Contractor needs advice

smokey636

Hi guys need some advice, currently im working through an agency (Hays) and paid about £12 an hour which is paid tome through another company called Sterling which sorts out my tax/NI and pays the wages into my bank etc... and charge about £85 a month

But the other week they sent me a letter saying from the 6th April i will no longer be able tobe paid like this due to a change in the law.

They said ive got 2 options, 1st being paid directly through hays as PAYE but its says that i will end up paying more tax and wont be able to claim back any expenses (petrol) so will bring home less.

Otherwise they said for a monthly 'fee' (so atleast the £85 as before im guessing) they will open me up my own limited company and busness bank account and sort out my accounts each month.

But i was looking around the net and seen that its pretty easy to open a ltd company and bank account etc... And seeing as Hays will be sending me an invoice each month anyway im thinking about just doing it my self and saving myself the £85 a month. As if Hays send me an invoice each month and ill have my seperate bank statment and just keep them in a file with all my petrol receipts etc.. that should be all of my accounts needed for the end of year tax wont it, then all i would need to do is either do self assessment or get an accountant at the end of year (would you say a accountant is needed in this case, ie. would he save me money?)


Which method do you think would be the best and any advice appriciated as this is all new to me! :beer:

Tallymanjohn

The reason that you're having to change is that the treasury have realised that these 'umbrella companies' were just a way of avoiding tax & NI payments from agency employees. As a result, they have clamped down on them so your only option apart from PAYE is to go self-employed. The problems then start if you are only working for one agency, possibly on only one contract, the tax-man would not consider you to be wholly self-employed - that's the next hurdle, check out the government's site at http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/WorkingAndPayingTax/DG_4015975 to decide whether you are classed as SE.

If you are, then certainly it's a lot cheaper to do it yourself - setting up a limited company is only about £40 from what I recall. As a limited company you will need to get an accountant to do your books at the end of the year - if you were a sole trader then you could do the whole lot yourself, but you may need the protection of a limited company, depending on what trade you're in.

stugall

Hi
Definitely do a limited company. Remember, Hays is working for itself, you need to protect your own interests and earning power.
I have been in business and work for Hays occasionally and have to be quite hard with them with regard to payment!
Stuart

danwednesday

I'm not sure if it's legally the case, but certainly when I set up my limited company recently I was advised by everyone to get an accountant - at the very least to file my returns with Companies' House each year. I'm pretty sure it is a legal requirement, but you'd best check. If so, you need to include accountancy fees into your equation. Plus, from my experience of sole-trading versus limited company, it's a hell of a lot more complicated running the latter. You need to be careful about drawing a salary from the company (to avoid much higher taxation than you were subject to previously) and need to consider dividends, setting up/administration of PAYE, you need better record keeping (e.g. noting down of all business miles you run up in your car, so that your petrol is accounted for) etc etc etc.

Don't take setting up a limited company lightly. Do your research, speak to lots of accountants - mine is crap and caused me a lot of headache in having to pretty much learn everything myself (book keeping, record keeping, tax situations etc). I'd imagine if you find a good accountant it would make running your company 100 times easier, but probably still much more difficult and time consuming than not trading as a company.

Hope this gives you some food for thought...