Permie->Contract-Geographical Considerations

**TheFaQQer** · 11 January 2012, 12:07

Originally posted by dundeedude View Post

I would like to know whether £470 per day works out at an appropriate level for me, based on the following conditions:

1) Aged 27, single, no mortgage, no other financial commitments, £25k savings.
2) Regularly commute to Edinburgh most weekends. If I ever created a Limited Co the address would be in Edinburgh.

Only you can answer that - no-one here knows what's appropriate for you. What experience do you have? What does the market pay for someone with your kind of experience? Are you interested in contracting as a vocation rather than just looking at the money? If the project dies suddenly after a few months, what are your plans then?

Originally posted by dundeedude View Post

The O&G company in question offer me free lunch, use of the gym....sounds very caught by IR35 to me. I am going to consult B&C, as mentioned on this forum, to have any contract legally reviewed first

If the client sees you as an employee, and you act like an employee, then if HMRC come calling, it becomes a lot harder to argue that you aren't an employee. If you become part of the furniture, then you are probably going to be a pseudo-employee. Read the first timers guides. Read the PCG guide.

Originally posted by dundeedude View Post

My company will earn £470 per day, then my company pays me - all good so far. I can expense driving, but I doubt I can expensive from Edinburgh to Aberdeen and back once per week, so presumably I can only expensive from my unregistered lodgings in Aberdeen to the company premises? I'm not trying to milk this, it's just Edinburgh is my home-place where my life concerns are present, and I've been interviewing there recently.

You expense what you do, and nothing else. If you are living in Aberdeen and drive to Edinburgh each week for business, then you claim that. If you are living in Edinburgh and drive to another part of Edinburgh, then you claim that. Read the guides. Read the SJD guide to expenses.

Originally posted by dundeedude View Post

Assuming this role is caught by IR35, why wouldn't I just use an umbrella co? I read approx 65% of pay would be earned when going through an umbrella; however Limited Co Calculators show a very wide range of values for take home pay for me (68% through to 82%) when using a Limited Co. My main issue is that I do not always trust the calculators to accommodate expenses and provide fair guesstimate of take-home pay.

This is my first contract, but I am not scared to start the Limited Co - but if it's Umbrella=65% take home VS LimitedCo=68% take home, then in the interim I would be happier to use an Umbrella.

Inside IR35, 5% of your income is allowed as expenses. Also, by being VAT registered and on the flat rate scheme, you can make a bit there as well. However, you need to balance this against whether you want the hassle and responsibility of running a company yourself. If you are looking for a longer-term experience, and have read up on what it entails, then go Ltd. If you aren't sure, and just want to get started quickly, then go umbrella. On that daily rate, though, I'd be going Ltd from the start.

Originally posted by dundeedude View Post

Any advice appreciated; and I am currently reading yet more literature on the matter. FWIW the job role itself looks interesting. Current permie role has plenty of work coming my way, but often dull, tedious, Americanised company.

What's to say that the contract won't be dull, tedious and Americanised? Or the one after this one?

Personally, I'm not sure I'd be jumping from £55k to £470 a day, but you need to do the sums.

**Scrag Meister** · 11 January 2012, 12:11

For starters, £470 pd is £108k gross for a 46 week year.

Obviously no paid hols, no sick pay, no pension etc.... etc....

**northernladuk** · 11 January 2012, 12:12

Having been offered a six month contract, likely to be, in total, twelve months and beyond specified during interview, I would like to know whether £470 per day works out at an appropriate level for me, based on the following conditions:

Offered as in you have seen the contract and ready to sign or offered as in verbally asked if you are interested? This can fall through at anytime leaving you with zip.

Do not get confident on renewals. It is possible you get canned in reception on the first day so banking on renewals is heading for trouble. If you get a contract for 6 months bank on that lasting 6 months only. Even that has risk around it.

When do they want you to start? Will they wait your one month notice period? They rarely will.

**malvolio** · 11 January 2012, 12:38

Originally posted by Scrag Meister View Post

For starters, £470 pd is £108k gross for a 46 week year.

Obviously no paid hols, no sick pay, no pension etc.... etc....

Or by the finger-in-the-wind methodology £470 a day is effectively £58.5K salary, so it's ahead of what you're getting as a permie. If you can keep working...

**dundeedude** · 11 January 2012, 12:39

Originally posted by Scrag Meister View Post

For starters, £470 pd is £108k gross for a 46 week year.

Obviously no paid hols, no sick pay, no pension etc.... etc....

Hi Scrag Meister. Just as well you're not into scag.

I have been using that site the last couple of days, and some generic calculations bring up information, such as this one from my maximum existing permanent salary:
__________________________________________________ __
To earn the same contracting, outside of IR35, you would need an hourly rate of £30 per hour (£232 per day)

To earn the same contracting, inside of IR35, you would need an hourly rate of £43 per hour (£314 per day).
__________________________________________________ __

The latter calculation suggests to me that being inside IR35 contracting at a rate of £480 per day should make me substantially better off. However, I completely accept that your contract is only as long as the day you are currently billing for!

I think Aberdeen is within it's own bubble, and there are plenty of opportunities around. In terms of expanding skills, I think this contract role, compared to my current role, would actually provide a huge amount of benefit to my CV. But then a gain, could I handle being told to sod off after 1 week or even after the six month period? Yes, I probably could, as I'm quite resilient and able to move about the country as required.

I have to say that I do not mind paying appropriate tax, but it seems a shame that I'm basically PAYE if inside IR35, which it seems these days probably applies to the majority of contract, when such administration and effort is involved running a Limited Co.

**dundeedude** · 11 January 2012, 12:45

Originally posted by malvolio View Post

Or by the finger-in-the-wind methodology £470 a day is effectively £58.5K salary, so it's ahead of what you're getting as a permie. If you can keep working...

May I ask how you came to your figure of £58.5k?

The calculator showing inside IR35 would be:

Your current net monthly income is £4,725
Avoiding IR35 would increase your income by £1,294 (27%) to £6,020
To get the same income via permanent employment would require a salary of £86,377.

A £58.5k permie salary would not bring in £4725 per month, it would bring in £3,378.25 per month, according to UK PAYE Income Tax Calculator 2011 salary calculator UK. Updated for 2011 / 2012 tax year. Calculate wages pension national insurance and student loan repayments online. with no pension or other benefits accounted for.

The key for me is: being inside IR35 seems to mean the actual take home-pay estimates vary so wildly that it can be hard to know what you'll actually get. I can see this is contract T&Cs dependent of course.

**jmo21** · 11 January 2012, 12:58

Originally posted by dundeedude View Post

I have to say that I do not mind paying appropriate tax, but it seems a shame that I'm basically PAYE if inside IR35, which it seems these days probably applies to the majority of contract, when such administration and effort is involved running a Limited Co.

I don't know what makes you think that. Considering you yourself say you've read all the material you can and you don't understand it, what on earth brings you to that conclusion?

Umbrella's work for many people, but I've never bought into the whole "ltd is a lot of work and hassle" patter. There is a bit of admin yes, but it's not difficult.

**northernladuk** · 11 January 2012, 13:06

Originally posted by dundeedude View Post

I think Aberdeen is within it's own bubble, and there are plenty of opportunities around. In terms of expanding skills, I think this contract role, compared to my current role, would actually provide a huge amount of benefit to my CV. But then a gain, could I handle being told to sod off after 1 week or even after the six month period? Yes, I probably could, as I'm quite resilient and able to move about the country as required.

Again I would be very careful with this wishful thinking. When the chips are down you will have to go anywhere. Sorry to sound like the harbringer of doom but if you can deal with the worst case, the rest will be a breeze.

**malvolio** · 11 January 2012, 13:19

Originally posted by dundeedude View Post

May I ask how you came to your figure of £58.5k?

.

Experience? And a background in cost accountancy perhaps...

If you want to allow for all the visible and invisible expenses and bench time that an average contractor carries over a permie in a year and return the same net take home a month, which is the bit that matters, the hourly contractor rate is very roughly 1/1000 of the gross permie salary. It's a far more realistic figure than any of the calcualtors give and has held up for as long as I've been contracting. But it is very rough, everyone's mileage will vary (literally...)

Permie->Contract-Geographical Considerations