Reply to: about agents and umbrella companies

[malvolio]

Yes, very true. Of course, the hard-hearted might say you should have allowed for that, but it's not always possible to do so. It is another reason to break the job down into a set of deliverables (Product Breakdown Schedule in Prince2-speak), cost them individually and then you can discuss overruns and overspends on smaller pieces which might make the negotiation a bit more palatable to the client. Or not, in these hard times

[boredsenseless]

I agree you can't make a loss on the terms you talked about unless you're really bad at estimating and you actually charge less than you need to pay yourself over the duration of the work.

I was thinking more of the position whereby you contract for a discrete item of work such as an application from scope through to delivery and charge a fixed fee but then have to employ people to deliver the product as otherwise the timeline is too long. In those cases losses are very real and need to be considered.

[malvolio]

What "loss"? Stop thinking like a pseudo permie for a moment.

If you can sell a product - be it a PC or a developed and tested application or a deliverable in someone's project plan - you will need to cost it. Say you estimate 10 days at £300 plus 15% contingency, which is £3450, you price it at £3500 and that's what you agree with the client to do it for.

So you're good at your job and you do it in 5 days, you still get £3500.

Or you're sloppy and slow and you have to do it again taking 15 days altogether, you still get £3500.

It's called business. As long as you only thinking in terms of "hours of my time" = "money in my pocket", you'll never grasp the wider opportunities that are out there, especially for developers and other technical people. Admittedly, 90% of the time, we do hours worked for hours paid but that's no reason not to think like an supplier rather than an office temp. And the real way out of the whole IR35, pseudo-employee, agency-driven nightmare we have now is to start using proper business contracts, which means we have to start selling business solutions rather than slave labour. Although that isn't going to happen overnight (I wish!), we have to start sometime.

[boredsenseless]

Some agents will create schemes that are basically ways to evade IR35. For example, they allow you to bill for a block of work rather than on an hourly rate. You just have to make sure that the total cost divided by the number of hours worked happnes to match your hourly rate! That makes it look like you have tendered for a specific project, rather than simply turning up each day.

Leif

SO what happens to you if you overrun, do you run back to the agent crying or do you have to put up with the 'loss' out of your own pocket.

Under these sort of schemes how does the client extend you for an extra two days at the end of the engagement?

i.e. You have invoiced 20K for a product (which really was 70 days of effort just doing stuff each day). The client would like you to 'bum on seat' for another two days, do you get a contract for a small project or just two days?

Do people not realise that whats written on paper is meaningless the powers that be can look into the situation by interviewing the end client. They'll say - we paid X agent 250 a day for Y. The agent will say yes Y asked me to draw up a contract for the whole amount, as it cost the same amount I saw no issue in it.

Hey X and Agent are home and dry and Y is f@cked through their stupidity

[malvolio]

OK, but that's actually about what I said. Hector will assume a brolly user to be inside IR35 and most of them will be paying the "fair" amount of tax anyway, which is ok becasue the brolly is a real business. It's people like me trying to run a non-expanding small company that are in the firing line.

As regards your accountant's crap advice, nuff said - except I repeat the point about being aware of fundemental business practice by yourself; advisers can get it wrong and there is no excuse for not having such basic stuff at your fingertips.

And I'm always rude and to the point: remeber who Malvolio really was - so bollocks to you too...

[Fungus]

Yes you can. The 5% allowance is to cover the admin cost of the the company. You can claim mileage and similar "employee" business expenses, you can claim pension contributions and a few other things before you take off the 5%. It's all laid out on the MHRC website and most accountants will have a summary and/or a ready reckoner that lays out each piece of the overall calculation.



You are paid a salary by the brolly and get dividends proportional to your shareholding. You are therefore employed by the brolly - loosely perhaps, but still employed. IR35 therefore does not apply. But then I haven't ever used one, not will I, so I'm no expert on their machinations.



So do I - there's more than one amateur out there. More fool them, then. Not knowing the rules is no excuse for not following them.



Well that's just b****cks and the first I've heard of it. It won't work anyway - the key IR35 pointers are D&C, MOO and substitution rights. Pretending to do project based work that can be directly broken down to hours worked is a waste of effort.

See what I mean - the legislation has been out there for 5 years now and people still can't be arsed to find out how it works. I'm not being snide (and I'm not aiming at you personally, I hasten to add), I just despair at the general level of ignorance over something so well documented and that is absolutely key to how we work.

Malvolio:

I have no problem with polite disagreement, but I don't think much of your rudeness and your bringing the 'discussion' down to the level of the school playground. And as for saying b****cks we all know you mean bollocks so what's the point of the *'s.

I checked on the 5% and it covers basic admin costs. It seems that you can also claim travel, subsistence etc in addition to the 5%. I think I need to have a little word with my accountant. (Not that I have any such expenses. But his printed documentation was wrong. What did I say about accountants?)

Sorry but you are mistaken about the brolly. The IR will investigate, and if they think that you are using the brolly as a tax evasion scheme, then you will be done for tax evasion. A brolly does not guarantee that you are outside of IR35. They will look at the complete picture. Anyone considering a brolly should get independent legal advice from an expert, not the brolly, and not you and me.

Here is a quote from <removed>

"Q: Can umbrellas avoid the IR35 tax?"

"A: No. The only way to avoid the financial impact of IR35 is to ensure your contract and working practices put you outside IR35."

The method of getting out of IR35 by bidding for work, rather than charging per hour, is not bollocks as you so crudely put it. It is used by a well known agency with well known clients. (The director of the agency made it clear what was going on but would not say "this is a fiddle". The finance director of a large well known company using contractors was aware of the scheme.) IR look at your overall working practices to decide on whether or not you are caught by IR35. The way that you bill is just one part of the whole picture. So charging by project does not automatically mean you are outside of IR35 but it helps. Working from home, having multiple clients, buying equipment such as a PC and the MSDN all help.

Incidentally if the IR conclude that you are knowingly evading tax, then they will fine you, in addition to requesting payment of tax due. That's why professional legal advice is important.

Part of the problem is that quite often someone cannot be sure that they are outside of IR35 as some high profile court cases have demonstrated. Sometimes even the finest legal experts in the UK cannot even agree.

Fungus

[malvolio]

My understanding is that you are in IR 35 then you take a flat 5% as expenses. You can't claim expenses AND get 5%.

Yes you can. The 5% allowance is to cover the admin cost of the the company. You can claim mileage and similar "employee" business expenses, you can claim pension contributions and a few other things before you take off the 5%. It's all laid out on the MHRC website and most accountants will have a summary and/or a ready reckoner that lays out each piece of the overall calculation.

Brollies make the claim that you repeat, but I doubt that the IR would follow your reasoning.

You are paid a salary by the brolly and get dividends proportional to your shareholding. You are therefore employed by the brolly - loosely perhaps, but still employed. IR35 therefore does not apply. But then I haven't ever used one, not will I, so I'm no expert on their machinations.

But I know someone who was investigated by the IR and had to pay back tax and financially he was in deep doo doo having spent the money.

So do I - there's more than one amateur out there. More fool them, then. Not knowing the rules is no excuse for not following them.

Some agents will create schemes that are basically ways to evade IR35. For example, they allow you to bill for a block of work rather than on an hourly rate. You just have to make sure that the total cost divided by the number of hours worked happnes to match your hourly rate! That makes it look like you have tendered for a specific project, rather than simply turning up each day.

Well that's just b****cks and the first I've heard of it. It won't work anyway - the key IR35 pointers are D&C, MOO and substitution rights. Pretending to do project based work that can be directly broken down to hours worked is a waste of effort.

See what I mean - the legislation has been out there for 5 years now and people still can't be arsed to find out how it works. I'm not being snide (and I'm not aiming at you personally, I hasten to add), I just despair at the general level of ignorance over something so well documented and that is absolutely key to how we work.

[Fungus]

Well, nice to know the last five years haven't been totally wasted then... Let's try again.

Brolly or not, it's all your money. It's up to you how you arrange your life.

If you use a brolly, they will make a service charge, which may or may not be less than using an accountant (IMHO it will be more, but that's just me). In or out of IR35 makes no difference, you are an employee of the brolly so IR35 is not an issue.

If you have your own company, then inside IR35 you take all your income less a few allowable expenses (basically mileage and pensions), take off 5% of the balance and that is your annual salary on which you pay PAYE and NICs. Outside IR35, you pay yourself a salary from your company's income then figure out how much you can pay your shareholders from the profits.

It's not that difficult. Ignore the propaganda and look it up, (here and the PCG site are good sources of information). Or speak to an accountant.

"Well, nice to know the last five years haven't been totally wasted then... Let's try again."

I don't understand what sounds like a snide remark. Maybe I've misread it.

My understanding is that you are in IR 35 then you take a flat 5% as expenses. You can't claim expenses AND get 5%. There's also discussion about increasing the 5% to something more reasonable. R4 were debating it. Unfortunately Gordon does not understand about contracting, risk, our value to the economy etc. But that's the nature of "control freak no-risk we're all the same" socialists.

Brollies make the claim that you repeat, but I doubt that the IR would follow your reasoning. Were the IR to investigate you and you were 'employed' by a brolly, they would not automatically assume that you were an employee of the brolly. They could consider you to be evading tax, and request payment of 'back tax'. Of course you can always gamble that you will not be caught.

But I know someone who was investigated by the IR and had to pay back tax and financially he was in deep doo doo having spent the money.

You can get assessed and insured if you are obviously outside IR35. Most colleagues evade IR35, some with no trouble, but some are definitely taking risks.

My experience of the IR is that they are arrogant fascists.

As you say, get advice from the PCG. The problem I have with them is the very high membership costs, and the one I heard interviewed on R4 was as wet as the Pacific Ocean on a rainy day.

I would not trust advice from accountants. They have little liability for their mistakes, and friends have been fined for their accountants mistakes.

Some agents will create schemes that are basically ways to evade IR35. For example, they allow you to bill for a block of work rather than on an hourly rate. You just have to make sure that the total cost divided by the number of hours worked happnes to match your hourly rate! That makes it look like you have tendered for a specific project, rather than simply turning up each day.

Leif

[malvolio]

If you plan to comply with IR35, then I believe you are best to have your own limited company rather than use a brolly. The reason is that 5% of your company income can be paid in one tax free block nominally to cover expenses. Using a brolly will remove that 'perk'. It partly makes up for IR35. If you are outside IR35, then it works differently. But you'll have to provide reasonable evidence that you are not a 'disguised employee' as the jokers at the Inland Revenue describe it. Simply using a brolly does not mean that you are outside IR35 despite what some brollies will tell you.

Well, nice to know the last five years haven't been totally wasted then... Let's try again.

Brolly or not, it's all your money. It's up to you how you arrange your life.

If you use a brolly, they will make a service charge, which may or may not be less than using an accountant (IMHO it will be more, but that's just me). In or out of IR35 makes no difference, you are an employee of the brolly so IR35 is not an issue.

If you have your own company, then inside IR35 you take all your income less a few allowable expenses (basically mileage and pensions), take off 5% of the balance and that is your annual salary on which you pay PAYE and NICs. Outside IR35, you pay yourself a salary from your company's income then figure out how much you can pay your shareholders from the profits.

It's not that difficult. Ignore the propaganda and look it up, (here and the PCG site are good sources of information). Or speak to an accountant.

[Fungus]

Seems like most of you have been contractors/freelancers for quite some time.

Maybe you can suggest which agents and/or umbrella companies to use or what sources of information you use to get contracts?

Been working as a developer for more than 10 years now and just quit a job, it got kind of boring. Contracting in short-term projects sounds much more fun.

If you plan to comply with IR35, then I believe you are best to have your own limited company rather than use a brolly. The reason is that 5% of your company income can be paid in one tax free block nominally to cover expenses. Using a brolly will remove that 'perk'. It partly makes up for IR35. If you are outside IR35, then it works differently. But you'll have to provide reasonable evidence that you are not a 'disguised employee' as the jokers at the Inland Revenue describe it. Simply using a brolly does not mean that you are outside IR35 despite what some brollies will tell you.

You don't choose an agent. You apply for a job advertised by an agent, on JobServe for example, and hence the agent gets a cut. An agent is sometimes a necessary evil, but best done without. You can apply direct, and cut out the bottom feeder. Not all companies like direct applications, and you must know your market. It helps to have contacts who can tell you when positions are available.

Leif.

[The Late, Great JC]

Seems like most of you have been contractors/freelancers for quite some time.

Maybe you can suggest which agents and/or umbrella companies to use or what sources of information you use to get contracts?

Been working as a developer for more than 10 years now and just quit a job, it got kind of boring. Contracting in short-term projects sounds much more fun.

Advice...

Get a contract, then quit your job...

[boredsenseless]

Can't comment on umbrellas never used one.

Agents are a different manner, and it is basically a relationship between two people so an agent who hates one contractor will love another. Best to go into it with an open mind and make your own decisions

[John Galt]

I've used ContractorUmbrella for a long time and have always had great service.

Agencies - difficult - had some good experiences and some bad but the big ones are all much of a muchness

Good luck

[Rebecca Loos]

I use jobserve or cwjobs to apply for contracts, and I use whichever agency has placed the ad. Unfortunately my approach does not allow me to pick and choose which agency I work with, although I would not work if some basic conditions aren't right, e.g. rate, payment method etc.
I have good things to say about Pathway-IT and RDF, and bad things to say about Progressive and Computer Futures.

[ratewhore]

Brolly = Parasol.

Agents = Different people have different experiences. I am currently with a 2 man band who I have to say are exemplary but I have had problems in the past with major names and I wouldn't touch the likes of ComputerFutures with a bargepole - bunch of barrow boys!!!

Keep viewing CUK, Jobserve, try LinkedIn...