Umbrella first and switching to Ltd during same contract

[JRCT]

The contract as presented to me sucks:
It says my ltd must provide contractor who opted out of 2003 agency regulations act.
It says I will not get paid if my contract termintes first month.
It says that agency can terminate my contract for any reason, no notice period from them is mentioned. Althoug I am oblidged to give notice to agency and client.

I think the no notice is pretty standard. At the end of the day, most contractors (or a lot) are working on a project of some description. If a business decision is made to can that project or work stops for any other reason, then they want to be able to say they don't need you anymore.

I think, however, the fact that they can do that for 'any reason', and also not pay you for a month's work if the contract is terminated, means all they have to do is find 12 contractors and terminate each one on the last day of the month and not have to pay anyone for a whole year.

That's extreme and I'm sure wouldn't happen, but it sounds rubbish to me.

And I've never had a contract that I don't invoice weekly. So, by the time I get to the end of the month, there's only a week at most that I haven't yet been paid for.

[TheFaQQer]

Supplying goods or services within the UK. If your turnover of VAT taxable goods and services supplied within the UK for the previous 12 months is more than the current registration threshold of £81,000, or you expect it to go over that figure in the next 30 days alone, you must register for VAT. However, if your turnover has gone over the registration threshold temporarily then you may be able to apply for exception from registration - see the section later in this guide for more information.
There is a section later in this guide on calculating your VAT taxable turnover.

That bit ... It's a moot argument as you will be better off being VAT registered.

If you expect to earn more than £81000 in 30 days, then you are right. Of course, that means that you are averaging £2700 a day, which seems unlikely.

Even more unlikely is that you earn £2700 a day and are considering going via an umbrella.

[gardener]

Another factor, did you select your brolly on the basis of the pimps recommendation? If so the real reason is Jackmaster will lose out on his brolly backhander.

I have selected brolly from pimps "approved list". I don't think agency will not get their cut in case I terminate the contract with Brolly. I can terminate brollys' contract anytime anyway.

[gardener]

You mean if you work 30 days and they terminate your contract on the 31st then you don't get paid anything for the 30 days work?

I don't think I'd be signing THAT contract whether I was Ltd or Umbrella.

The contract as presented to me sucks:
It says my ltd must provide contractor who opted out of 2003 agency regulations act.
It says I will not get paid if my contract termintes first month.
It says that agency can terminate my contract for any reason, no notice period from them is mentioned. Althoug I am oblidged to give notice to agency and client.

[gardener]

To be fair if they won't consider a change in the contract mid stream ; swapping from umbrella to Ltd does require them to issue a new contract; then there's nothing you can do about it. It's their business decision.

True, but the sames goes for me too. It is my decision if I decide to trade through Ltd and agency can do business with it or not. No party is oblidged to nothing here.

But being with the client on site already might strenghten my negotiating position IMO.

[TheFaQQer]

I believe the wording is something along the lines of when or when you believe you will exceed the VAT threshold. With your hot little contract it will difficult to prove you didn't know. Potential fine and fun and games with HMRC to follow.

HM Revenue & Customs: When to register for UK VAT

If you haven't started to trade yet
If you intend to start carrying out one of the business activities described above, you can choose to register for VAT voluntarily. See the section in this guide on voluntary registration.

[TheFaQQer]

You will need to be VAT registered as well.

No you don't. You need to be VAT registered if your VAT-able turnover exceeds the registration threshold. If it doesn't, then you don't need to register at all.

In terms of your strategy, I would sign with the brolly. When you are ready, tell the Agent you want to go LTD. He will give you some guff about not being able to do it. Just call his bluff and threaten to resign, if that doesn't work, just tell the client you are having a contractual dispute with the agency (It will be factually true) and follow it up with notice to the agent.

If you are planning to follow this advice, make sure you have read your termination rights carefully. The last thing you want to do is to terminate the contract and then find yourself in breach.

[Clare@InTouch]

Thanks Eirikur, I am sure I want to do contracting, I am doing this to mitigate the risk. E.g. contract with the agency for ltd company has clauses saying they will not pay me at all if my contract gets terminated during first month.

If you change from Brolly to limited you get a new contract though, it's not an extension of the contract you have with the Brolly, so that clause would apply to the first month of your work through the new limited company regardless of the fact that it's technically your second month on site.

Unless the agency agree to remove it from the Limited contract if you go Brolly for a month first.

[TykeMerc]

To be fair if they won't consider a change in the contract mid stream ; swapping from umbrella to Ltd does require them to issue a new contract; then there's nothing you can do about it. It's their business decision.

It is of course a potential negotiation point, but it's extra work they're not obliged to do.

Oh and that no pay clause? Get it binned, that's a show stopper right there. There are legitimate reasons a contract can come to an early end no matter how skilled you are and how well you fit on site, that clause is totally unacceptable. You work, the time sheets are signed off and you get paid first month free isn't reasonable.

[TheFaQQer]

Thanks Eirikur, I am sure I want to do contracting, I am doing this to mitigate the risk. E.g. contract with the agency for ltd company has clauses saying they will not pay me at all if my contract gets terminated during first month.

So negotiate and get that ridiculous clause removed.

[JRCT]

Thanks Eirikur, I am sure I want to do contracting, I am doing this to mitigate the risk. E.g. contract with the agency for ltd company has clauses saying they will not pay me at all if my contract gets terminated during first month.

You mean if you work 30 days and they terminate your contract on the 31st then you don't get paid anything for the 30 days work?

I don't think I'd be signing THAT contract whether I was Ltd or Umbrella.

[TheFaQQer]

Why wouldn't they be accomodating to my scenario?

Because it causes them extra work for absolutely no gain.

It's not a bluff - what are you going to do if they say no?

[gardener]

The agency is probably bluffing, but I do agree it's much easier for every party involved, to do it at extension point. Alternatively ask for an initial contract of 3 months and have it extended.
1 month is not enough to tell you if you like to be a contractor or not

Thanks Eirikur, I am sure I want to do contracting, I am doing this to mitigate the risk. E.g. contract with the agency for ltd company has clauses saying they will not pay me at all if my contract gets terminated during first month.

[Eirikur]

The agency is probably bluffing, but I do agree it's much easier for every party involved, to do it at extension point. Alternatively ask for an initial contract of 3 months and have it extended.
1 month is not enough to tell you if you like to be a contractor or not

[gardener]

Hi comrades,

I have an offer for a 6 month contract. It is my first. So thinking about going through umbrella for the first month and then, if everything is fine, setting up my Ltd and start trading through it during the same contract.

I have asked the agency is it going to be a problem. At first pimp replied that he had asked HR about it and they replied that ideally I would switch only at extension point, but if essential they can do the switch mid contract.

After that I got a second email from him saying that he spoken to HR again and they said I can switch from umbrella to ltd only at extension point.

Is this a bluff? Why wouldn't they be accomodating to my scenario?