New to contract world, please advise... New to contract world, please advise...
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  1. #1

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    Default New to contract world, please advise...

    I am in full time employment and got a six month (350 a day rate) opportunity to work on a project as a contractor. I will be spending few hours working on the project in the evening.

    I can be a sole trader or get paid through a umbrella company.

    I have also looked into LTD option but not sure if its a right option. I am already paying 40% tax on my full time permanent job and not planning to take any salary from this contract work. I may just leave the money in the business and if i don't get any more contract then i will close it in the future.

    I have gone through the following link as per new term and conditions on my contract i get status Off Pay Roll. Does this mean my contract is outside IR35?

    Set up as self-employed (a 'sole trader'): step by step - GOV.UK

    Also, my new contract states this;

    ------------------------------------------------------------
    In order to ensure compliance with IR35 we require you to sign a declaration confirming some details:
    • That XYZ is not your only client
    • That you have a substitute if you are unable to fulfil the services you have been engaged for

    If you are unable to answer yes to these questions, XYZ will deduct Income tax & NI from
    your invoice and pay it directly to HMRC.
    -------------------------------------------------------------

    It seems my new client doesn't want to get any trouble from HRMC and prefer to pay all taxes.

    Which option is better for me? Sole Trader, Umbrella , LTD or PAYE?

  2. #2

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    If it's a one off then I'm not sure setting up a LtdCo is worth it. It's unlikely, but not impossible, that the agency will accept you as a sole trader. Worth asking though. You would then need to register as a sole trader and declare all income - from your PAYE and contract work which could see you hit for tax.

    Another option, if this is just a temporary one off, is to go with an umbrella that will let you max out your pension contributions from the contract earnings. I'm assuming you don't need the extra income from the contract work to pay your bills.

  3. #3

    bored now

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    Quote Originally Posted by ladymuck View Post
    If it's a one off then I'm not sure setting up a LtdCo is worth it. It's unlikely, but not impossible, that the agency will accept you as a sole trader. Worth asking though. You would then need to register as a sole trader and declare all income - from your PAYE and contract work which could see you hit for tax.

    Another option, if this is just a temporary one off, is to go with an umbrella that will let you max out your pension contributions from the contract earnings. I'm assuming you don't need the extra income from the contract work to pay your bills.
    Various regulations make it impossible for an agency to offer you work as a sole trader - direct with a company isn't a problem, via an agency it definitely is.

    Also what does your employer know about the contract? Does your employment contract allow work outside of the company you work for?
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  4. #4

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    I’m not sure how £350 a day translates into a few hours in evenings and weekends.
    How does the agency think this will work?

    It seems odd though. There’s plenty of benched contractors, so why would an agency want to get involved like this? It’s never going to get them the full time commission.
    Something doesn’t stack up...
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  5. #5

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    Quote Originally Posted by Lance View Post
    I’m not sure how £350 a day translates into a few hours in evenings and weekends.
    How does the agency think this will work?

    It seems odd though. There’s plenty of benched contractors, so why would an agency want to get involved like this? It’s never going to get them the full time commission.
    Something doesn’t stack up...
    Correct and it seems it's project work. Where even when WFH full-time you have to interact with other team members throughout the day. I have never been on a project where that isn't the case. It's not a part time evenings and weekend job then, is it? Besides, GBP 350 a day for 6 months simply doesn't come close to being able to quit a day job for.
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  6. #6

    Should post faster


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    Quote Originally Posted by sdyson31 View Post
    I am in full time employment and got a six month (350 a day rate) opportunity to work on a project as a contractor. I will be spending few hours working on the project in the evening.

    I can be a sole trader or get paid through a umbrella company.

    I have also looked into LTD option but not sure if its a right option. I am already paying 40% tax on my full time permanent job and not planning to take any salary from this contract work. I may just leave the money in the business and if i don't get any more contract then i will close it in the future.

    I have gone through the following link as per new term and conditions on my contract i get status Off Pay Roll. Does this mean my contract is outside IR35?

    Set up as self-employed (a 'sole trader'): step by step - GOV.UK

    Also, my new contract states this;

    ------------------------------------------------------------
    In order to ensure compliance with IR35 we require you to sign a declaration confirming some details:
    • That XYZ is not your only client
    • That you have a substitute if you are unable to fulfil the services you have been engaged for

    If you are unable to answer yes to these questions, XYZ will deduct Income tax & NI from
    your invoice and pay it directly to HMRC.
    -------------------------------------------------------------

    It seems my new client doesn't want to get any trouble from HRMC and prefer to pay all taxes.

    Which option is better for me? Sole Trader, Umbrella , LTD or PAYE?
    I dont think either your agency or client is expecting you to work a few hours during the evening. I think you are anticipating working in the evenings as a side line during your spare time.

    While many clients (all?) are accepting of WFH in the current circumstances, they will not expect you to be doing other full time work. How will they know? Perhaps regular daily progress reports and evidence of something being produced etc?

    Yes, the agency doesnt want to get into trouble regarding taxes with HMRC because if you are actually 'caught,' it is them on the hook for penalties and interest. And note your current employer does not satisfy the criteria of 'other client.'

    As has been said, agency exceedingly unlikely to allow self trader status. Your options are PAYE, umbrella and ltd co. If this is going to be a one off, limited is not worth it.

    If you go PAYE with your other earned income, you'll get caned for tax. With the umbrella, you're not in control of the money and you insert another link in the chain for things to go wrong ie umbrella messing you about and heavens forbid, either going bankrupt owing you money or, signing you up to a dodgey tax avoidance scheme.
    Last edited by TheDogsNads; 28th September 2020 at 11:45.

  7. #7

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    Who is this Unicorn who can pay 350£ a day for a few hours work in the evenings ? How is it possible I have never heard of this magical tree.

    There are no red flags I can see, go for it. If you do not want to disturb your current tax structure, get a Ltd company up and running asap, get the contract through that and just let the cash flow into the company bank account.

    Please do let us know how you are getting on one this all starts.
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