So after searching for work for over a year I have finally been offered a temping role back in the city. It's only a 3 month rolling contract but hopefully this can lead to a full time position for me.
Having looked into this I have been asked in preperation for "onboarding" to provide my limited company details and my insurance details. Having only ever worked as PAYE I don't know anything about this or even where to start. Apparently I need to set up a seperate bank account amongst other things.
If anyone understands this and can point me in the direction of getting this all set up (apparently I need to do it today as my start date is planned for Monday) then it would be greatly appreciated.
thanks
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I am sure you can operate PAYE if you want to but you may have been quoted a limited company rate.
You can go through an "umbrella" company whereby they invoice the principal and pay you. I have never used them but I understand you pay a reduced rate of tax/NI.
I used Giant for 6 months in 2011 on a contract with Nomura. Was impressed at what you can claim back off of tax. Also they only pay out tax on minimal wage and you take the rest in "dividends". They will talk you through it.
I spoke to the agency and they have recommended me a company to use who I have just spoken to.
It seems I can earn up to £600 a month take home pay more by setting up through them as a limited company rather than using their umbrella option so it's a no brainer for me.
thanks for all your responses. It seems particularly complicated. But fortunately it sounds like they're going to do all the hard work for me so to maximise my earnings it seems that's the way to go.
Lets just hope I can do well there and finally have some money coming in!
You're going to need an accountant unless you do your own books and tax returns. Your accountant will probably expect you to keep records of your own so discuss this upfront and make sure you do it regularly otherwise an annoying backlog will build up!
You're exempt from employers liability insurance if you're the sole shareholder in your company (check that though to be sure/ ask accountant). You'll probably need to point this out to the agency (Not worth assuming they are your friend or expert in all things financial).
Also you become 'self-employed' so forget many of the legal rights and protections workers get. (though temps/ casuals have never done well from employment protection law and the increased income certainly goes a way to compensating this anyway!). H&S and some anti-discrimination laws continue to apply.
Something quite scary for a lot of contractors are hmrc's IR35 rules. These are deisgned to stop people opting out of paye just to make tax gains. Basically you need to be seen to running a business and taking risk like a business owner in the hmrc's eyes (i.e. different to a worker in the paye sense). There are grey areas in this - and controversy and much of the hmrc guidance is written to deter rather than instruct. HMRC do provide a service where they will assess your situation to determine whether your situation falls outside or is captured by IR35. You hope for it to classed as low risk, hence likely to fall outside IR35. If classed as low risk they are more likely not to investigate you, should your number come up (it's rare apparently but stressful if it does). Some accountancy services will offer an IR35 case management service for a small extra fee to protect your interests during an IR35 investigation. You decide if you want that. Eitherway i definitely suggest you keep good records, including copy of the recruiters advert, contract documentation, corres with your client confirming your tasks/ changes in duties etc, details of contract extensions, and other basic notes i.e. about your company and its environment as it changes (a 'corporate diary' in other words).
Hope that's some help. Hope you enjoy the extra income and freedom that comes with self-employment! And don't forget your mates if you do really well out of it
Setting it up, and running it is, literally, a piece of cake. I would avoid the agencies as they charge a fortune to do it. If you want some more detail then let me know and I'll point you in the right direction.
You should note, however, that you need to guard against IR35 as it can make your tax bill a lot higher.
....and this is why someone like the firm's window cleaners will be genuinely offering a limited company service and why most interims or temps are not and just avoid tax.
Anyway, as PL35 says one of the key tests that HMRC would look at in an IR35 situation would be the substitution test, i.e. if you were sick/unavailable/indisposed one day could you send someone else to do the job on your behalf. If this answer is no, this would count strongly against you (although it is not the only thing they look at of course).
As has been pointed out,if you go freelance through your own limited company or through an umbrella, you are taking more risks than someone on PAYE, so you are not conning HMRC or paying less tax than you should. I was freelance for 20 years I never got one paid holiday or a single day's paid sick leave or redundancy or pension or any other benefit you would expect to get from a permanent job. During my time the tax rules got tighter and tighter, until IR35, which seemed to be a direct attack on the way I liked to work. I got paid more money and I paid less tax (certainly in the early days) when I was working, but I had periods when I had no work also, I became seriously ill about 15 years ago and had several months off with no pay, so it's swings and roundabouts.
Sorry for the rant - this is something I feel strongly about.
I now have a permanent job, but with this recession I find that the benefits are almost non-existent.
Where I think we differ is that I don't see a huge difference between individuals and large companies. If everyone in the UK was able to work through an umbrella company, the treasury would suffer a massive loss and tax rates for such companies would have to go up. So, by definition, the fact that some people can benefit from this sort of arrangement only comes about from the fact that most people realistically can't. Not saying this is necessary wrong or unfair (see next paragraph), but it is a fact nonetheless.
This brings us back to the old employed vs self-employed debate, which was never my intention when I posted. I think you summed it up perfectly when you said 'swings and roundabouts'. You make valid points about a lack of paid holiday, sick leave, and job security, but I could counter by saying that this is why freelancers tend to charge higher daily rates to compensate for this. It's a personal lifestyle choice either way. Personally I would rather earn less and have the other benefits of paid employment, but this isn't for everyone. But it does annoy me when people are willing to charge 'freelance' rates and then still moan about a lack of holidays, pensions, sick leave etc. (That wasn't a personal dig, just speaking in general terms because I do hear it quite a lot).
I don't believe that IR35 was ever intended to be an attack on the 'genuine' self-employed. However, there are several industries where these sort of arrangements were being set up deliberately to reduce tax liabilities, which really is stretching the concept of 'avoidance' to its limits. Indeed, this seems to be the inference of the original post (albeit at the request of the employer) - whether the OP intended it or not.
Even if you don't fulfil the criteria you could play the numbers game and hope they don't have the resources to investigate but be aware that if they take an interest you'll have to pay any tax owed back.
I never whinged about the lack of benefits personally and I don't know anyone in my industry who did - we were paid handsomely and we accepted the risks.
Pay yourself a wage the lowest you can --that gets you nil tax or low tax. pay yourself e regular dividend (3months) you dont pay NI on the dividend you do pay tax.
Im VAT registered---you may wish to or not(depends what your plans are)
There is the corporation tax which is a pain but my accountant sorts that out.
Make sure you plan ahead for when your between contracts.