Permament to Contracting - Again ---PLS HELP!!!!!!!

[mrcheeks147]

I know this has been discussed extensively on this forum, but I would appreciate any logical advise by more experienced people on here please....

Anyway, I am in a situation where I work in a relatively steady Permie job with £40,000 a year in Project Management/Business System Analysis.

My intention is to go back to contracting (had a stint @ this a few years back and only went to back to permie job due to family etc. and comfortable enough with my experience so far) as soon as possible.

I am not sure my current employer would take a fancy on me going contracting at this time, especially when we are going Live on a Global System Deployment Project in a couple of months. I enjoy working on this project, but I fear I will get bored and not add any value to myself when the job becomes more operational/routine after going Live. I enjoy working on varied projects with its associated Challenges/issues/team/risks etc.

My question is - how do I negotiate with my current employer (I've a very good relationship with my Boss and Project Team) that I would rather be on a contract and not a Permanent staff (I work in a firm that has a large amount of contractors - some have been there as long as 4-5years-and in an industry where its the way to go) @ least in the short term. I realised there is really not much growth in terms of career in my role/organisation and I would rather be in charge of my career and grow my experience working on diff. projects etc.

Also, it seems I would most likely be caught by IR35 - being a Permie on a Friday and back as a Contractor on Monday - but a colleague (whom is a seasoned contractor with over 15years in the game) suggested that I can negotiate a Golden Handshake and take 3 months off work and come back as a contractor (work with the same company but not officially in the books as a staff/contractor - Is this legal though? ). My colleague gave this suggestion based on his experience working with a multi-national Org. years ago and it was done so surely this is not frowned upon by HMRC

Going by the rule of thumb that Hourly rate x 1000 = equivalent permie salary, so £40ph = £40,000 pa as suggested - so £320 on a 8hr day seems reasonable considering the ave. day rate for my role equates to £375 going by ITJobswatch - In London). How do I sell this to my employer when I decide to go contracting? (Guess i'm trying to get the best of both world really in the short term and have enough for the war chest before taking the full plunge into contracting - )

Any advise will be greatly welcome - Thanks a lot

[mrcheeks147]

Any one plsssssssssssssss???????????

[kaiser78]

Why not be up front and ask your boss if it is possible to switch to a contract basis based on the rationale you have stated? You can do this informally over a pint if as you say you have a good working relationship with him, just to test the water.

The big risk as would appear to me if I was your boss is they may see this merely as a way of you getting your foot back into the contracting door and so would probably be off at some point in the short term if you land yourself a juicy contract. Therefore ask yourself what is in it for them ?

Also if as you say it is your intention to go back into contracting (and cannot say if you are actively looking) why not look for live contract roles elsewhere ?

IR35 stuff your refer to etc I'll let someone else answer.

[Wanderer]

how do I negotiate with my current employer (I've a very good relationship with my Boss and Project Team) that I would rather be on a contract and not a Permanent staff.

Going from permie to contractor at the same place isn't really contracting is it, it just makes a bad smell when the tax man comes sniffing around and it also encourages employers to try to screw their employees by asking them to become contractors and sign away their permie rights. It doesn't help the average contractor in their IR35 fight when permies do such things either.

a colleague (whom is a seasoned contractor with over 15years in the game) suggested that I can negotiate a Golden Handshake and take 3 months off work and come back as a contractor

And then he woke up and he had come in his undies. Seriously, why would your employer pay you a load of money so you can take a 3 month holiday then come back and work for them again costing them even more money? And you're right, you would almost certainly be clobbered by IR35 if you did this so you would end up paying a lot of money in tax.

Oh, and welcome to the forum by the way.

Any advise will be greatly welcome - Thanks a lot

Well, at least you've done a bit of research so credit to you for that. I'm afraid you're going to get a bit of tough love from us lot here though, it sounds like you are living in a bit of a fantasy land.

My advice is to spend an afternoon figuring out how the company can't afford to do without you and then go and ask for a pay rise from your employer. It sounds like you are a key player so go for it! Don't to this Friday-Monday permie-tractor thing, you will get caned by IR35 tax and if it doesn't work out then you will piss your boss off too. If you want to go contracting then get saving to build up 6 months living expenses into your war chest and then go for it and make the jump into a proper businesslike contract not some disguised employment tax dodge...

[mrcheeks147]

Thanks for the response kaiser78 and Wanderer .

My Boss does not know I had done contracting before and I only mentioned it when I had an informal chat on my 1st interview for this current role where I was asked on the rates I was on before etc.

I believe asking my Boss if I could go contracting instead would not hurt anyone @ least not in the short term of delivering the Project on Time/Budget anyway- my real concern is being caught by IR35 and the chances of being investigated by HMRC. I don't want to see myself paying a hefty fine in the long term.

Would you say this might pose a big threat?And what happens in a scenerio I resign my appointment as a permy, take a 2/3 weeks holiday and come back as a contractor?

Also, another trusted work colleague mentioned that some contractors working within the company have agencies - which supposedly is owned by them (or maybe they are Directors in these companies) - that do their books (acting as Umbrella companies etc) which is separate from their Limited Companies - Is this a legal Tax Aviodance Scheme?

And what happens if indeed I'm caught by IR35 and pay the usual rates etc for my Limited Company or if I go through an Umbrella - does this still pose a risk of being investigated?

Advised from experts in this regard would be much appreciated.

Thanks.

[northernladuk]

I am afraid you really need to read up on the basics before asking too many questions else you are going to get ripped appart. All the links are available to the right.

IR35 is about how your working practices and you must appear to be seperate entity providing a service to your client. Most rules/processes and the like that apply to permies must not apply to you. This is a very very canned sentence so don't take it is gospel. The point I am making is... leaving permie job... to come back to it with a different pay system makes you a hidden permie and slap bang in IR35. As I say read up on it and this will become a little more clear.

Have you even looked in to how you will be contracted to and paid by your client? If you go umbrella then IR35 isn't an issue as you are in. Only if you have an LTD do you need to worry about it.

I know the question may have been asked but WHY do you want to go back on to this as a contractor? Is it for more money? Is it for the ability to leave on short notice? From these questions you have to ask WHY would the client/empoyee agree to this. He may if he has plans to trim his workforce and suddenly one of them says he wants to drop out of the system and just be on a no quibble one month notice.... but this isn't really good for you.

This sounds all pie in the sky to me and I think you need to look at your situation in more detail. You are talking about resigning your position before you even know if there is a position available or this option will even fly. Cart before horse seems to come to mind here.

[Wanderer]

my real concern is being caught by IR35 and the chances of being investigated by HMRC. I don't want to see myself paying a hefty fine in the long term.
Would you say this might pose a big threat?

Yes, it's a massive threat. The IR35 legislation was specifically created to counter this type of arrangement.

And what happens in a scenerio I resign my appointment as a permy, take a 2/3 weeks holiday and come back as a contractor?

Nice try but no, it won't make a single bit of difference. The HMRC aren't stupid.

Probably the only scenario that would work would be if you were made redundant and you went and used the money to set up a company premises, brought a pile of equipment and employed a bunch of people then ended up supplying services back to your old employer as well as to other clients then you may have an argument against IR35 in your situation.

To see how much tax you will pay if you are IR35 caught, check out some of the IR35 calculators on the net. If you go umbrella then you are effectively IR35 caught. To be outside IR35 you need to run your own business (eg LTD).

If you want to go contracting then be a bona fide contractor and go contracting. But don't try and do the permie to contractor thing, it's not going to work very well.