About to begin contracting

[Graham]

Hi all, been looking around for information on contracting and came across this forum, having spent the last few hours reading threads on here I decided to register, post up and risk being accused of not using the search well enough to find my answers

I've been offered a contract which is for an IT support role.
From what I've read, I believe it probably falls under IR35 as I would be working at a fixed location, reporting to the department manager, using their equipment (due to security), would not be possible to send anyone else in my place (again due to security) and having to work to hours set by them. Also the contract is a daily paid rate not a fixed rate for work delivered.
I believe there is a high probability of the contract only lasting between 6-12 months but with the option to go permanent following this (which I would be interested in doing).

I have seen many say that it is worth going LTD if your contract is worth £30k+ p.a. and 6+ months, however not mentioned if its still worth this if you think the contract is likely to fall within IR35.
Calculators I've found suggest that through an umbrella company I could earn as much as £3.4k a month and through LTD £3.9k a month, I've not found a calculator that tells me how much I could expect to earn through a LTD if falling within IR35.
I don't believe I would be likely to incur many expenses, travel would be approx £120 a month, subsistence I guess at a pretty standard rate. I may buy additional computer equipment and training/exams however thats not a definite at the moment.

I have no problem with any additional effort required to go LTD, I just want to ensure I get as much money as I possibly can due to saving to buy my first house.

I also spotted this reply to a thread which I guess would affect me if I were to take a permanent role following this contract...

If you've only had the one place of work, then that becomes your permanent place of employment and you shouldn't have claimed expenses for travel / subsistence.

[MarillionFan]

Hi all, been looking around for information on contracting and came across this forum, having spent the last few hours reading threads on here I decided to register, post up and risk being accused of not using the search well enough to find my answers

I've been offered a contract which is for an IT support role.
From what I've read, I believe it probably falls under IR35 as I would be working at a fixed location, reporting to the department manager, using their equipment (due to security), would not be possible to send anyone else in my place (again due to security) and having to work to hours set by them. Also the contract is a daily paid rate not a fixed rate for work delivered.
I believe there is a high probability of the contract only lasting between 6-12 months but with the option to go permanent following this (which I would be interested in doing).

I have seen many say that it is worth going LTD if your contract is worth £30k+ p.a. and 6+ months, however not mentioned if its still worth this if you think the contract is likely to fall within IR35.
Calculators I've found suggest that through an umbrella company I could earn as much as £3.4k a month and through LTD £3.9k a month, I've not found a calculator that tells me how much I could expect to earn through a LTD if falling within IR35.
I don't believe I would be likely to incur many expenses, travel would be approx £120 a month, subsistence I guess at a pretty standard rate. I may buy additional computer equipment and training/exams however thats not a definite at the moment.

I have no problem with any additional effort required to go LTD, I just want to ensure I get as much money as I possibly can due to saving to buy my first house.

I also spotted this reply to a thread which I guess would affect me if I were to take a permanent role following this contract...

4

Nicely crafted post this time. But you haven't actually asked a question.

[Graham]

4

Nicely crafted post this time. But you haven't actually asked a question.

Yeah realised that after I posted lol
Just really want to find out what people think about my situation in regards to whether its worth going Ltd or umbrella?

[LisaContractorUmbrella]

Hi Graham,

With regards to you take home pay - if you are inside IR35, there won't be a great deal of difference between your take home Ltd vs Umbrella - there is a sticky in the Accounting/Legal section (I think) which will explain the differences i.e. flat rate VAT scheme and salary to 95% of revenue instead of 100% of earnings.

It really all depends whether you are intending to be a career contractor or if you are just seeing how contracting goes before making a decision. If it is the latter I would suggest that you use an umbrella company as it is much easier to leave your employment with them than it is to close down a Limited Company. You should then also question whether you want the responsibility of running your own Limited Company - you will need to be organised and disciplined in dealing with paperwork and make sure that you retain enough money in the company to meet your obligations to HMR&C.

In your situation, especially if the contract is only going to be 6 months, the umbrella route would be the most sensible IMHO

[The Spartan]

I'm new to contracting and have chosen to use an umbrella company, the reasons I did this were as follows:

Firstly my contract was only for 6 months
Secondly as I'm a first timer I wasn't sure whether I'd enjoy and want to remain contracting
Thirdly I didn't want all the hassle of running a limited company just yet
Lastly when I'm ready to go limited then it'll be easy to go from an umbrella and set one up

Obviously these are my personal reasons and many might tirade me because they see limited as the be all and end all, but I just wasn't ready for it and am by no means a seasoned contractor like some of the posters on here.

[redgiant]

I'm new to contracting and have chosen to use an umbrella company, the reasons I did this were as follows:

Firstly my contract was only for 6 months
Secondly as I'm a first timer I wasn't sure whether I'd enjoy and want to remain contracting
Thirdly I didn't want all the hassle of running a limited company just yet
Lastly when I'm ready to go limited then it'll be easy to go from an umbrella and set one up

Obviously these are my personal reasons and many might tirade me because they see limited as the be all and end all, but I just wasn't ready for it and am by no means a seasoned contractor like some of the posters on here.

Setting up LTDs is pretty easy and there are companies that specialise in setting up LTD companies for you with no real hassle. Couple that with getting a capable accountant and a willingness to learn what is required of the company from HMRC and Companies House (e.g. paying VAT, corp. tax and filling out your tax return etc.) it's pretty easy going and the greater returns over going with an umbrella arrangement are worth it.

[Graham]

Thanks for the replies everyone.

Whilst I am tempted to go with an umbrella company due to it being easier. For me its all about the money (so I can save a deposit for a house) and I shouldn't have a problem with affording the time to learn whats needed for running a LTd company.

That said, I'm still keeping my options open and not committing to either course yet

[Jeremiah@RHJAccountants]

Just to add my opinion

if it is a short term contract and you are a first timer testing the water i would go for the umbrella route.

if you are looking to make the move into contracting full time i would go down the Ltd routeyes it is more responsibility but it you can get a decent accountant who can offer you advice on Flate Rate Scheme VAT, tax planning and lots more.

What ever you decide good luck

[Joeman]

If it was me i would go LTD and assume NOT under IR35.
Its a short contract, so by they time HMRC catch up with you, you may well have gone perm and folded the company, or moved on to another client, so it would be hard for anyone to show you were under IR35 for this first contract.

[northernladuk]

If it was me i would go LTD and assume NOT under IR35.
Its a short contract, so by they time HMRC catch up with you, you may well have gone perm and folded the company, or moved on to another client, so it would be hard for anyone to show you were under IR35 for this first contract.

I disagree. The last thing you want to do on your first contract is getting yourself in all sorts of trouble you do not understand and cannot get yourself out of. Wing it when you know what you are doing, not before.

I did Umbrella for the first 6 months and it didn't do any harm bar a little less money which is now totally irrelevant 4 years later.