Any IT Contractors?

chrismscotland · 22 Dec 2011 at 21:05

Perhaps an odd place to be asking for advice but I wondered if anyone on here was an IT Contractor at all??

I'm being made redundant in January and I've been looking for work in the area I currently work (Projects / Change Management) and I've mainly been looking at contracting work, I've been lucky enough to be offered my first Contracting role to start in late Jan 2012 but now I need to start looking at how to set myself up, either as a Limited Company or via an Umbrella scheme and I'm not really sure what to do!!

How hard is it to setup a limited company for the purposes of receiving my contracted salary? I guess that sort of goes for any type of limited company, not just for contractors.

TNGL · 22 Dec 2011 at 21:35

I'm not an IT contractor, but there are plenty on this forum. You just need to hope they see this thread, lol.

[FnG]magnolia · 22 Dec 2011 at 22:08

I'd imagine a substantial part of the forum are IT contractors. Do you have an accountant?

Trifid · 22 Dec 2011 at 22:15

Having used an Umbrella before, I'd set up a Limited company. The Umbrella was a waste of money and delayed the payment too.

chrismscotland · 22 Dec 2011 at 22:15

[FnG]magnolia;20859641 said:
I'd imagine a substantial part of the forum are IT contractors. Do you have an accountant?

Not yet, thats really what I'm trying to decide, whether to go down the Ltd Company route and get an accountant or just go with an umbrella.

I've got a bit of a background in accounting/tax before I went into Change/Project Management so I'm sure that I'd be able to handle the admin of running my own Ltd Co but I just want to make sure I'm doing the right thing!

wonder_lander · 22 Dec 2011 at 22:24

My advice would be start with a brolly then go limited for your second contract if you can.

Jas1975 · 22 Dec 2011 at 22:27

Yup been a contractor for 16 years.

Best bet is go with someone like SJD or Nixon Williams as accountants who will setup everything for you (Google them). They will take you through everything. Might be worth reading up on www.contractoruk.com for the newbie guides as most questions are asked there every week.

Finally if you have any specific questions then feel free to email me.

Eriedor · 22 Dec 2011 at 22:30

Definitely go Ltd company if you think you'll be doing it for a while.

1) Form company - https://www.quickformations.com/
2) Accountancy software - http://www.clearbooks.co.uk/
3) Register for flat rate VAT 13.5% in first year meaning you 6.5% you keep

4) Profit....

Ev0 · 22 Dec 2011 at 22:31

How long are you planning on doing it for?

If only contracting for a short time I'd just go with an Umbrella. Pick one of the big ones, everyone has heard horror stories about each of them though!

If it's for the foreseeable future or a reasonably significant amount of time then setup as limited imho.

Zirax · 22 Dec 2011 at 22:32

Jas1975 said:
Yup been a contractor for 16 years.

Best bet is go with someone like SJD or Nixon Williams as accountants who will setup everything for you (Google them). They will take you through everything. Might be worth reading up on www.contractoruk.com for the newbie guides as most questions are asked there every week.

Finally if you have any specific questions then feel free to email me.

Good advice, just fired a quick email saying the same to his trust

Don't forget all the insurances you may need depending on the contract. Also get the contract reviewed before you sign.

edit: Remember all agents are ****'s. Even if they are your best friend when trying to get to sign with them.

iGiDK · 22 Dec 2011 at 22:36

Umbrella is slightly more convenient but theres a good chance you'll query your initial payments due to the convoluted way your take home salary is calculated.

With an umbrella you will have deductions for income tax, employers NI, employees NI, umbrella fees, and they'll also retain a chunk of your earnings for holiday pay (useful if you take leave or are sick!)

You'll take home more with a Ltd Company, but you'll need to pay a little more up front to register your company, then you'll need to register for VAT (can take a few weeks to go through), also get a business bank account sorted, and find an accountant.

Plenty of info at http://www.contractoruk.com/

Personally i'd do some reading and start out as ltd, have used 2 different umbrellas in the past, was quite frustrated with both of them.

chrismscotland · 23 Dec 2011 at 00:00

Thanks guys, I'm planning to make the move into contracting a semi-permanent move and keep doing it long-term (unless I get offered a really good permie post!) so I've really been thinking that while its more up front expense that I'd be better off just starting as I mean to go on and going Ltd.

I've been looking at SJD and Nixon Williams actually along with InTouch Accounting who seem to be very active helping out with queries over at the ContractorUK Forum.
I know a few ex colleagues who have had some poor experiences with Umbrellas, it seems to me that I might as well be in charge of it myself and get an accountant.

Thanks for the email Zirax!

wonder_lander · 23 Dec 2011 at 08:56

iGiDK said:
Umbrella is slightly more convenient but theres a good chance you'll query your initial payments due to the convoluted way your take home salary is calculated.

With an umbrella you will have deductions for income tax, employers NI, employees NI, umbrella fees, and they'll also retain a chunk of your earnings for holiday pay (useful if you take leave or are sick!)

Not all brolly's retain holiday pay, some will roll up your holiday. You are also protected via employment rights so have access to SSP if you're sick.

Contracting is horses for courses and as someone who has done it, and now works for one of the biggest brolly companies, I would always offer the advice of starting with a brolly then when you contract is renewed or you have a second contract then review your options.

Do not under estimate IR35 legislation, make sure you're not caught by it before you plough down the limtied company route.

Bear · 23 Dec 2011 at 09:10

The most important thing is how long you intend to contract for, because if it is less than a year then there are extra costs invoved in wrapping up a ltd company. I started using an umbrella for the first 3 months then decided to change over to a ltd company. There isnt any extra work involved between the two but depending on your working practices IR35 as mentioned is very important if you want to go ltd and pay yourself in the most tax efficient manner.

NathanE · 23 Dec 2011 at 10:02

@Bear:

Why would you wrap it up? You'd just leave it running and make sure the accounts are made up each year. It's not like a contract Ltd company has any real outgoings to worry about.

Bear · 23 Dec 2011 at 10:33

NathanE said:
@Bear:

Why would you wrap it up? You'd just leave it running and make sure the accounts are made up each year. It's not like a contract Ltd company has any real outgoings to worry about.

Well you can do that but some people might not want to pay an accountant to do the paper work for something that earns them no money especially if they take a permie role after. I know people that have put companies to sleep and others that just closed them.

NathanE · 23 Dec 2011 at 10:46

I think you can inform Companies House to put the company into a "dormant" state actually. Not entirely sure.

But even still, I can't imagine an accountant would charge much for filing the accounts of a clearly dormant company.

gambitt · 23 Dec 2011 at 10:57

It depends what your daily rate is. Below a certain point and there is little benefit to going Ltd over umbrella.

Admiral Huddy · 23 Dec 2011 at 11:15

wonder_lander said:
My advice would be start with a brolly then go limited for your second contract if you can.

Don't you still have to be registered to a limited co? I gave up 10 years of contracting just shortly after IR45.

I would definitely find yourself a decent accountant because there are deadlines and statutory reports that need doing.

Haircut · 23 Dec 2011 at 11:44

Contractor here, started doing it just over 3 years ago and it's the best decision I've made in my career. It would take a heck of a permie role to convince me to go back over to that side of things now.
Took 3 months off towards the end of last year just to relax and do some work on a start-up company with some mates, just the ability to do stuff like that makes it worth it for me.

I went with a ltd company from the start as well so haven't experienced umbrella companies, but the ltd route has worked well for me.
I would recommend keeping a buffer in your company account for the times when you make not be in work. I try and make sure I always have at least enough to pay myself the money to live for at least 6 months without having to change my lifestyle.

If and when you come to close the company you can benefit from entrepreneur's relief on the profits too, which is quite nice.

Eriedor said:
Definitely go Ltd company if you think you'll be doing it for a while.

1) Form company - https://www.quickformations.com/
2) Accountancy software - http://www.clearbooks.co.uk/
3) Register for flat rate VAT 13.5% in first year meaning you 6.5% you keep
4) Profit....

To be honest, that's a good way not to profit as much as you should do. Between steps 2 and 3 make sure you buy any equipment you need for the company. Laptop, printer etc. before you register on flat rate. That way you can claim the VAT back for those purchases getting the benefit from that and then go flat rate without needing to purchase much stuff.