First time contractor and scam client

MyMissC3

Thank you, ThemeOne.


I was indeed thinking of going limited. I agree that it seems a better option and it would also save me a lot of money.


Mostly I was uneasy about doing my own Ltd accounts.


I totally agree with you, the direct relationship client-freelancer is different and more to my taste.


I am a bit disappointed that my first experience as a contractor went extremely wrong though I must also admit I had that "gut feeling" from the very beginning, before even actually starting this contract.


I am surely going to investigate thoroughly the limited company option in the coming year.


Do you have any suggestions on courses or books, or else, to understand more about limited companies' accounts?

ThemeOne wrote: »

I agree. Personally I would ditch the umbrella company. They are by no means essential to the process, and can complicate things more being an extra link in the chain.

It's not difficult or expensive to setup a limited company, nor is it massively difficult to do your own ltd co accounts and tax returns, assuming you fall into the small companies turnover threshold.

I think this experience will have also shown you that the relationship with clients as a freelance or contractor can be quite different from that between employee and employer.

ThemeOne

MyMissC3 wrote: »

Do you have any suggestions on courses or books, or else, to understand more about limited companies' accounts?

Once you've signed up to do Corporation Tax and PAYE online you can download the CT600 form, which is how you submit your company tax return. You fill in the figures, and it submits accounts in the appropriate form to both HMRC and Companies House. The form comes with quite good help, and you can also download example accounts.

You do need to know a few things, such as how to calculate a simple balance sheet, and how to marshall your incomings and outgoings into a Profit and Loss Account but, if you keep adequate records, it's just a matter of re-arranging the figures you've already recorded.

You then need to decide how much to pay yourself under PAYE. The returns are all submitted back to HMRC automatically via their online PAYE system.

You can supplement your salary with dividends, and you can make company contributions to your personal pension scheme, which can be claimed as an expense.

That's a very bare-bones outline - I think a lot of the contractor forums have better / more detailed guidelines.

Many people prefer to use an accountant as they're frightened of getting things wrong - I tried this and despite him charging me £750 per year (this was in the late 90s, it would be more now) he ended up submitting my accounts late, and I was fined.

After that I decided to save myself his fee and fired him. I've never regretted it. OK accountants doubtless know some of the more creative dodges to save a bit of tax, but how useful that is for a simple contractor business is arguable.

MyMissC3

Ahahah I have had some unsuccesful stories with accountants myself.


I will study the matter as thoroughly as I can. It sounds like a quite doable thing for a one-man business.


Thank you very much for your advice, I much appreciate it

ThemeOne wrote: »

Many people prefer to use an accountant as they're frightened of getting things wrong - I tried this and despite him charging me £750 per year (this was in the late 90s, it would be more now) he ended up submitting my accounts late, and I was fined.

After that I decided to save myself his fee and fired him. I've never regretted it. OK accountants doubtless know some of the more creative dodges to save a bit of tax, but how useful that is for a simple contractor business is arguable.

Latazza

ThemeOne wrote: »

I agree. Personally I would ditch the umbrella company. They are by no means essential to the process, and can complicate things more being an extra link in the chain.

It's not difficult or expensive to setup a limited company, nor is it massively difficult to do your own ltd co accounts and tax returns, assuming you fall into the small companies turnover threshold.

I think this experience will have also shown you that the relationship with clients as a freelance or contractor can be quite different from that between employee and employer.

Eh, What a crock this is. If he is working for an umbrella he gets paid regardless dependant whether he is opted in or out. If he was LTD in this scenario he wouldnt have been paid as yet and would have had to go through the dunning process all the way to MCOL. The fact that he is wwith an umbrella here is not complicating the chain at all. He submits his invoice to them and gets paid.

OP there are pros and cons of going ltd or umbrella, suggest you seek them out and decide what you are comfortable with. Can you afford to go ltd and two contracts of 2 months each dont pay you?

Also dependant on the work you do, you will need to make sure these contracts are watertight in terms of the work they request, project milestones etc and get them signed off. Would also recommend popping over to http://forums.contractoruk.com/ for any further advice and read up on the many threads there. You can also get yourself covered for clients/agencies that dont pay and have your contracts examined.

getmore4less

Umbrellas terms will likely mean no pay out till they get the money.

I can dig mine out from a previous contract.

...
These were the payment terms.

Min wage paid 8 weeks in arrears or 7 days after payment.
(other income generated paid on a variable basis)
Various other clauses limiting their liability.
Various other clauses to try to make it an employment contract acceptable to HMRC.


Would be surprised if any umbrella exposes themselves to any more than min wage and would shut the contract down if the first payment does not materialize.

ThemeOne

Latazza wrote: »

If he is working for an umbrella he gets paid regardless dependant whether he is opted in or out.

That may be the theory (though not in my experience) and umbrellas claim to give you all kinds of advantages, but in practice I don't know any experienced freelancer or contractor who uses them because they just represent another level of complication.

The agencies get kick-backs for recommending them and ultimately they're just one of a long list of parasites trying to get their hands on your hard earned money for doing very little in return.

awolo1

avoid umbrella companies at all costs. Just do it yourself. Incorporate a Ltd co, you can do it yourself. I do it this way and save costs.

Latazza

getmore4less wrote: »

Umbrellas terms will likely mean no pay out till they get the money.

I can dig mine out from a previous contract.

...
These were the payment terms.

Min wage paid 8 weeks in arrears or 7 days after payment.
(other income generated paid on a variable basis)
Various other clauses limiting their liability.
Various other clauses to try to make it an employment contract acceptable to HMRC.


Would be surprised if any umbrella exposes themselves to any more than min wage and would shut the contract down if the first payment does not materialize.

Doesnt sound like an umbrella to me, all reputable umbrellas pay on receipt of funds.

Latazza

ThemeOne wrote: »

That may be the theory (though not in my experience) and umbrellas claim to give you all kinds of advantages, but in practice I don't know any experienced freelancer or contractor who uses them because they just represent another level of complication.

The agencies get kick-backs for recommending them and ultimately they're just one of a long list of parasites trying to get their hands on your hard earned money for doing very little in return.

Well may not be in your experience but what has happened here for the OP and in my experience seeing many similar cases.

Most experienced contractor will be contracting on a regular basis and therein would be using a ltd company for reasons we have all mentioned earlier. For new contractors and those that might do ad hoc contracts then a Umbrella is workable. As for agency kickbacks yeah I agree, !!!!es me right off when a agency tries to say they only work from a PSL.