brolly as this sounds like it's well within IR35-land.

Moving from perm to contracting with the same employer is not the way to go, in my book. What have they got to gain and you got to lose in this change of circumstance?

WSS - where is the incentive for either of you? When looking at your rate, make sure you remember that you need to take VAT, PAYE and two lots of NI into account.

**Wanderer** · 24 March 2010, 09:38

Originally posted by king132 View Post

they are asking for a letter from me stating rates, duration etc (basically a letter of intent). I haven't set-up a LTD yet which means i don't have a business name, should i wait until after Ive set that up and send a letter with my company name etc or just send a letter from myself?

Welcome!

Would anyone like to comment on what the letter of intent is all about? Any traps to watch for? I've just shrugged and signed them in the past. I don't know if that's good advice or not though.

However, I would say DON'T send the letter from yourself. Form a LTD company and use it's name, remember that the contract will be between your company and the client, not you personally.

Setting up a LTD is as easy as jumping out of a plane. It's only after you have done it that you start wondering what sort of parachute you have packed. If you are an absolute beginner then consider joining the PCG who will help you with company formation recommend you an accountant.

Read this, it will help you understand the basics.

http://www.contractoruk.com/first_timers/index.html

Don't be dazzled by the headline daily rate, check out the calculators that can give you an idea of your net income for a given hourly/daily rate. I work out an annual salary based on working 45 weeks per year but there are plenty of skilled people here who have been off work for months looking for contracts.

http://calculator.contractoruk.com/

Umbrella is a no-hassle option but you pay a lot more in tax (despite the BS that they tell you). LTD is much more tax efficient, especially if you are outside IR35 (which you could very well be if you are going direct) but there are a lot of legal obligations and admin to deal with.

Good luck!

**king132** · 24 March 2010, 09:42

I should’ve given a bit more background info. I'm currently contracting through a Recruitment Company, I've found out what my rate is and I’ve negotiated with the company (my manager) for me to work for them directly through my own LTD.

What they are asking for is a letter from me just confirming that I no longer wish to work through a RC and to state that I intend to set up a company, my rate, contract duration etc. Its just a letter at the moment not a contract.

The company I work for haven’t actually agreed but from their stance before where I my contract extension would continue through the RC they seem to be more reluctant for me to go solo. I am in two minds if I should set up a LTD now or after they have agreed? obviously I don’t want to waste my time and money on setting up a LTD if they later say no so my idea is to get this letter to them and then set it up when they have agreed.

from my understanding it's pretty easy to set up a LTD, there seem to be plenty of online sites that can do it v quickly. I have been told an accountant can set one up pretty much the same day.

I will invoicing the company a month in arrears so I figure if I can get a company set up, then the rest I should be able to sort out all within a month?

Or am I being naive?

**singhr** · 24 March 2010, 09:43

Originally posted by king132 View Post

Guys/ Girls new on here so please take it easy, i have searched the forums and couldn't find anything.

Completely new to contracting and my current employers have agreed(ish) for me to go direct - they are asking for a letter from me stating rates, duration etc (basically a letter of intent). I haven't set-up a LTD yet which means i don't have a business name, should i wait until after Ive set that up and send a letter with my company name etc or just send a letter from myself?

If someone can point me in the direction to a sample/ template of some sort i would really appreciate it.

Thanks....

I think the tail is wagging the dog here. Get them to tell you what they want from you

**cojak** · 24 March 2010, 09:43

Originally posted by Wanderer View Post

Umbrella is a no-hassle option but you pay a lot more in tax (despite the BS that they tell you). LTD is much more tax efficient, especially if you are outside IR35 (which you could very well be if you are going direct)
Good luck!

It's very unlikely that s/he'll be outside IR35 as he'll probably be performing the same job as he was doing when a permie and will therefore be a disguised employee.

One of the reasons IR35 was brought in was to stop this sort of thing from happening.

Going direct is one indicator amongst many other contra-indicators...

Note: now OP has given us more info, this proably doesn't apply to him.

**downsouth** · 24 March 2010, 09:55

If this is your current permie employee, i'd be thinking in this climate why your current employer is 'allowing' you to go direct?

What happens if you do go direct and they pull the contract within Weeks?

Are they in trouble financially, redundauncies on the horizon etc???

Personally i'd be looking to stop as a permie and look for contracting work elsewhere whilst employed, it aint all roses in the contracting world at the mo

Newbie - letter of intent