Top 10 contractor business tips for 2022
1. Sort IR35 status early and probe if it’s not right
Establish IR35 status for new contracts on a VERY EARLY DOORS basis.
So do this before any sort of rate negotiation takes place with the agent.
Once you’ve agreed the rate, it’s almost set in stone with the end-client. From here onwards, your power in the negotiation has dissolved.
Also question the IR35 status if it sounds too good to be true. For example, if you role will be sitting on a Helpdesk logging tickets on ServiceNow and the advert claims outside IR35, then that’s a red flag!
Next? Remember the rate needs to reflect the almost undeniable inside status of such gigs.
Natalie Bowers, founder of niche recruitment firm Bowers Partnership.
2. Forget One Trick Pony Ltd
It's clear that the winners of 2021 were true SPECIALIST contractors, able to work in many sectors, rather than those with commodity skills, or skills with limited appeal beyond a single sector.
So contractors should challenge themselves to refine their skillset in 2022, and shoot to become a respected specialist!
In doing so, reflect honestly on your envisaged skills transformation and ask yourself some key questions.
Does demand outstrip supply? Will I have appeal beyond a single sector? Who can help me validate my assumptions? And who can help get contracts I really want?
3. Ready a fine-tooth comb for your agency contract
Check EVERY contract you sign (or get a contracts professional to check it for you), to make sure agencies are not offloading unreasonable amounts of risk onto limited company suppliers like yourself.
Forced to indemnify the agency against IR35? It’s possible your next contract will unfairly attempt this.
And don’t expect such a clause to be sitting in plain-sight!
Matt Collingwood, managing director at IT recruitment company VIQU.
4. Take the (financial) pulse of your wannabe partners
Consider any new engagement carefully and central to this consideration is fully credit-checking any agency or intermediary (such as an umbrella company). But you must run such checks BEFORE you sign on the dotted line!
Given Q3 2021 saw a bumper rise in corporate insolvencies (43% increase on 2020), contractors need to know that any agency they sign up to has the money in the bank to pay what they owe.
Oh and as always, avoid any 'pay when paid' clauses as these are toxic to limited company cashflow.
Adam Home, senior credit manager at Safe Collections.
5. Sniff out clones by checking for the dotted ‘i’ and crossed ‘t’
Amid another 12 umbrella companies being cloned for fraud purposes in December 2021, we implore contractors to stay VIGILANT, and very wary when umbrellas lead their approach with take-home pay claims.
Be aware, the clone, fraudulent umbrella company name is often a very closely spelling of the original and genuine umbrella company name, with often a single letter, character or typo being the only difference!
Lucy Smith, managing director of Clarity Umbrella.
6. Refresh yourself on what a rogue umbrella company isn’t
Contractors in 2022 who seek a compliant umbrella must ask the umbrella key questions while remembering the FUNDAMENTAL FIVE.
In particular, a compliant, bonafide umbrella company should:
- Employ you.
- Give you all statutory rights and benefits of employment (holiday pay, sick pay, pension etc).
- Give you the flexibility for numerous different end-hirers.
- Consolidate your pay from numerous hirers into one pay packet.
- Process the full amount of your gross pay through PAYE.
Crawford Temple, CEO of Professional Passport.
7. Don’t feel you’re banished to brollies if you prefer ‘Ltd’
Just because you find yourself inside IR35 on some contracts, it doesn’t mean that you have to close down your PSC!
Keeping your limited company active keeps your options open and enables you to respond to market changes.
Phil Pluck, the outgoing CEO of FCSA.
8. Know that HMRC might come calling
Contractors should be aware that there is a lot of work still to be done on the IR35 front, despite outside IR35 contractors becoming more popular.
We expect (and contractors might be wise to expect the same) that HMRC will ramp up its compliance activity, notably when the ‘soft-landing’ ends in April 2022, at which point HMRC will be free to issue penalties for non-compliance, in addition to tax liabilities.
More positively, keep an eye on a case law this year. There are multiple cases with potentially huge implications that should come to a head in 2022, which might, for example, be the final nail in the coffin for CEST and impact how IR35 status is determined.
Seb Maley, chief executive of Qdos.
9. Make your money work for you
I’ve spoken with many individuals in just these first few working days of 2022 who chose to work through their own PSC and, despite the numerous difficulties recently directed at their companies, they are now totally focused on the financial benefits of working as an incorporated business.
The key is to always be operating tax-efficiently. Whether that’s paying into your pension, or even buying commercial property. For PSCs with additional employees or shareholders, perhaps even a spouse, they ought to consider making additional pension payments.
Generally speaking – stand back, potentially with the help of an expert, and look at what HMRC-compliant but tax-efficient solutions would work for you.
Submitted on condition of anonymity.
10. Be prepared to stay at the sharp end
At times, 2021 felt more like a drawn-out tug of war than a standard 12-month period!
2022 is likely to continue the trend of new challenges and although the government has provided some support to pandemic-hit businesses over the last year, this is likely to continue to be scaled back further in the coming year.
This New Year will also see further challenges in the form of Labour Market Enforcement and the formation of the Single Enforcement Body.
In addition, HMRC will no doubt continue to increase its compliance activities, particularly in relation to claims made by employers under the CJRS and of course the more joined-up multi tax enquiries that we have started to see from the VAT, employment taxes and the National Minimum Wage teams.
Chartergates, an employment law firm.