Neo_VR

In my hunt for jobs, i seem to be getting several "headhunts" for contract work, which ive been turning down..
now ive considered contracting in the past, but never seriously...

Maybe now is the time to start... saying that i dont really have any specific commitments and it could be interesting... not to mention the potential to earn some decent money

So does anyone on here do IT-contract work?

How did you get into it?
What do you do regarding tax etc?
Will you stay contracting all the time or eventually take a fulltime role?

im a total n00b when it comes to this, so any info would be helpful

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ColGod the UberMod


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SkodiRS

Col,

for tax have a look at PDG web site....has information for all things contracting.

Job...sign up on the job search sites and put contracting in your profile. Say the same for any agencies.

You can either go through an umbrella company who will sort everything for you.....payroll tax etc but for a fee....much less hassle but make sure you read the small print and have clarification of fee.

Or you can set up your own Limited company and get an accountant. Most accountant can set up the company for you and go through all the tax implications (IR35).

You will need to get yourslef insured, Indeminty Liability, and be VAT registered. Flat rate is the easiest.

Been contracintg for last 4 months.... I work no differently, you are exclude from company sensitive meetings etc, you get more money in your hand.

If you plan to do this long term you need to get a personal pension and pay for any training you may want to do. Also unpaid holidays.

You really find out where the "time is money" sayng came from.

Check out PDG...has lots of good info...and it's well worth talking to an accountant....Tinkerbelle is very helpful....or any of thoss member who have contracted long term....TaviaRS for example.

If I get time I'll try an write up what I did for my contract....cut's out all the chaff TBH.

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Adrian.

ScoobyChris

Slightly O/T, but how does being a contractor affect things like loan/mortgage applications? I've been thinking of going solo, but we're also looking to move house this year so I don't want to apply for a mortgage with a low-tax "declared" salary rather than my company's income....

Getting out of company sensitive meetings must be worth being a contractor alone!

Chris

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SkodiRS

I think you would then need to get a "self assessment" mortgage which allows you to calculate how much you can borrow.

I'm not entirely sure if that's the right term though....it's definately "self2 something,

Your mortgage advisor should be able to point you in the right direction on this.

We remortgaged a month after I started contracting...it didn't make a difference....actually it allowed us to borrow more if required.

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Adrian.

ScoobyChris

Ah so you'd go the self-certification route... that makes sense Food for though that!

Chris

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tippo1983

dont be fooled by people spouting of about earning40-50K as a contractor.

remember no pension, no car, no health care! get yourself in with a big firm! you just can beat good job security!

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robmawer

Big firms make redundancies and go bankrupt too - and in the latter case, you're likely to loose all three of those benefits too.
And while a contractor earning £40-£50k might have to pay for their own pension/car/healthcare, the alternative as a permanent employee would be to get paid £20-30k and have the company provide them for you. So you're probably still better off as a contractor.

More so if your company's pension and healthcare plans are rubbish, and if you're not eligible for a company car...


Rob.

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cheezemonkhai

Your company can easily earn £50k+ a year especially in london.

What you have to remember is you pay botht he employer and employee NI, you pay both lots of pension contribution, if you want a car you pay for that etc.

If you want a computer for work however you don't pay VAT on it, but you have to be careful to make sure you work in such a way., and your contract is written in such a way as to avoid being caught out by IR35.

You would want to set up a limited company to contract from.

As for job security... what's that then?

People i know who are contractors have been out of work less most other people of a similar age.

If you have experience and are looking for a new job i'd say give it a go. Just make sure you realise all the work required around it, definitely read the PCG website, speak to an accountant etc.

If you give it a whirl make sure you get to know the other contractors and get on good terms. My impression is there is a lot of jobs for the boys/girls in the contractor world.

HTH

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robmawer

You do pay VAT on it - the only difference is if you're VAT registered you can claim this back. Not all contractors/companies are VAT registered...

There's also no need to set up a limited company to contract from and it may not be the best option - the exact way in which the business activity should be registered will depend a lot on how it is intended to operate and the nature of the industry.


Rob.

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tippo1983

it swings an roundabouts, personally i couldn’t sleep at night not having job security. I know my firm could go bust but with a 1.9bn turnover it isn’t too likely, we would just get bought out (again)

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robmawer

Turnover doesn't really mean much if there's little or no profit being made on that...and how much credit does the firm owe?
Enron were a pretty large company and they managed to go bankrupt...

And if the firm did get bought out there's no guarantee they'd keep all the existing employees on.

To quote cheezemonkhai: "As for job security... what's that then?"


Rob.

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Fluffmeister

I have been a Contractor in one shape or form for 4 years now (4th Anniversary on the 28th ) as well as having a 50% stake in a small training company.

Adrian has put up some great references, using those in combination with good agencies that know how to be IR35 friendly in their contracts and a good accountant that understands what you do is probably the best place to start.

My Ex Co-Director goes from 3 month contract to 3 month contract almost seemlesly and is drawing around £3k per month from his company as a combination of dividends and salary.

I am pretty much contentrating on short term contracts having carved a niche out for myself in SMS and Operations manager and get plenty (at the moment) 5 day jobs which suits me perfectly. It's not ideal for family life, but I like to be moving around or I get itchy feet (must be something to do with all the time in the mob).

Mortgages wise it's not been a problem, I have done 2 mortgages since being self employed, both had to be self assesment mortgages and as such I pay around 1/4% over the standard high street rates, currently my mortgage is with Gmac (as in General Motors, so I expect my windows to fall out shortly) and acceptance and processing was not a problem.

Any other finance, the car for example has not been a problem because I am an "employee" of the company, but this does vary from company to company.

I know some good agencies in and around the Northwest and at the moment there is a demand for SMS / MOM / Exchange2K3 and beleive it or not Vista (if like me your mor Microsoft Orientated)

I would hate to work for anyone else again, I like the feeling of having an element of control in how / where I work.

I was nervous about doing it at first, and the first 6 - 12 months was hard going getting your "name" established, I would say if you have no ties as such, then give it a go Col' it may be for you

Stuart_J

As others have said If you have no ties you have nothing to loose, give it a go. All industries are generally heading more & more towards short term contracts & eventually it will become more of the norm.

My honest advice if you have no ties is also to look overseas, this country is going to the dogs, the grass is definately greener elsewhere, its just choosing which field is the greenest.

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Fluffmeister

One thing to look at is the Flat Rate VAT Scheme, if your turnover is below £150K you can do this, you don't need to retain VAT receipts and you don't get to claim VAT back unless it's on a "Capital Purchase" (Over £2k for your companies use)

It works really well for me, I am on a flat rate of 10% VAT, so the way it works is I invoice my customers at 17.5% VAT, then at the end of the quarter I add up all my invoices inclusive of VAT, take 10% of that value and pay that as my VAT. I can't claim VAT back unless it's the aforementioned capital purchase, but as I don't buy anything (essentially I am selling myself) it works out in my favour.

As a general rule of thumb the company gets to keep approx 6% of the VAT charged. Nice, Clean, easy to work with and idiot proof.

SkodiRS

How did you get a flat rate of 10%? I got a first year 1% discount so I have to pay 12% then it goes upto 13%.


If you don't do any company purchase then it works out generally in your favour.

I'm on a months notice, which is the same as a permanent employee. My main concern when I got the contract was IR35 and all its implication. It can spin your head...do your home work and talk to an accountant.

Money really works out to be the same if you converts pension, sick/holiday, training into cash....contracting has the benefit , as I said, of you getting money "in hand"...you have to allocate it youself.

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Adrian.

Lady Elanore

I left a very stable job with a good income to become self-employed and I now operate as a Ltd company. One VERY IMPORTANT thing to sort out though is this IR35 thing. Even though I was a director and owned the company, I was not technically self-employed until I had proven to the IR that I could jump through several flaming hoops and juggle jelly, this took 18 months for me. The result of this was I had to pay myself PAYE from my own company ie tax and NI and then on top pay another 10% NI from the company to employ myself!!!!!!!!!! That’s around 40% of any income and it’s not including going into high rate tax. Outrageous, but this is the Law and you do NOT get self employed status automatically, even if you are a ltd company. You defiantly do not want to get caught out with this, so even though you can form a company quite cheaply on the internet I would strongly recommend that you speak with a Charted Accountant first. Your job description may entitle you to automatic ‘self-employed’ status anyway.

The good news is I only pay 19% on any dividends I take out of the company and that’s it (plus accountants fees) For driving, you get £4K tax free for the first 10K miles and then 25p/mile tax free thereafter (I think it’s 25p/mile) and you still retain your normal single/married persons allowance all tax free too. So if I grossed say £29K per annum I would probably only pay around £3.8K back to the IR.

It took me about 18 months to get established in my field and even though I think I'm about to go into a lean spell, I don't regret becoming self-employed.................yet.

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matt@theforce

i've been a contractor, it was right for me and my wife at that time, my 3 month contract turned into 18months before they wanted to renew the staff. I used an umbrella company, i'm quite lazy and suited me fine. Was one huge shock when i went back as a permie though. I didnt look after my money all that well whilst contracting, i did invest some of it wisely though (octi vrs fully paid ) let just say my wife and i lived life to the full.

I now have a family and am considering returning to the IT Contracting scene once we get a little more settled after moving to sheffield from hertfordshire, need to work out whats best for my family.

ItsOnlyMe_vRS

I run my own company, and pay mysels a salary of 10k, this i pay NI and TAX (PAYE), i can then take upto 25k in dividends before i have to pay TAX on them. Although the company pays 19% as its deemed profit and falls under the corporation TAX banner.

I dont think that permies get anymore job security than Contractors and as far as pensions go, the company can pay this on your behalf, again reducing the amount of TAX that is to be paid.

You can get a great deal of money out of the company TAX free in the form of expenses as well.

I earn 3 times the amount that my permie counterparts erarn and can take ot insurance to cover loss of earnings because of sickness.

Contractoruk is also a good place to take a look at.

cheezemonkhai

You are of course correct and that was me over simplifying.

From friends experience, the nice thing about the limited company is that if there is a dispute the contractors company gets sued not the person. That means that should you find yourself on the receiving of a rather nasty employer (rare, but it does happen) the company can be folded rather than bankrupting the individual.

You are again, however, correct that you don't need to be a ltd company, this jsut seems a very popular way for IT workers.

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JPreston

I'm a contractor, and a chartered accountant

Some good advice above, and on PCG but really there is no substitute for going to see a real live accountant because everyone's situation is different. Eg I use an umbrella company and work entirely within IR35, noone would tell you to do that in a forum but an accountant will if it's the most appropriate vehicle for you

KenONeill

And the downside to this is?

cheezemonkhai

Relatives have been contracting for 12+ years now. There is a definite advantage to getting the correct advice from an accountant etc as they know the currently exploitable loopholes

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eddie

You were technically self-employed - what you were proving to the IR was that you weren't a disguised employee. I'm surprised you had 18 months of hassle with them - how did they get onto you in the first place? Did you volunteer, or did they decide to investigate you? I've been contracting for 13 years (I've nearly disappeared!) and not had any hassle from the Revenue over IR35 (the only IR35-related hassle I've had was with my (now ex-)accountant who decided that my contract, which he hadn't actually seen, meant I was caught by IR35 and arranged my books to pay an extra 10K in tax. That's why he's ex.

Regarding the permie vs contracting comparison, I calculated that to get as much disposable income as a permie as I got from contracting I'd need a salary in excess of 90K to take account of the fact that I couldn't organise my finances in a tax-efficient manner.

And ion repsonse to the poster who suggests going abroad because this country has "had it" - if that's what you want to do fair enough, but don't do it for tax purposes; this country is a tax haven for the self-employed, why do think the government is trying to make self-employment so unnatractive by introducing punitive, but fortunately poorly thought out and ineffective taxation regimes?

Final, but most important, piece of advice, get yourself a good accountant that you can trust - they'll save you far more than they'll charge.

Good luck!

Lady Elanore

I had the hassle when I started up the company. I used a charted accountant and he advised that it would be unwise of me to draw Dividends etc until I qualified for self employed status. In Broadcasting only certain jobs are considered as automatically self employed and so I had to prove through my working practices that I was truly self employed. E.g. short term contracts, business risky on my shoulders etc…… but it is a mistake to think just because I have a Ltd company I’m self employed, it is not necessarily so from the IRs point of view. 3 different Charted accountants firms confirmed this!

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. Amanda - All's fair in Love and Car