What should I do with new consultancy job

frogg

Hi,

I’m looking for some advice; I’ve been not-working for a number of years (my choice) but I’ve been asked to do some consultancy for (initially) 6 months. The contract specifically says 6 months, but there is a high probability of it being extended. The contract specifically states I’m responsible for any tax (I assume VAT is not included here)

I am likely to earn over the VAT threashold hold within this six months.

So my questions are:

How should I organise? As a limited company, sole trader or use an umbrella company?

Should I register for VAT immediately or wait until I’m over the threashold?

As I will be working for only 1 company. And I cant suggest a replacement if I’m Ill, I’m certain I’ll Fall foul of the IR35 rules - so i’d Want to make sure that the tax man is happy with me and I’m not trying to get out of paying my fair share of tax.

Thanks in advance for your advice.

trailingspouse

You need to speak to an accountant - there really isn't a one-size-fits-all solution, and what is best for you depends on lots of variables.
Many organisations won't use consultants who aren't operating as limiteds, but it's a serious step to take. Many accountants will give you 30 minutes of their time free of charge, so prepare your questions in advance and make the most of it.

frogg

Thanks, I was hoping to get some advice here.

trailingspouse

Yes, I know!


And the advice is - speak to an accountant!


I've been running a limited providing consultants to the pharma industry for 8 years. We only take on people who are themselves limited companies.



It needs a lot of thinking about.

frogg

Thank you, Can I have other opinions please.

cmattingly

The first thing to do is determine your IR35 status. There are many reputable sites that can assist you with this. Be honest with this process and don't try and gear an assessment to Outside IR35.

If you are Outside, then talk to an accountant (who understands contracting) about your options and merits of setting up as a Limited company.

If you are Inside IR35, go Umbrella.

Be very wary of agency / end clients IR35 assessments, as they are financially motivated to assess you as Outside IR35. Most will try and pass all the risks (tax included) onto you through the contract.

In terms of Accountants or Umbrellas, this industry is full of cowboys, so be very aware and make sure you understand what is going on. You should look for either FCSA / Professional Passport Accredited Members and even then double check their credentials, as there are plenty of scam merchants who pretend to be everything and promise you the world.

Take home should be anywhere from 55-70% depending on your day rate, benefits and expenses. Given your original message, you look like a higher earner, so you are likely to be at the lower to middle end of that.

Certainly anything higher than 70% is highly likely to be dodgy, so avoid. HMRC are turning the screws on this industry and the last thing you want is an tax enquiry.

Comms69

frogg wrote: »

Thank you, Can I have other opinions please.

Sure, here's an opinion which is highly irrelevant and factually incorrect, but it's clearly what you wanted to hear....


These are complicated area of law. An accountant can see the whole picture, we see only a fraction of the relevant information

motorguy

cmattingly wrote: »

The first thing to do is determine your IR35 status. There are many reputable sites that can assist you with this. Be honest with this process and don't try and gear an assessment to Outside IR35.

If you are Outside, then talk to an accountant (who understands contracting) about your options and merits of setting up as a Limited company.

If you are Inside IR35, go Umbrella.

Be very wary of agency / end clients IR35 assessments, as they are financially motivated to assess you as Outside IR35. Most will try and pass all the risks (tax included) onto you through the contract.

In terms of Accountants or Umbrellas, this industry is full of cowboys, so be very aware and make sure you understand what is going on. You should look for either FCSA / Professional Passport Accredited Members and even then double check their credentials, as there are plenty of scam merchants who pretend to be everything and promise you the world.

Take home should be anywhere from 55-70% depending on your day rate, benefits and expenses. Given your original message, you look like a higher earner, so you are likely to be at the lower to middle end of that.

Certainly anything higher than 70% is highly likely to be dodgy, so avoid. HMRC are turning the screws on this industry and the last thing you want is an tax enquiry.

+1

Thats wholly it. There are lots of online status checkers including a (skewed) one from HMRC themselves.

You can pay someone like QDOS to validate your contract for you. If they deem it outside IR35 they will stand over that if you get an inspection by HMRC.

https://www.qdoscontractor.com/news/2018/08/29/determining-your-ir35-status

And you're bang on with the 55%-70% from the day rate if inside IR35.

What kicks it in the head are :-

• Employers National Insurance (13.8%)
  
• Apprenticeship Levy (0.5%)
• Employees National Insurance
• PAYE

A lot of people dont realise they must pay the first two.

If its inside IR35 i'd budget to receive 55% of day rate as net pay and see how the figures stack up.

Outside IR35 and through a LTD co, then you'd probably be able to keep 75% of your day rate after taxes, accountancy fees, etc.

motorguy

Comms69 wrote: »

Sure, here's an opinion which is highly irrelevant and factually incorrect, but it's clearly what you wanted to hear....


These are complicated area of law. An accountant can see the whole picture, we see only a fraction of the relevant information

"an" Accountant may not be aware of the nuances of IR35. They will often just see black or white, not the many shades of grey / interpretation.

If in doubt i'd use QDOS - its not a big amount of money in the grand scheme of things - to review the contract and make a decision. They will stand over their decision and pay your legal costs / represent you if they get it wrong. An accountant wont. Also an accountant will charge you for his time anyway, so not much of a saving to be made.

motorguy

O/P - have a look around here....

https://www.contractoruk.com/forums/

Theres a wealth of knowledge.

trailingspouse

I'll modify my original advice - do lots of research, and then speak to an accountant...


Don't make any decisions until you understand IR35, VAT, RTI, NI, dividends, and the responsibilities that come with running a limited company. Once you go down that route, you're playing with the big boys - and saying you didn't understand something is absolutely no excuse when the proverbial hits the fan. You'll need an accountant anyway if you're going to do that, so you might as well start shopping around now.