Taking on a contract while working as a Permie

[TollerMe]

Hi

I work as a permie but have been approached by my former company to do a little out of hours work in the evening or at weekends - likely 4-8 hours a week. Since they don't want to take me on as staff, that would essentially make me a contractor. Therefore, I have a few questions.

What is the simplest way to achieve this? The terms of my employment state that I can't take on the position of a director of another company. Does this mean I shouldn't set up a small company to receive payments? What other options are there? Can I use someone else's company, as I have a number of friends who are full time contractors.

Do I need to tell my employer about it all, for tax purposes? Assume whatever further earnings I make I would have to pay at the higher tax bracket.

Am I over-thinking this? Would it be simpler to just be paid by personal cheques and simply declare earnings to HMRC via a self assessment at the end of the year. Wo

FYI, I'm probably going to ask for around £50 an hour, so not big bucks. Enough to help make ends meet, which is the point of doing this.

Thanks

[Martin at NixonWilliams]

The options I can think of are:

- Try and seek approval from your employer to use a company.
- Set up another company, but without you as a director (for example, your spouse as a director and you as an employee).
- Register as self-employed and include the income on your self-assessment.
- Ask them why they can't add you as an employee on a casual basis?

I hope this helps.

Martin

[TheCyclingProgrammer]

Also be aware that it being a former employee increases your IR35 risk factor if working through your own LtdCo. That's not to say you would definitely be caught and on the face of it there's a reasonable chance you wouldn't if it's fairly adhoc and casual BUT impossible to say for sure with given details. But you'll need to really nail down your contract and working practices

[TollerMe]

The options I can think of are:

- Try and seek approval from your employer to use a company.
- Set up another company, but without you as a director (for example, your spouse as a director and you as an employee).
- Register as self-employed and include the income on your self-assessment.
- Ask them why they can't add you as an employee on a casual basis?

I hope this helps.

Martin

Current employer is a large company. Unlikely they would approve it quickly.

My old company like the idea of the ad-hoc nature as well. It may only be for a few months.

The self-assessment seems simplest. Would I likely pay a lot more tax than going down the small company route? I assumed I would pay 40% of any additional income.

Also be aware that it being a former employee increases your IR35 risk factor if working through your own LtdCo. That's not to say you would definitely be caught and on the face of it there's a reasonable chance you wouldn't if it's fairly adhoc and casual BUT impossible to say for sure with given details. But you'll need to really nail down your contract and working practices

I left my former employer almost 2 years ago. What would I be caught doing?


Thanks

[TheCyclingProgrammer]

I left my former employer almost 2 years ago. What would I be caught doing

I mean "caught" inside IR35. The fact that you'll be doing ad hoc work, presumably without supervision means you probably won't.

All I was saying is that IR35 was brought in to stop people leaving their permanent job and then go back as a contractor doing exactly the same thing as before.

The fact you left 2 years ago means you probably have little to worry about BUT, in my opinion your chance of investigation could be a little higher. That's all.

IOW, all I'm saying is if you go down the Ltd route, make sure you understand IR35 and make sure yiur contract and working practices are reviewed properly. This advice applies to any contractor but I'd make extra certain if I was doing work for an ex employer.

[TheCyclingProgrammer]

As far as tax goes, if you register as self employed you'll need to pay tax at your marginal rate on any income and also Class 2 NIC, plus Class 4 on earnings over a certain amount. Double check on HMRC website.

If you were doing a single one off piece of work, I'd avoid going down the self employed route and just declare it to HMRC as a piece of one off freelance income (they may still ask for a tax return if they can't collect the tax through your tax code).

But if you plan to have some work on a regular or even semi regular basis you will need to register as self employed.

[sal]

Isn't the most obvious solution to use an Umbrella for the ad-hoc work? Or i'm missing something?

[d000hg]

Setting up a new Ltd for 8 hours a week would seem daft to me. Getting paid personally as an additional income source and doing a SATR seems easiest?

[Martin at NixonWilliams]

It would certainly be easier including the income on his self-assessment but there could be a lot of extra tax to pay.

If the OP earns enough from their permanent job and so does not need to access the money earned he could save the £20,000 or so a year in the company account and take the funds as capital with entrepreneurs relief etc.

[TheCyclingProgrammer]

Martin makes a good point. It would earn no interest sitting in the company account but it would make for a tidy pool of funds to draw income from without any further tax to pay up to the higher rate limit should OL find themselves unemployed.

Consideration should also be made to whether or not OP has plans to contract full time at some point, in which case they would be good to go.

That said if it really is just a temporary arrangement imI would still be inclined to just go through an umbrella to save faff.