Advice please - new part time contractor

[retreat]

Hi all

I have been offered 21 hours a week (over 3 days) as a contractor (test/qa engineer). I went directly to the company, rather than through an agency.

Can anyone tell me what the most tax-effective way of doing this is? I expect that the contract will last for 12+months at least. I am at a loss as to whether I have to set up my own company, hire accountants, or go through an umbrella, or none of the above?? I know people who have set up little businesses doing crafts etc who don't use umbrella companies or anything, or doesn't this apply?

The rate isn't high so I'm keen to take home as much as possible, but legally!

Thanks for reading.

[cojak]

Hi retreat - Welcome to CUK!

On the right you'll find CUK Navigation. >>>>>>>>>

Look down and you'll come to the First Timers section. Have a read through there.

Then pay particular attention to IR35.

If you go into the Accounting/Legal forum you'll discover the thread Basic advice when running your own contractor business.

Guide to Contracts also has some good articles.

Happy reading!

[northernladuk]

Also have a look at this thread about whether to go Umbrella or LTD and in the same part of the fora is a thread called 'Everything you wanted to know about Umbrellas'

http://forums.contractoruk.com/umbre...composite.html

There is a cut of point where it isn't worth running a LTD..I seem to think under £30k a year or something and it wasn't worth it.

Read up on the 24 month rule though and umbrellas. If this does end up being your own assignment you cannot claim subsistence or you might end up having to pay it all back 12+ months later.

Read the How to search stickie and use it.. a lot...

http://forums.contractoruk.com/welco...uk-forums.html

I would echo Cojaks comments about IR35... 12 months+ would make me think you will be testing more than one system which would lead me to think you are being treated as a disguised employee. If that is the case then brolly is a no brainer.

Search for contract review and QDOS to find out what to do about having your contract checked for IR35.

[retreat]

Hi, thanks for your replies, which were really helpful !

I have done loads of reading and I'm going to go with an umbrella. However, my contract starts on Tuesday and I don't yet have the umbrella side of things sorted out - how long does that all take? Will be able to get it done in a day? If not, can I start work without that in place? I know the client very well so I'm not worried that they will try to fleece me but I don't want to start and then find out that they can't pay me for that day or something for legal reasons.

Thanks for reading.

[Old Greg]

Any reason the OP can't see if client will contract with him on self-employed basis?

[mudskipper]

Yep, if the client's agreeable, you can just invoice them as yourself and fill in a tax return. Nice and simple and you probably don't need an accountant.

But if you intend to go contracting long term, or trying to find work for the other two days, it may be worth getting the LtdCo set up - agencies will not deal with you on a self-employed basis.

[Old Greg]

Yep, if the client's agreeable, you can just invoice them as yourself and fill in a tax return. Nice and simple and you probably don't need an accountant.

But if you intend to go contracting long term, or trying to find work for the other two days, it may be worth getting the LtdCo set up - agencies will not deal with you on a self-employed basis.

And cheaper on NI than a brolly, although I don't have the figures. Worth asking the client IMO, unless one of the experts can advise otherwise.

[retreat]

Thanks for all your helpful replies - sadly I am really confused now!

How is it possible to go self-employed without umbrella or limited company - I thought they were the only two ways you could go contracting - apologies for my massive ignorance!! Do I need to set up a company to do the self-employed route (ie where I invoice the client directly?) Or is that what is known as a sole trader?

My working conditions definitely fall within IR35 which is why I was thinking umbrella rather than Ltd. I may go full time for the same client at some point in the future but I wouldn't be looking for a two day contract somewhere else to make up the other days of the week. Basically I am going to be a disguised employee, by the looks of things.

Other problem - I 'signed up' for an umbrella on Friday by filling in their online form, can I retract that if I decide to do this self-employed invoicing directly option? If it is an option?

Sorry to be utterly useless, I am new to this and nothing I have read quite answers my particular situation!!

Thanks for any wisdom anyone has!

[stek]

SE for me too - you only need a Ltd or Brolly if working though an agency - it's the Law.

With SE though be wary of NI payments, think it's class 2 with SE, means Dole is limited if you need it later.

[retreat]

But if I register with HMRC as SE and my contract/working conditions are inside IR35, doesn't that meant that my client can get a huge tax bill if they are investigated? I guess that SE means that I need to avoid IR35, which is going to be difficult as they have set me up a desk with a pc, told me my hours and what I'm going to be working on (multiple projects) and are basically treating me as an employee.