First time contractor seeking help

[Wanderer]

Nobody has mentioned flat rate VAT. It is in your interests to register for this as soon as you start trading. In a nutshell, you charge VAt at 20% but you pay HMRC 15% (depends on your type of business the exact %, mine is 15%). So you automatically gain 5% of your turnover for nothing. Plus for the first year, you get an extra 1% bonus. Also ask the accountant about cash accounting for VAT. That helps with your turnover when you are paying your VAT since you pay over the VAT on monies received instead of monies invoiced.

I was going to mention it but then I saw that it's one of the topics covered in detail in the links on the right.

[SueEllen]

@SueEllen,

thank you for being nice. Same as above: I read at least 20-30 discussions on the forums before posting. And you know what is the funny thing? It's that in most of those discussions there were several replies like yours. E.g. "search is your friend".

The reason "search is your friend" is that there is a wide variation of opinions on a subject including tax and law due to the fact that the laws in the UK are written to be interpreted rather than as black and white. This means that even the resident forum accountants have discussions on threads about a point of tax.

Also people disagree on simple things for example I would say don't bother opening a business banking account now if you are going with HSBC if you have a good credit record as they open them very quickly (like the same day) and give you your account number there and then for incoming payments. However if you want a company mobile phone or another contract then yes open a business bank account asap. (Though I wouldn't do that until you have a contract.)

I also would avoid having all my banking with one banking organisation simply because I have heard stories including one from a contractor where they have had trouble with a banking organisation and all their accounts have been affected even though the business account should be regarded as separate. In this guy's case his accounts were all frozen as fraud prevention even though he had been doing the same transactions for years. (It was our favourite Spanish bank.)

Besides this, I haven't asked anybody to hold my hand or to make decisions on my behalf. All I asked is some advice. I think it's quite different, isn't it?

Good to know but your first post was long and a bit rambling.

In regards to being a company director as a permie, different employers have different clauses for it. As with all contracts if the clause is over-reaching then you can ignore it but if the clause states something like you need to ask permission to be a company director or permission to work in another business outside this employment, then you can't.

BTW being a company director doesn't necessarily mean you do any "work" for that particular company.

[Old Greg]

Nobody has mentioned flat rate VAT. It is in your interests to register for this as soon as you start trading. In a nutshell, you charge VAt at 20% but you pay HMRC 15% (depends on your type of business the exact %, mine is 15%). So you automatically gain 5% of your turnover for nothing. Plus for the first year, you get an extra 1% bonus. Also ask the accountant about cash accounting for VAT. That helps with your turnover when you are paying your VAT since you pay over the VAT on monies received instead of monies invoiced.

WFBS except you pay HMRC 14.5% (for I.T. consultancy) of the total invoiced, including VAT, (so if you invoice £1000 + VAT = £1200, then you pay 14.5% so £1200 = £174), so you keep 2.6%. As FB says you get a 1% reduction, so 13.5% in first year.

The only reason I can think of not to register for VAT is if your clients (private individuals mainly) cannot claim back the VAT. Info here:

HM Revenue & Customs: Flat Rate Scheme for VAT

IANAA so happy to be corrected if wrong,

[Blade]

The only reason not to have a company while permie is that your employer tells you "You can't work for us and be a company director too". There is no legal impediment that I know of.

Yes, the Home | PCG is correct.

You don't have to register unless you turnover ~£70k in your first few months. The information on this website is accurate and generally good advice. Go back to the right side of the page, read all about "VAT" and "IR35". If it's not clear then you should get a specialist contractor accountant engaged and have a good old chat with them to get to grips with it. Good luck!

Thanks, good to know then it's not something I have to rush about.
In the meantime I have opened the business bank account with HSBC, and it was a lot easier than I thought it would be. It took just an hour since I am already HSBC customer.

That's a good choice:-)

Yes, I totally agree. I love Ruby development on Mac with deployment on Linux.
It's been a while now, but sometimes still today I wonder why I hadn't switched before!
In the meantime it looks like I almost forgot .NET, C# and all that crap though
And at times I read these still pay more than Ruby & co. What is your take on this? Do you agree with this or do you think there isn't much difference between Ruby and .NET, for example, as contracts go?

You could look here.

Nice page, thanks. Do you find from your experience that the figures listed on that website are accurate/realistic?

Nobody has mentioned flat rate VAT. It is in your interests to register for this as soon as you start trading. In a nutshell, you charge VAt at 20% but you pay HMRC 15% (depends on your type of business the exact %, mine is 15%). So you automatically gain 5% of your turnover for nothing. Plus for the first year, you get an extra 1% bonus. Also ask the accountant about cash accounting for VAT. That helps with your turnover when you are paying your VAT since you pay over the VAT on monies received instead of monies invoiced.

That sounds good and confirms/reminds me what I've read about this also on this site, so I was already thinking to do the flat scheme. If I go for the flat scheme, would you recommend I do this now or it doesn't matter and, as said, I can wait for now since I don't have my first contract yet? I like the idea of that extra 5% for nothing

Also people disagree on simple things for example I would say don't bother opening a business banking account now if you are going with HSBC if you have a good credit record as they open them very quickly (like the same day) and give you your account number there and then for incoming payments. However if you want a company mobile phone or another contract then yes open a business bank account asap. (Though I wouldn't do that until you have a contract.)

Yep as said mine was opened in just an hour or even less, which was surprisingly easy. Got everything sorted out so quickly including Internet/telephone banking, debit and credit cards, saving account..

I also would avoid having all my banking with one banking organisation simply because I have heard stories including one from a contractor where they have had trouble with a banking organisation and all their accounts have been affected even though the business account should be regarded as separate. In this guy's case his accounts were all frozen as fraud prevention even though he had been doing the same transactions for years. (It was our favourite Spanish bank.)

Ooops that sounds a bit scary

Good to know but your first post was long and a bit rambling.

In regards to being a company director as a permie, different employers have different clauses for it. As with all contracts if the clause is over-reaching then you can ignore it but if the clause states something like you need to ask permission to be a company director or permission to work in another business outside this employment, then you can't.

BTW being a company director doesn't necessarily mean you do any "work" for that particular company.

Makes sense. Out of curiosity if, say, I am in that kind of situation in the future, so I want to keep the company perhaps as "dormant" but I have a permie job and the company doesn't agree with me being the director of a company etc etc, can't I just make my wife for example director and that's it or would this somehow be still a problem, legally, if the contract with my employer clearly states that I can't own my own company or so?

WFBS except you pay HMRC 14.5% (for I.T. consultancy) of the total invoiced, including VAT, (so if you invoice £1000 + VAT = £1200, then you pay 14.5% so £1200 = £174), so you keep 2.6%. As FB says you get a 1% reduction, so 13.5% in first year.

The only reason I can think of not to register for VAT is if your clients (private individuals mainly) cannot claim back the VAT. Info here:

HM Revenue & Customs: Flat Rate Scheme for VAT

IANAA so happy to be corrected if wrong,

What does "WFBS" mean? Sorry if it's obvious to everybody else...

[Wanderer]

What does "WFBS" mean? Sorry if it's obvious to everybody else...

What
Fred
Bloggs
Said

Where FB is the name of the previous poster. A variation on WHS (What He Said).

[nomadd]

A variation on WHS (What He Said).

..or WSS, if it's SueEllen. She gets quite upset when people call her a "guy".

[malvolio]

And just picking up on an earlier point, PCG doesn't sell insurance, it's way cleverer than that. You should join anyway.

[krytonsheep]

And at times I read these (.net) still pay more than Ruby & co. What is your take on this?

It may change over time. I personally would always go for a Ruby on Rails contract over .Net because you'll normally end up working with better people (or at least on a better project).