Contracting, Ltd/Umbrellas, IR35 Arrrgh... HELP!!!!

[Stevie B]

Hi Guys & Gals,

I've just resigned from my permanent job (telecoms) and am in a postion whereby, I am flexible enough to think about taking on some contract roles. Since I left University 6 years ago, I've always been employed in a permanent position by the same company.

I don't have any experience with contracting so have spent the day reading through these forums trying to get an idea on both a) how do I go about contracting and b) is it worth me contracting. It all seems very confusing!

Before I start setting up my own Ltd. I wanted to ask a few questions - hopefully someone somewhere will be able to help me out.

So anyway, I was wondering how easy it was to swap between permanent/contract roles - isit even worth me trying to make this work if the contract is going to be 3 or 6 months - if the contract runs out, how easy is it to forget about the contracting and go back to a permanent role?

I was thinking about creating a Ltd. - say I was to set up a Ltd. (which would cost 150 - 250 GBPs, could I then choose not to use it? As the director of the Ltd, can I be the only owner or do I need to employ anyone (other than the accountant?)

Also, With the cash I get paid for doing the contract, how much can I pay myself as the owner ofthe company? Can I pay it all to myself or should I be thinking about takng the cash as dividends?

I assume that if I get an accountant to set this up, I would invoice whoever wants me to contract under the comany name... Is that generally correct?
Also, is it advantageous to be inside or outside the IR35 and what governs whether you are in or out?

Is it easier just to go with an Umbrella Company - what is anyones experience - which is better - an Ltd. or an Umbrella?

Finally, if i want to say **** it all, how easy is it to disband te company?


I hope that wasn't too painful to read through. If someone has some answers to any of the questions I'd be really grateful because so far I'm struggling!

[[email protected]]

Hi Stevie B

Great to see that you are considering taking the plunge into the world of Contracting!

I was in the same position as you about 8 years ago when I resigned and took my first steps as a newbie contractor and I have never looked back.

To try and help with some of your questions:

To go about contracting there are a few things you need to do to start; get your CV into a number of agencies that specialise in your field of work, decide whether to go Ltd or use an umbrella (naturally I've vote Ltd everytime!), if you go Ltd you'll need a company formed, setup bank accounts, sort out appropriate insurances and find yourself a good accountant.

Is it worth it? There are so many things to consider when trying to answer these questions and it has a lot to do about you and whether it is really what you want. It is worth it for many reasons; rates, flexibility, avoidance of office politics etc but it can be hard work sometimes; commuting, staying away from home, maintaining a business, being 100% professional at all times to secure future work etc.

Is it worth taking a contractor for 3-6 months? Absolutely. This is in my experience a typical contract duration however they can go on for longer but I suspect it is very much dependent on the services you'll provide to clients, ie on long or short term projects. When the contract comes to the end you just start again on securing your next contract. You'll probably get enough notice of the contract end date to give you enough time to get in touch with the agencies and secure your next contract. As for going back to permanent employment, there should be no issue whatsoever if that is what you decide ..... but you may never want to go back!

There are many options as to how best set yourself up in business and it very much depends on your personal circumstances. I'd suggest that you get in touch with an accountant to talk through your needs and they will be able to advise on the best solution for your personal needs. As for the umbrella option it is a personal choice and one that I'm sure many people will have views on! Naturally I'm biased towards running a business due to that company I'm involved with but umbrella solutions have their place. ;o)

As far as wrapping up a company, there are a few formalities including, preparing the companies accounts, informing HMRC, deregister for VAT, close your bank accounts, informing Companies House. In most cases the contractors accountant will assist in ensuring all matters are dealt with.

You may be interested in taking a look at our website where you can find more details that may help with your decision.

Good luck!

Matt
www.inniaccounts.co.uk

[NotAllThere]

Looks like an MSC to me. Run away. Run away.

[Mart001]

Hi Guys & Gals,


I was thinking about creating a Ltd. - say I was to set up a Ltd. (which would cost 150 - 250 GBPs, could I then choose not to use it? As the director of the Ltd, can I be the only owner or do I need to employ anyone (other than the accountant?)
struggling!

Setting up a LTD won't cost that much I done mine for £30

Yes you can choose not to use it, but you have to let the HRMC know.

Just you and your LTD are required nobody else.

[LisaContractorUmbrella]

Also, is it advantageous to be inside or outside the IR35 and what governs whether you are in or out?

http://www.contractorumbrella.com/what_is_ir35.html

You may find this useful Stevie B. Basically IR35 determines the way that you are paid so it is important that you understand the rules.

HTH

[pmeswani]

Looks like an MSC to me. Run away. Run away.

Isn't it strange that Matt & Stevie are first time posters? I'm just wondering if this is blatent advertising.

[blacjac]

Isn't it strange that Matt & Stevie are first time posters? I'm just wondering if this is blatent advertising.

WHS

Plus, if you have spent a day reading up on it, why do you not know if IR35 is good or bad?

[[email protected]]

WOW! Does every first timer in this forum get the same initiation of fire!

I assure readers I have no connection whatsoever with Stevie B & us both being first timers is coincidence.

Just to help with the point made by NotAllThere, our clients are in complete control of their businesses plus as I mentioned in my post I have been a contractor with my own business for 8 years now and I know enough to steer clear of anything that resembles an MSC!

Matt

[blacjac]

loverly

[YasminHuegilll]

It's a tough one to know what route to take in terms of how you pay yourself but in terms of rates and flexibility then contracting is tough to beat. I would recommend it for sure, the tax breaks themselves are worth it alone.
As mentioned: most contracts start out as 3-6 months but often roll a great deal longer. I started one for 3 months and it rolled for 4 years.
as regards Ltd companies and Umbrella there are benefits to both. Why don't you go to www.contractorumbrella.com or www.contractortaxation.com and ask them as they have access to heaps of them and should be able to point you in the right direction