Reply to: First contract - caught by IR35?

[malvolio]

Yes, fair point but a half decent accountant will tell people how much salary to draw and organise the dividend paperwork so as long as they don't go borrowing the company's money then they'll probably be OK.

Yeah, they might get a few fines if their accountant isn't up to scratch (certainly I did) but that's more than offset by the money saved in tax...

Whic is exactly why HMRC have started checking company records. If at the point they visit you can't demonstrate where your money has come from, where it's going and how much is owed, you get yet another fine. Waiting until year end and making up the answer according to the bank balances just got a lot harder.

[Wanderer]

Wanderer - you know this sort of advice causes people to get in a mess and post on here about how they are in trouble for dipping into the company's bank account like it was their own.

Yes, fair point but a half decent accountant will tell people how much salary to draw and organise the dividend paperwork so as long as they don't go borrowing the company's money then they'll probably be OK.

Yeah, they might get a few fines if their accountant isn't up to scratch (certainly I did) but that's more than offset by the money saved in tax...

[malvolio]

For balance. I don't agree with you, I agree with Wanderer. Go LTD, make sure you follow the rules and your accountant will help you sort it at the end of the financial year.

This thread has so far had

1/1000 bunkum
IR35 boogie man
and now HMRC checks.

Are you, NLUK and Malvolio purposely trying to scare every newbie poster at the moment?

Im not trying to scare anyone. But coming into contracting without knowing about these things is a very bad idea. Since most people don't take any notice unless you shout to get over the noise of the "Hey, it'll be fine" brigade, I tend to shout.

The 1/1000 is an estimate to give someone a very broad idea of the comaprison, as I've explained at least three times. IR35 is not bunkuim, especially if, like many contractors and almost all newbies, you don't have the faintest idea how it works ("I use my own equipement so I'm outside" - Really?) . HMRC are performing 20,000 checks a year now, escalating to 50,000, and can impose fines up to £3,000 if they consider your cashflow recoridng to be deficient.

It's not me that needs to wake up.

[northernladuk]

He is broadly speaking a useful guard dog but with a pronounced tendency towards occasional uncontrolled howling following an acquired brain injury. But he's still our well loved family pet.

Hey OG, I think you dropped these.

[northernladuk]

Are you, NLUK and Malvolio purposely trying to scare every newbie poster at the moment?

But we never get people on the forum who were unable to manage their accounts and are in a right mess. The ones that actually come and post will be a small minority of those that don't and are still trying to sort it out. No, never happens.

I don't say Umbrella to all, just when the OP shows a distinct lack of common sense about their situation. If someone can't even work out the basics of their career choice putting money aside for CT and VAT will be nigh on impossible. LTD's straight off do not suit everyone and it is not like Umbrella is a world ending option. So they lose a couple of grand for 6 months. Isn't gonna kill them. Anyone can just quote the dact LTD is the way to go and they forget about it. That is advice is what is the best method, not what is best for the OP. Softly softly catchee monkee....

[Old Greg]

For balance. I don't agree with you, I agree with Wanderer. Go LTD, make sure you follow the rules and your accountant will help you sort it at the end of the financial year.

This thread has so far had

1/1000 bunkum
IR35 boogie man
and now HMRC checks.

Are you, NLUK and Malvolio purposely trying to scare every newbie poster at the moment?

I do sometimes wonder if those lower down the food chain are trying to scare off the competition. I would name NLUK as an honourable exception. He is broadly speaking a useful guard dog but with a pronounced tendency towards occasional uncontrolled howling following an acquired brain injury. But he's still our well loved family pet.

OP, this is a rare opportunity to jump into contracting without the uncertainty of initial bench time, wondering if you'll ever land a contract. If you shouldn't take it lightly, neither should you turn it down lightly. It will be much harder once you've got family responsibilities.

[MarillionFan]

Wanderer - you know this sort of advice causes people to get in a mess and post on here about how they are in trouble for dipping into the company's bank account like it was their own.

Also don't forget HMRC are doing Business Record Checks so they can fine more small businesses.

So while you can delegate admin to your accountant they are not the company's financial advisor, and even the most helpful want you to do basic bookkeeping and not piss around with the company's bank account like it was your own.

For balance. I don't agree with you, I agree with Wanderer. Go LTD, make sure you follow the rules and your accountant will help you sort it at the end of the financial year.

This thread has so far had

1/1000 bunkum
IR35 boogie man
and now HMRC checks.

Are you, NLUK and Malvolio purposely trying to scare every newbie poster at the moment?

[SueEllen]

Check out one of the many calculators to see how much you would make with the various trading structures.

LTD - more admin but you can delegate this to your accountant so it doesn't need to be difficult - the accountant will sort out the majority of the admin stuff for you.

Wanderer - you know this sort of advice causes people to get in a mess and post on here about how they are in trouble for dipping into the company's bank account like it was their own.

Also don't forget HMRC are doing Business Record Checks so they can fine more small businesses.

So while you can delegate admin to your accountant they are not the company's financial advisor, and even the most helpful want you to do basic bookkeeping and not piss around with the company's bank account like it was your own.

[Wanderer]

I was perm for a year. Then left. Then the boss rang asking would I return for 400 per day, with one week's notice.

Check out one of the many calculators to see how much you would make with the various trading structures.

LTD - more admin but you can delegate this to your accountant so it doesn't need to be difficult - the accountant will sort out the majority of the admin stuff for you.
Umbrella - no brainer to run but go back and look at that calculator again.
IR35 - Don't presume that it will automatically apply to you. Get a professional review of your contract and your working practices first. Make sure you understand what you need to do to be outside.

If you go LTD:

Join the PCG and sign up for their package which includes company formation, accountant, insurance etc
Use their contract template with your client and make sure the client understands that you aren't an employee any more.
Read and understand IR35 and get your head into the mindset of being in business of your own account rather than an employee of your client.
Take out insurance against an investigation which will cover costs and tax owed to be on the safe side.

That's my take on it. There's a quite a spectrum of other opinions here, most of them pretty good. It's now time to make your mind up.

Good luck.

[heyya99]

Have I missed something here? When you were perm your boss said he would pay you that day rate in return for leaving earlier than your notice?? Really? This sounds more like they are going to bin you on the cheap to me. I would be worried with this arrangement unless there is more to it than you have put here.

I was perm for a year. Then left. Then the boss rang asking would I return for 400 per day, with one week's notice. I don't understand what you're saying..

[northernladuk]

I negotiated a rate of 400 pd in return for a notice period of just a week. My boss told me he will give me a head's up alot earlier so I agreed.

Rang another invoicing company. They advised me to go LTD even if I am caught by IR35. I think I will go for a LTD. The company I called said there is not much work for me to do bar an hour or 2 per month.

Have I missed something here? When you were perm your boss said he would pay you that day rate in return for leaving earlier than your notice?? Really? This sounds more like they are going to bin you on the cheap to me. I would be worried with this arrangement unless there is more to it than you have put here.

[heyya99]

I negotiated a rate of 400 pd in return for a notice period of just a week. My boss told me he will give me a head's up alot earlier so I agreed.

Rang another invoicing company. They advised me to go LTD even if I am caught by IR35. I think I will go for a LTD. The company I called said there is not much work for me to do bar an hour or 2 per month.

[northernladuk]

NL you strike me as the sort of person who would drive an inch off the bumper of a learner driver.

The fact they even let drivers on the road pisses me off, and WTF is that stupid green P plate for? but anyway, lets not get started on that hey

That aside, there is a difference between a learner driver and someone that can't be bothered to read or understand advice that is been given to them. The answer to (another) of the OP's simplistic question was in the advice that MF kindly spent time composing.

[MickeyP]

Jesus christ

I will condense it for you...








There are useful words inbetween but that is a little summary which I think answers your questions.

NL you strike me as the sort of person who would drive an inch off the bumper of a learner driver.

[Wanderer]

Newbies may ask the sam damn pointless question but that's no reason to give the same damn pointless answer. Try saving £40k in 9 months on £50k or £ 60k per year.

There are loads of calculators out there where people can put in their own numbers but people feel the need to come on here and ask, thinking that a bunch of strangers can read a two line summary of their circumstances and make a judgement. We all know the formula is wrong, but there is no "right" answer so if people have to ask then that's what we will say.

I went from a 50k permie job into a £500 pd contract

So you think the formula should be permie salary / 1250 then?