Reply to: Advice please - new part time contractor

[Taita]

(Be aware that even if this method is what you would like, your clients or agency may not be prepared to engage you on this basis. This is because that if you’re self-employed status is challenged they could become liable for any extra tax and NIC liabilities that may be due.

The Income Tax (Earnings and Pensions) Act 2003 Section 44 effectively prevents individuals from trading as sole trader where an agency is involved, as it obliges the agency to treat the individual as if they were an employee, and so required to deduct PAYE and NIC from any payments due.[/QUOTE] from NLUK)

Absolutely correct. As far as I am aware part of the HMRC random reporting regime is to spot check agencies for SE engagements as well as Off Shore companies. Just because an agent is prepared to go along with your request does not mean that HMRC will not come visiting you, probably after an aggressive visit to the agent ( the newer they are, the more likely an inspection) who will be told that they are liable for any shortfall in your income tax and NI contributions.

The shortfall will be presented to the agent as an (over) guesstimate of the contractor's liability and the agent will probably be told to pay up and then claim back from the contractor. Beware, in the unlikely event that the contractor pays the agency and HMRC, the latter will refund to the contractor!

Properly organised (usually large) non-agency employers will shun such contract arrangements like the plague purely on the grounds that one small accommodation for a respected and valued line manager/good contractor can trigger a very deep and highly inconvenient investigation. If you were RBS, Nissan, BHS or similar you could do without the hassle!

[Earl Purple]

Once you have the Limited Company you will use it for all your contracts. You will need certain insurances:

- Public liability
- Professional indemnity
- Employers liability.

You may wonder why you need the 3rd if you are the only employee. If you are within IR35 then you probably don't need to worry, but it is useful to have otherwise in case you want to "substitute" labour.

You may also want some legal insurance to cover you in case you have a dispute with the client company, and to find yourself an accountant.

[LisaContractorUmbrella]

Thank you all so much for all your helpful advice.. I don't want to worry about IR35 and the client getting hit for a huge tax bill so I'm definitely going for umbrella.

Do I need to be registered, have sent all the paperwork etc before I start work on Tuesday morning?! Cutting it fine...

You are cutting it a little fine but most umbrella companies should be able to set you up with an account within 24 hours - you will just then need to send in your P45, identification etc etc before they can make payment to you

[mudskipper]

Summary of the options here http://www.parasolgroup.co.uk/contra...or-freelancer/

Not sure why it suggests sole trader is only suitable for short gigs/multiple clients though.

It is the simplest option (and will leave more in your pocket that a brolly I believe), but it depends if your client will accept it - worth asking before you rule it out.

[retreat]

Thank you all so much for all your helpful advice.. I don't want to worry about IR35 and the client getting hit for a huge tax bill so I'm definitely going for umbrella.

Do I need to be registered, have sent all the paperwork etc before I start work on Tuesday morning?! Cutting it fine...

[northernladuk]

Personally I think the SE option is a read hearing.. Very few companies/agents will take people on SE basis. Get a LTD or umbrella and do it properly.

Do a search on these forums for the term Self Employed and you will find out why you cannot do this.

Self Employed

Be aware that even if this method is what you would like, your clients or agency may not be prepared to engage you on this basis. This is because that if you’re self-employed status is challenged they could become liable for any extra tax and NIC liabilities that may be due.

The Income Tax (Earnings and Pensions) Act 2003 Section 44 effectively prevents individuals from trading as sole trader where an agency is involved, as it obliges the agency to treat the individual as if they were an employee, and so required to deduct PAYE and NIC from any payments due.

[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.

[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]

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!

[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.

[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]

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

[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.

[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.

[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!