3 questions from a future new contractor.

[Ricardo19ip]

Hello,
I work as a permanent (software engineer) in London, and after several of my friends became contractors last year, I think it's time to do the same. All of them are very happy and making good money.

Some questions:

My friends are using Crunch (accountant) and Metro Bank (business account). They say this combination works very well for them. Do you have a better combination or any suggestion about this specific combination?

Is it normal telling recruiters you need a couple of days to review the contract with an expert in IR35 issues? This is an option given by Crunch, but my friends don't care about IR35, which I guess it is a bad idea.

I would like to start as a contractor this 6 April, that is, the new fiscal year. I don´t want to have to fill a personal self assessment for the current year (17/18) and I want to spend these 2 months preparing my CV, refreshing my knowledge and improving my portfolio. Can I create my limited company (and bank account, VAT number...) before 6 April but start trading 6 April? Or does that mean because I'm director of my company the year 17/18 I have to fill a self assessment for this year?

Thanks a lot for your time.

[jamesbrown]

which I guess it is a bad idea.

Yep.

Or does that mean because I'm director of my company the year 17/18 I have to fill a self assessment for this year?

Nope. HMRC will tell you something different, but the legislation is clear on this. You do not need to fill out a SATR unless you have income that is chargeable to tax. Being a company director is not a sufficient condition.

Do you have a better combination or any suggestion about this specific combination?

I don't think a combination is the right way to look at it. You want a good bank. You want a good accountant. You want good accounting software. On the latter, FreeAgent is great. In terms of accountants, check out the sticky here.

[ladymuck]

Just out of interest, why are you moving from permie to contractor?

In no particular order, and by no means an exhaustive list, have you asked yourself the following:
What makes you think that no regular/guaranteed income, no paid sick/holiday/patenity/maternity leave is a good thing?
Do you have at least six months money in the bank to cover your bills in the event you can't find work? (everyone's buffer is different, this is just a suggestion)
Are you aware of your legal responsibilities as a company director?
Is there a market for your skillset that will pay you enough to stash cash for a rainy day and pay your bills?
Are you aware that your LtdCo's money is not yours?
Do you have a young family? Will your partner (and children) mind that you might have to travel at unsociable hours/stay away from home in order to work?
Do you know what IR35 is and are you aware of any potential risk it may pose to you?

[Ricardo19ip]

why are you moving from permie to contractor?
I've been already a contractor in another country (south Europe), although the salary there was/is ridiculous. I don't really care about progressing vertically in the same company, I just want to write programs and go home. I can work independently without help or in a team if needed.

What makes you think that no regular/guaranteed income, no paid sick/holiday/patenity/maternity leave is a good thing?
Math. Right know earning 57k, which is about 3200 per month. As a contractor my market rate is between 400 and 500, which according to sdjcalculator is between 6619 and 8159, more than double. All my friends are also software engineers, they do the same as me and all are happy.
Managing tax, law and numbers is not a problem for me.
Moreover, the reason I'm in London is to make money, as much as possible, as soon as possible.

Do you have at least six months money in the bank to cover your bills in the event you can't find work? (everyone's buffer is different, this is just a suggestion)
I could live 4 years without income, and I have no debt.
In the worst scenario, I could find a job as a perm in literally days.

Are you aware of your legal responsibilities as a company director?
Yes, I bought and read the book "Contractors' Handbook: The expert guide for UK contractors and freelancers. 3rd Edition", everything is explained there. Really good book although very long.

Is there a market for your skillset that will pay you enough to stash cash for a rainy day and pay your bills?
I think so, I develop mobile apps and nowadays seems everyone needs one.

Are you aware that your LtdCo's money is not yours?
Yes, it's explained properly in the book.
I also think this can be an advantage if you divorce (not my case).

Do you have a young family? Will your partner (and children) mind that you might have to travel at unsociable hours/stay away from home in order to work?
I'm completely alone in this world.

Do you know what IR35 is and are you aware of any potential risk it may pose to you?
Yes, that's probably the most important topic in the book, that's the reason I asked a question about that.
The thing is, I don't trust at all state agents, and recruiters seem to me they are the same (maybe I'm wrong), they only care about their customers and their profits, not about contractors.
So, that's one of my questions. If I tell them that the contract must be reviewed and perhaps modified, would they think I'm wasting their time and take another contractor?

[Ricardo19ip]

Nope. HMRC will tell you something different, but the legislation is clear on this. You do not need to fill out a SATR unless you have income that is chargeable to tax. Being a company director is not a sufficient condition.

OK, I'm going to try to confirm that with an accountant, because if you are right, it would be very useful to me to manage everything (company, business account, accountant, insurance...) before 6 April and then start trading 6 April or later.
Thanks.

[jamesbrown]

OK, I'm going to try to confirm that with an accountant, because if you are right, it would be very useful to me to manage everything (company, business account, accountant, insurance...) before 6 April and then start trading 6 April or later.
Thanks.

By all means. Here's the legislation:

https://www.legislation.gov.uk/ukpga...art/II/enacted

Still, I wouldn't put this at the top of your list of priorities. Don't let the tail wag the dog.

[jamesbrown]

I'm completely alone in this world.

(Pretty soon you'll regret having us )

[TheFaQQer]

Can I create my limited company (and bank account, VAT number...) before 6 April but start trading 6 April?

If you are going to use the flat rate scheme, it would be silly to register for VAT before you are almost ready to invoice - first year of VAT registration gets a 1% discount on the rate.

The 1% *might* make it worthwhile to be on FRS but you'd have to consider it carefully.

[Ricardo19ip]

If you are going to use the flat rate scheme, it would be silly to register for VAT before you are almost ready to invoice - first year of VAT registration gets a 1% discount on the rate.

The 1% *might* make it worthwhile to be on FRS but you'd have to consider it carefully.

Yes, my idea is to use the flat rate.

If I start 6 April, then after just one week I will invoice for the first time.

Anyway, perhaps I'm over thinking this.

Can I send invoices without VAT and amend them later? I mean, send invoices without a VAT number but including it in the amount of money and after 3 weeks add the VAT number?

Thanks a lot.

[ladymuck]

You can't charge VAT until you're VAT registered. However, there is always a period of limbo between applying and receiving confirmation. I believe, in that scenario, you can invoice without VAT and add a note to say, "VAT registration applied for; VAT invoice to follow". Then, when your VAT registration comes through, you raise an invoice for the VAT element only. This is only valid during the period while your registration is being processed. You can't trade for six months, apply to join a VAT scheme, and then raise six months' of VAT invoices.