Non-motoring > Employment - contracting & IR35	Miscellaneous
Thread Author: smokie	Replies: 24

Thu 17 Feb 11 22:55   Employment - contracting & IR35 - smokie

I have some possible opportunities for short to medium term contracts in IT (max 1 year). This may not work out so I have to avoid expensive overheads. Some contracts may, but won't necessarily, be running at the same time. Should I be looking at sole trader or limited company? If I was working at a desk in the same place for the same person etc for 7 months, would I be able to claim home to office travel expenses? I read something about only if it's two years or more... (one contract will be quite an expensive daily journey) I've had a read of the HMRC web site but still I'm not clear. Reply to this message | Report message

Thu 17 Feb 11 23:05   Employment - contracting & IR35 - rtj70

Who would you claim expenses off? Your own limited company is what I assume you are asking. If you're contracting your day rate is what you get I would imagine. Different contractors I know do things differently - sole trader, limited company and even more exotic ways to avoid tax. I can see how setting up a limited company, paying yourself a salary and allowing expenses might work out better because the travel expenses will then not be taxed. Reply to this message | Report message

Thu 17 Feb 11 23:15   Employment - contracting & IR35 - Mark

More than 3 contracts? (at least where you start success brings more!!!) Bear in mind this is measured year to year by HMRC If you can show suffiecient diversity of client and no singular dependence Then a Ltd no question As always Mark Last edited by: Mark on Thu 17 Feb 11 at 23:18 Reply to this message | Report message

Thu 17 Feb 11 23:15   Employment - contracting & IR35 - smokie

Unfortunately I don't have much idea. I had a load of contractors working for me a bit back but they mostly got paid through umbrella companies who seemed to cost quite a bit and didn't necessarily seem to get them the best deal, based on my limited understanding. I don't want to evade tax, but avoiding is OK with me, so long as it's legal. AFAIK I would just get a day rate to do the job, although I would expect if there is business travel then they would pay me for that. Reply to this message | Report message

Thu 17 Feb 11 23:26   Employment - contracting & IR35 - rtj70

I would think they would pay for travel if it's to other locations for the contract. Getting to the office then no. I am not that clued up but know what some do/did. I am against the umbrella company type approach when they often pay themselves low wages and get the rest tax/NI free. But if you're a sole trader then your daily rate will include getting to work and even accommodation if needed. But if you work for your own company then these costs might be claimable as expenses. And a laptop and mobile might become company provided devices, even though you're the sole employee. And if you went down the company route then I assume there are ways to legally reduce the tax paid. Are dividends now not the way to do this? Reply to this message | Report message

Thu 17 Feb 11 23:32   Employment - contracting & IR35 - Mark

More than 3 clients you can generally beat IR35 But you are guessing a year ahead so say you get 4 clients in the next year IR 35 can be defeated with ease. Umbrella contractors exist for a reason and its not really to assist you but to charge fees; look carefully at thier T&Cs; do any idemnify you against an HMRC ivestigation? As always Mark Reply to this message | Report message

Thu 17 Feb 11 23:37   Employment - contracting & IR35 - spamcan61

Have you tried asking an accountant? A friend recommended one to me, I had the best part of an hour of his time looking at the options, without charge. Having had a nightmare time with an umbrella company last year I'm going down the limited company route, employing myself, claiming expenses etc. Whether it works out much better financially than an umbrella company, who seem to charge around 80 quid a month here, we shall see; but at least I feel I have a bit more control of the situation. Reply to this message | Report message

Thu 17 Feb 11 23:46   Employment - contracting & IR35 - spamcan61

>> >> Umbrella contractors exist for a reason and its not really to assist you but to >> charge fees; look carefully at thier T&Cs; do any idemnify you against an HMRC ivestigation? >> LOL, the shower I used last year made it quite clear in the contract that I was 100% responsible for my tax affairs; despite the fact they were charging me for supposedly paying my taxes. Reply to this message | Report message

Thu 17 Feb 11 23:49   Employment - contracting & IR35 - rtj70

I know of a contractor who was using an umbrella company and my employer told him we wouldn't pay him via that company. He wasn't happy but came around in the end. Reply to this message | Report message

Thu 17 Feb 11 23:59   Employment - contracting & IR35 - smokie

If things go to plan then I'm looking at three employers this year. (I have three job interviews, one is perm and I would probably take that in preference to contracting, given a choice). So all being well, IR35 won't count. So, limited co or sole trader? Reply to this message | Report message

Fri 18 Feb 11 00:03   Employment - contracting & IR35 - spamcan61

>> If things go to plan then I'm looking at three employers this year. (I have >> three job interviews, one is perm and I would probably take that in preference to >> contracting, given a choice). So all being well, IR35 won't count. >> >> So, limited co or sole trader? >> I am by no means an expert, having been a PAYE employee 1979-2009, but at the very least if you go limited you're not risking the roof over your head if it all goes very Pete Tong. Some clients insist on limited anyway. An accountant will sort out HMRC and Companies House filings for a few hundred quid a year. Reply to this message | Report message

Fri 18 Feb 11 00:05   Employment - contracting & IR35 - Mark

Ltd No question and try to find another client even if its only a days work As always Mark Reply to this message | Report message

Fri 18 Feb 11 00:09   Employment - contracting & IR35 - spamcan61

There's also the VAT registration and flat rate question to think about, assuming, like me, you're providing consultancy/design services of one sort or another (with little VAT claimable expenses) it's probably worth going flat rate, adds a few more quid to the company coffers. www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm I'll just add my usual disclaimer that I'm basically an RF engineer that's currently trying to get his head round all this complicated stuff :-/ Last edited by: spamcan61 on Fri 18 Feb 11 at 00:10 Reply to this message | Report message

Fri 18 Feb 11 00:14   Employment - contracting & IR35 - rtj70

I know of another contractor that went above the threshold for VAT and had not planned for this. He was fined and had to pay. Previous employer sent him the VAT amount when requested (they claimed it back) and he paid it. Net result was.... not sure. Apart from the HMRC fining him because he paid them VAT but this ultimately was clawed back anyway. Reply to this message | Report message

Fri 18 Feb 11 09:31   Employment - contracting & IR35 - spamcan61

Seems to me that if your main customer(s) are VAT registered and you're mainly providing services (i.e. not buying in goods and adding a markup) then it makes sense to VAT register and go flat rate, although the flat rate for IT consultants is around 14%, so not much margin compared with the 20% charged to the end customer - and you don't have to worry about exceeding the 70K ish turnover threshold. On the other hand if you're a Handyman/Gardener/Mobile Mechanic with a domestic customer base then registering for VAT is going to put your prices up 20% with no increase in net revenue, so I wouldn't VAT register in that scenario unless I was expecting to get close to the threshold. As usual IANAA. ( I am not an accountant) Reply to this message | Report message

Fri 18 Feb 11 00:12   Employment - contracting & IR35 - rtj70

I got a cold call from a 'head hunter' yesterday. I couldn't talk but was curious. I gave him an email address and role spec provided. I then asked what was the location and salary range and it was a bit vague. It went quiet though when I said there was no price on me moving away from the Manchester area. If I did that I might as well do contracting. Knowing who he was I then found him on LinkedIn and some of what he says he does/did on there is fiction. He worked for our company for a while. I always find it amusing when someone calls the company mobile head-hunting - so who told them my name/number... It's not cold calling. Reply to this message | Report message

Fri 18 Feb 11 12:37   Employment - contracting & IR35 - Mapmaker

Avoid umbrella companies like the plague. They tell you rubbish. They must increase your likelihood of a tax investigation. If you're going to be self-employed I wouldn't touch a limited company at this stage. The only beneficiary will be the accountant. If you've been doing it for a few months, and have a range of employers for whom you are working so IR35 is not in point, then incorporate if you think the savings will outweigh the costs (headaches as well as financial). If you haven't a range of employers then you should quite possibly be on their payroll anyway. And I'm sorry, "as always Mark" I don't think that working full time for one company and doing "only one day" for two others will defeat IR35. The "three" contracts isn't in tax legislation it is a rule of thumb, and clearly "only one day" is abusive. Edit. try posting on taxationweb forum if you want more guidance. Last edited by: Mapmaker on Fri 18 Feb 11 at 12:38 Reply to this message | Report message

Fri 18 Feb 11 12:41   Employment - contracting & IR35 - Zero

This guy clearly managed to drive a coach and horses through IR35 www.theregister.co.uk/2011/02/15/tax_tribunal_ir35/ Reply to this message | Report message

Fri 18 Feb 11 12:42   Employment - contracting & IR35 - Alanovich

>> Avoid umbrella companies like the plague. They tell you rubbish. They must increase your likelihood >> of a tax investigation. Just to add some balance, mine didn't. They were excellent and paid me weekly. I was never investigated by the tax man. I used to enjoy sitting happily with a glass of wine whilst my wife, operating through a Ltd company, used to sit tearing her hair out with the admin and accountancy/tax issues. Reply to this message | Report message

Fri 18 Feb 11 12:48   Employment - contracting & IR35 - Iffy

...umbrellas...IR35...ltd company... I didn't realise working in computers - or whatever it is you fellas do - was quite so complicated. I'm pleased Spammers and Smokie have got some money coming in, however they manage it. It is said money can't buy you happiness, but I've found having none can sure you make you miserable. Reply to this message | Report message

Fri 18 Feb 11 12:54   Employment - contracting & IR35 - Zero

>> ...umbrellas...IR35...ltd company... >> >> I didn't realise working in computers - or whatever it is you fellas do - >> was quite so complicated. Yeah. most of the contractors I worked with or employed spent more time trying to pay less tax than actually working. Last edited by: Zero on Fri 18 Feb 11 at 12:55 Reply to this message | Report message

Fri 18 Feb 11 12:51   Employment - contracting & IR35 - Mapmaker

A recommendation for an umbrella company. Which one? And did they let you claim your lunches for tax? Last edited by: Mapmaker on Fri 18 Feb 11 at 12:52 Reply to this message | Report message

Fri 18 Feb 11 12:53   Employment - contracting & IR35 - Alanovich

Parasol. I didn't claim lunches, no. Reply to this message | Report message

Fri 18 Feb 11 13:00   Employment - contracting & IR35 - Iffy

...Parasol... Top name for an umbrella company. Reply to this message | Report message

Fri 18 Feb 11 13:20   Employment - contracting & IR35 - Mapmaker

Parasol reputedly one of the better ones. When I was contracting a while back I refused to be paid through them and insisted on being PAYE. www.parasolgroup.co.uk/benefits/claiming-expenses/ I see they've rewritten this, but it's still full of errors. e.g. you *can* claim parking "fines" against tax. Reply to this message | Report message