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Potential first day rate contract - what should I choose, Ltd or Umbrella?

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    #11
    Originally posted by stevenp61 View Post

    thanks for the reply. When you say inside do you mean inside ir35? I'm not understanding why the difference in terms of not needing a clearly defined scope of work up front?
    And this is where you need to start reading. It's all out there. We can't explain everything to you.

    As a starter. To be outside you have to be a supplier delivering a product in a true B2B engagement. Inside is considered a disguised permie role.
    Another tip, there are three major pillars to IR35. To be outside you must not be under D&C (direction and control of the client). Permies are D&C, suppliers aren't. The must be a lack of Mutuality of Obligation. There must be no obligation to give any more work once you've delivered. Permies expect to get the next piece of work given, contractors do not. Finally is RoS (Right of Substitution). Suppliers can substitute staff in and out as it doesn't matter to the delivery of the product. Permies can't.

    These are very basic elements of IR35 and are discussed in most articles. If you can understand them then you might be able to understand the question above and many many more above.

    Time to start doing a bit for yourself now. It's all clearly explained.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

    Comment


      #12
      Originally posted by northernladuk View Post

      You assume incorrectly. Notice periods can be anything from zero days up to 30 days. They can be uneven so one party has different periods and there can be no notice contracts where you can't give notice until the work is complete. There is no standard. And as I said, you get paid for work done, if the client doesn't give you any more work tomorrow you don't earn another penny, effectively immediate termination on the day even though the contract might keep running.

      You can do that if you are worried about it all. There will be people that come on and say screw that go LTD straight from the off. It's not for me to tell you what to do as I don't know your situation but if you are really struggling and losing sleep over it then an umbrella is an option. You can be with them, one, two or more months until you are comfortable and then swap.

      LTD is better for all outside contracts, 1 day, 1 month whatever. I think what they might be saying is there is a limit where a LTD doesn't outperform a brolly. It used to be about 30k but that was when people in brollys could claim expenses so dunno what it is now.

      Can't advise you on the stress I am afraid but you do have to be able to deliver when you contract. It's not the place for jack of all trades and slackers. Contractors do get binned for being crap, no doubt about that. Many of us have years in our industry and probably been contracting for many years on top of that. There is no happy induction period or weeks of shadowing. For example, I got picked for the contract I'm in as I'd used the tech they were deploying before and in the interview I mentioned the same documents they were using. There could have been equally qualified guys at interview that hadn't used the tech or diff docs. By the end of day one I was expected to draft a plan of what docs I'd create in what order. Had to do it on paper as my laptop didn't appear until lunch.

      I could be wrong and other people have swaned in to contracts they had no idea about and learned on the fly but that's a skill in itself. I think the technical terms are winging it or blagging it. Not something I think I could do to be fair.

      Lots of little things to consider when contracting. You'll get paid a lot but you don't get paid for holidays. Two week hol in the middle of a contract is a very very expensive holiday but it's a mind set you've got to get used to for example.

      Correct. You are paying the right amount of tax (So HMRC thinks) so the status of the gig doesn't matter. The IR35 status only matters when you are outside via an LTD and you've got to make sure you are really a company delivering to a client and not a disguised perm which HMRC doesn't like. Yep, LTD income will be much higher than Umbrella as you can use the low pay and high dividend model as dividends are taxed differently.

      Another quirk of contracting though. You'll have to put everything you can in to building a warchest up first so it's not all free money you can blow on hookers and coke from day 1. You need to make sure there is enough spare money in the account to pay your taxes and on top of that you need money for when you are out of work. You need to hit 6+ months of money in the company account to be able to continue to pay yourself even when you aren't working. You should really be poorer than you've ever been in the first few months while you build the chest up. I kid you not I have seen a grown man cry when a contract got cut short and he'd not built is warchest up. Had the fancy car, expensive mountbike and the latest Apple kit but nothing to pay his mortgage the first month out of contract.

      Lots of these quirks and differences are in the first timer guides on the right and on the web. Too many for me to go through so get reading.

      Thanks again. This contract would be as a Business Analyst, and I have worked as one before but my most recent role is as a Project Manager, so I just feel a little rusty. No issues with motivation or slacking, more just whether I will be able to work at the level they will need. I feel like Business Analysis is one of those careers where things are done a bit differently everywhere too (e.g. requirements captured in different ways, software always a bit different) so that is why I've been asking about liabilities and worst cases if set up as a limited company..i.e. could they literally sue you if they don't like your performance or something.

      Also no worries about me going out and buying flash cars before I have built up any money.. my reason for considering this is 1) to make back some money I lost in the pandemic 2) to save for a future house deposit. I guess when you mention building up a war chest you don't mean that its not possible to take money out at an earlier stage (before the 6 months) but that you have to be careful and consider that the contract could be ended early.

      Holiday is actually a big one for me because I'd like to get abroad finally (have a trip booked in winter for 4-5 days), but that is a risk because with covid around it could be possible to get stuck out there. Wouldn't be good to lose so much pay.

      My last consideration is pension. I guess people just pay into a private pension. My current fixed term contract is a civil service pension but obviously at a much lower rate.

      Thanks

      Comment


        #13
        Originally posted by northernladuk View Post

        And this is where you need to start reading. It's all out there. We can't explain everything to you.

        As a starter. To be outside you have to be a supplier delivering a product in a true B2B engagement. Inside is considered a disguised permie role.
        Another tip, there are three major pillars to IR35. To be outside you must not be under D&C (direction and control of the client). Permies are D&C, suppliers aren't. The must be a lack of Mutuality of Obligation. There must be no obligation to give any more work once you've delivered. Permies expect to get the next piece of work given, contractors do not. Finally is RoS (Right of Substitution). Suppliers can substitute staff in and out as it doesn't matter to the delivery of the product. Permies can't.

        These are very basic elements of IR35 and are discussed in most articles. If you can understand them then you might be able to understand the question above and many many more above.

        Time to start doing a bit for yourself now. It's all clearly explained.
        OK thanks, I thought as it was advertised as being outside ir35 it should be fairly straightforward. Will read these guides tonight though.

        Comment


          #14
          Originally posted by stevenp61 View Post

          OK thanks, I thought as it was advertised as being outside ir35 it should be fairly straightforward. Will read these guides tonight though.
          I think you should have picked up by now nothing is straightforward. It's a new world and you need to learn it. You are will be a business supplying a product which is totally different to a cushy FTC being a perm. You'll need more than tonight to get to a position you can explain and understand the difference and how it applies to your situation. Even if the client gives you an SDS saying the gig is outside you still need to know how to act as a supplier and stay outside. The role is outside so the LTD carrying it out should also know what outside is and act it. If you fall back in to permie ways then you'll be putting the client at risk of massive fines for false determinations which is more likely to get you walked before it get's that far.

          I bet right now if you rocked up on site and saw the client has a gym, discounts at retailers, paid for xmas does and the like you think you can go on them. You can't.
          'CUK forum personality of 2011 - Winner - Yes really!!!!

          Comment


            #15
            Originally posted by stevenp61 View Post
            Thanks again. This contract would be as a Business Analyst, and I have worked as one before but my most recent role is as a Project Manager, so I just feel a little rusty.
            That's going to work against you big time. No disrespect but you'll be average at both. Contractors need to generally be dyed in the wool in either role with long experience in delivering that skill. It's not a place for can do's and a bit of this and bit of that. You'll be up against some bloody excellent BA's, and I mean proper ones, not the generic term used for people that do stuff on projects. You'll also be up against PM's that have delivered massive projects for decades and will probably have delivered exactly what the client is actually wanting. A quick scan of the CV and the client know what you truly are, they'll see you hoping roles. Not great when you are trying to sell yourself and your LTD as a specialist in your field and the best candidate out there.

            No issues with motivation or slacking, more just whether I will be able to work at the level they will need. I feel like Business Analysis is one of those careers where things are done a bit differently everywhere too (e.g. requirements captured in different ways, software always a bit different) so that is why I've been asking about liabilities and worst cases if set up as a limited company..i.e. could they literally sue you if they don't like your performance or something.
            They can't sue you if they don't like your performance, they'll just let you go as soon as they can. They can only sue you if you cost them money like deleting their customer DB but it never happens and you'll have PI insurance against it anyway. It will still mean you are sitting at home next day with zero money coming in for the next few months so can be just as serious.
            Also no worries about me going out and buying flash cars before I have built up any money.. my reason for considering this is 1) to make back some money I lost in the pandemic 2) to save for a future house deposit. I guess when you mention building up a war chest you don't mean that its not possible to take money out at an earlier stage (before the 6 months) but that you have to be careful and consider that the contract could be ended early.
            IMO you don't move in to contracting just to make a bit more money than you would normally. It's a career and it's a very saturated market at the moment. It's not an easy cash cow. Everyone would be doing it if it were.
            Your warchest cannot be touched. It's not a savings pot, its a warchest. If you dip in to it and then get canned a week later you could, and people have, lost their houses. It is an untouchable pot there for emergencies. A vast majority of contractors, however good have had to fall back on to their warchests. It's part of the job. A successful contractor will survive for 3 to 6 months with no incoming coming and not bat an eyelid. The others will have had to take perm jobs just to make ends meet after a very stressful period.
            Holiday is actually a big one for me because I'd like to get abroad finally (have a trip booked in winter for 4-5 days), but that is a risk because with covid around it could be possible to get stuck out there. Wouldn't be good to lose so much pay.
            So you've got to change your thinking. You can't just swan off when you fancy it. You're unlikely to be able to take time off during key periods like perms can and constantly not being there won't look good. I, and I think many others try and plan holidays after contracts end where possible.
            My last consideration is pension. I guess people just pay into a private pension. My current fixed term contract is a civil service pension but obviously at a much lower rate.
            Getting a bit tired of this now. Stop guessing. You've been wrong nearly every single time and it's all out there.

            Stop asking questions. Go read.
            'CUK forum personality of 2011 - Winner - Yes really!!!!

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