After my big employment thread before, I’m now considering quitting the comfortable (but underpaid) permanent lifestyle and going contracting.

So… umbrella or ltd, inside IR35 or out…

any advice?

currently leaning towards an umbrella company, and trying to stay outside IR35 for as long as possible – looking at a 6 month contract initially, with 6 month at a time renewals; should be able to avoid IR35 for at least 2 years.

Dave

really no-one? I thought this was ITContractingWorld.com

Dave

I avoided IR35 for 2 and a half years. Year as ltd, year and a half umbrella.

Earnt more as an ltd, but it was more hassle, in the end I think I preferred the umbrella route which was obviously hassle free. Apart from receiving dividends in Belarussian roubles!

I’ve never contracted but lots of friends have and we employee quite a few. All have their own Ltd companies. None have been hit by IR35.

Out of curiosity… what are your skills?

Go for the ltd route, get your contracts reviewed for IR35 unfriendly clauses, don’t act like an employee of the clientco, don’t take the p*ss with Hector (including foreign exchange schemes as alluded to above).

As a permie, I’m a “Principal Software Engineer”, basically a development team leader and technical architect for c#, java, c++ and c; on linux and windows – largely safety critical and security related (space and defence).

Thinking of going contracting as a direct response to the way I was screwed over by my company (see here for details).

Dave

As a permie, I’m a “Principal Software Engineer”, basically a development team leader and technical architect for c#, java, c++ and c; on linux and windows – largely safety critical and security related (space and defence).

Any niche skills / attributes ? Those technologies are pretty common and you’ll be competing with lots of suppliers of Indian origin working on low day rates. DO you have security clearance for example.

mainly obvious stuff
– use a limited company, all major employers and decent agencies will have processes in place to keep you outside ir35.
– use an accountant who specialises in contractors.
– register for the flat rate vat scheme- it’s free money
– move around. A lot of places now won’t have you for more than 51 weeks now anyway.
-keep on top of the books, nothing worse than trying to play catchup with a pile of invoices and receipts
-issue a share to wife/partner to double the tax break on dividends
– Remember it’s a company, and should be run like one, it’s not a bank account to dip into when you feel like.
– have fun. Remember, this is a job to fund a lifestyle – you no longer have a career.

I’d go limited, read up on IR35, get Bauer and Cottrel or similar to review your contracts/working practices and make sure you have legal expenses cover (usually by joining the PCG). Personally I’d avoid anything fancy, don’t take the piss and be always have IR35 in the back of your mind.

It’s a bit of a learning curve, can you talk to other (sensible) people at work to get advice?

Hi

work as an IT rec consultant – email me (morgs.bdavies AT gmail DOT com) for some info and a chat 🙂

Morgs

@morgs, ygm.

Remember that IR35 isn’t as simple as ‘I worked there six months and look at my contract’. It’s based on actual working practices. If you are working for an Umbrella, you don’t need to worry about IR35.

http://www.contractoruk.com/first_timers/

Sit down and do your sums. Day rates might look good, but all of the stuff that your company may have paid for or contributed to, are now for your expense. This includes the obvious stuff like pensions, medical schemes and holiday, but then there is certification, industry seminars you may attend, stuff like that. Build in a healthy amount of time on the bench into all your calcs.

To back up what allthepies says, do the research, and be honest with yourself, about how in demand your skillset is.

Remember it is running a business, and there is a certain amount of work that goes with that. Gone are the days of an amount of money appearing in your bank account at the same time every month. It can be frustrating at times.

After all that though, I’ve actually just gone the other way. I’ll be starting my first perm job next month after nearly a decade of contracting. The past 2-3 years have been a constant ‘one step forward, two steps back’ scenario, and I have had enough. Time for some consolidation, and then I can rethink it.

Here’s some advice from an ex contracter.
You’ll need an email address like this:
‘info#1@yourcompany.co.uk’ or similar.
Otherwise you will get so many spam emails to your real mail account from recruiters that it’ll result in a stack overflow of some sort.
Likewise think of getting another sim card or phone to reduce spam SMS and span calls from recruiters, …along the lines of ‘I have a VB or COBOL or whatever is not on your CV position in Dublin or where ever is a b’tard commute that seems to match your skills’.

alfabus; I did what you are doing 18 months ago(ish) – Initially I went with an umbrella company to test the water and make sure I was happy with my decision before committing to my own ltd company (which I’m currently in the process of setting up)

Be careful with your choice of accountant; I’ve seen first hand examples of people being let down by their accountant/firm and having to find signifcant volumes of cash to pay unexpected tax bills ….

Don’t go spend crazy – buy yourself a new bike and few other toys but make sure you pay £10,000+ off the mortgage every year as well. Don’t believe all those stories about paying 20% tax or getting everything on expenses…

There are different types of umbrellas as well.
Some operate as a sort fo group for LTD companies, others will employ you.
In the latter IR35 is not an issue, but you cannot take dividend etc.
IMO become a LTD company is the best, but more effort.
Beware business bank accounts (you’llneed one if going LTD) they are strict on charges, and so on.

I’m confident that the market I work in has a steady demand for my skills and domain knowledge – cheap indian labour is not a problem for me.

I’m also pretty confident that if I needed to, I could get a permanent job with one of the big players – the fact that I was offered one (see the other thread) last month testifies to this.

So; given my scenario, I’m struggling to see the downside of trying my hand at a 6 month contract.

If it goes well: I can carry on contracting, earning a lot more than I do now (even if I was inside IR35 and paid for all my pension, insurance etc. and allowed holiday and ‘bench’ time, I’d still be on a lot more)

If it goes badly: I will be in an arguably better position than I am now – I will be free to apply for jobs with any of a number of companies which have already expressed an interest in me but can’t have me because of anti-poaching agreements. I could even come back to my current company (lots of people have done this and come back for more money).

I have got a sizeable mortgage to pay, but no kids. My missus has a job which pays OK, but probably not quite enough to support us as a sole wage.

I’ve put my CV forward for a role, I’m going to do some sums and see if they offer me it.

Cheers guys,
Dave

@easyrider

oh how I love to be tarred with that brush!

I was just about to start this thread – cheers Alfabus!

Can anyone recommend an umbrella and/or accountant in the Sheffield area?

Morgs, I will also drop you a mail if that’s ok?

ourkidsam – feel free 🙂

so long as you tell easyrider that not all recruiters are as bad as easyrider makes out 😉

Yep, that there morgs seems alright 😉

dunno… he keeps sending me emails.

(granted, they are in response to my emails)

Don’t take it personally morgs!
You’re only trying to help.
I’ve done business with some great recruitment consultants, one presented me a bottle of champagne for the last job (he could have made it some real ale instead though).
Recruitment is a tough business : too many headhunters out there

@easyrider – I’ve worked in car sales, on the doors and as a recruiter. add in solicitor and traffic warden and I think I have the worst portfolio imaginable!!

Joking aside, I quite enjoy working in an industry with a shocking reputation. When I do a good job, when I’m fair, help out and work professionally then it’s nice to know that it makes me stand out!

@ alfabus – you need to reply to mine now 😉

Does everyone charge VAT and then claim back (on the flat rate?)