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Becoming a contractor programmer in the UK

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Re: Becoming a contractor programmer in the UK

#151
post #28

> The fixed rate VAT does not let you reclaim VAT, but you pay a lower rate than you charge your clients. So if you're a developer contractor you'll be adding 20% VAT to your client invoices, but only pay 14.5% to HMRC, keeping the remaining 5.5% to the business. This is not correct. The way the flat rate VAT scheme works is you add VAT to your bill, then pay 14.5% of your "flat rate turnover" to HMRC. Flat rate turn…

It also doesn't mention that you don't need to register for VAT until you have a turnover of £82k.

You don't have to,but you might want to - if you want to do any business with EU companies you have to give them your VAT number to be properly paid and invoiced. My company doesn't make anywhere near 82k,but it has to be VAT-registered for this very reason.

Re: Becoming a contractor programmer in the UK

#152

Earlier quoted context omitted.

Just out of interest, how? For a developer, £100k+ as a contractor is not particularly difficult, but as an employee this would be rare, no?

I agree; unless working for google or something, the ceiling for a super-duper dev at hiring time seems to be around 65k -- perhaps a bit more if you stay and negotiate well, but I topped up at 75k before I became a contractor. Now, this company tax year, I invoiced 120k ex-vat so far, managed to buy a rather large amount of kit on the company (like, that 4k£ dream workstation..) and I finally have the feeling I'm ge…

>the ceiling for a super-duper dev at hiring time seems to be around 65k

Not in London. Don't get me wrong, £65k will get you a decent developer but £60k is the starting point for good quality developers in London right now. I'm currently hiring a senior iOS developer and our aim is to hire someone around the £70k mark but I honestly think we'll need to pay more to get the calibre we need.

I've spent the last few years hiring developers in London and I also help run the HN London meet-up and based on first-hand experience along with the huge number of developers I've met through HN London, I can assure you that I'm not exaggerating the figures.

Re: Becoming a contractor programmer in the UK

#153
post #152

Earlier quoted context omitted.

I agree; unless working for google or something, the ceiling for a super-duper dev at hiring time seems to be around 65k -- perhaps a bit more if you stay and negotiate well, but I topped up at 75k before I became a contractor. Now, this company tax year, I invoiced 120k ex-vat so far, managed to buy a rather large amount of kit on the company (like, that 4k£ dream workstation..) and I finally have the feeling I'm ge…

>the ceiling for a super-duper dev at hiring time seems to be around 65k Not in London. Don't get me wrong, £65k will get you a decent developer but £60k is the starting point for good quality developers in London right now. I'm currently hiring a senior iOS developer and our aim is to hire someone around the £70k mark but I honestly think we'll need to pay more to get the calibre we need. I've spent the last few yea…

Oh I'm sure in London it's likely to be the case, but I'm around the Thames Valley here. Just the train ticket to London offsets any gain I would have made tho :-)

Re: Becoming a contractor programmer in the UK

#154

> The fixed rate VAT does not let you reclaim VAT, but you pay a lower rate than you charge your clients. So if you're a developer contractor you'll be adding 20% VAT to your client invoices, but only pay 14.5% to HMRC, keeping the remaining 5.5% to the business. This is not correct. The way the flat rate VAT scheme works is you add VAT to your bill, then pay 14.5% of your "flat rate turnover" to HMRC. Flat rate turn…

BTW there is a HUGE catch with that fixed rate system. It more or less prevents you from doing any work overseas (for a company that doesn't have a UK office). The reason is that the work you do oversea would have to be invoiced as /zero rate VAT/ -- however you will still be liable to pay back 13.5 (or 14.5 after a year) VAT from what you invoiced. This is cruel, but there is no way around it. The bottom line is tha…

Strange. In France you don't have to contribute VAT for the services you invoiced abroad (well, outside the EU. Inside the EU is another matter). You don't receive it, you don't pay it.

It seems absurd to make a company pay back a VAT amount that it has not perceived.

Re: Becoming a contractor programmer in the UK

#155
Something called entrepreneurs' relief is also nice for those with ltds or tech startups in the UK. It allows you to save massively on CG tax (10% instead of the normal rate of 18% or 28%) when selling assets or liquidating the business.

https://www.gov.uk/entrepreneurs-relief

Re: Becoming a contractor programmer in the UK

#156

Earlier quoted context omitted.

BTW there is a HUGE catch with that fixed rate system. It more or less prevents you from doing any work overseas (for a company that doesn't have a UK office). The reason is that the work you do oversea would have to be invoiced as /zero rate VAT/ -- however you will still be liable to pay back 13.5 (or 14.5 after a year) VAT from what you invoiced. This is cruel, but there is no way around it. The bottom line is tha…

Strange. In France you don't have to contribute VAT for the services you invoiced abroad (well, outside the EU. Inside the EU is another matter). You don't receive it, you don't pay it. It seems absurd to make a company pay back a VAT amount that it has not perceived.

I know, but I really went over with a comb on the HRMC website, asked them, asked all around and everyone agreed. These transactions are 'zero rated' -- therefore, you need to pay 1[34].5% VAT back... Stupid, but the rule is clear.

Incredibly bizarre that as a small company, you try to 'export' and thus bring cash back into the economy, and are in fact actively prevented from doing so when on that scheme.

Re: Becoming a contractor programmer in the UK

#157
post #144
post #134

Earlier quoted context omitted.

Good advice. I contracted for about 10 years in the UK, finance mostly. Had my own Ltd, took home about 65% of my day rate. No funny business, happened to move clients about every two years which helped for IR35. Nothing more complicated than that. Yes that means I paid 35% tax, which is pretty much the equivalent I would have paid if I could have ever found anyone who would pay me my day rate as a salary. 1. I belie…

> Had my own Ltd, took home about 65% of my day rate. No funny business What do you define as "no funny business"? Just curious what you mean by that. I operate a Ltd, take a low salary and the rest dividends (as recommended by my accountant), claim the odd lunch and transport as expenses and that is about it, which I think is fine (both legally and morally) as at the end of the day, I am operating as a company rathe…

My approach was exactly the same as yours and proportionally I paid roughly (within 2-3%) as much tax as I would if I had earned the same amount as a full time employee. About the only thing you are 'dodging' with a low salary as a Director of a Ltd. company and dividends is NIC contributions, which would likely be in the order of £2-3000/year.

The main advantages as I saw them to contacting were:

- day rate roughly twice what I would have earned salary - honest, mercenary working relationship

What do I mean by funny business? I worked in the City of London for a decade, contracting at some fantastic places and with some great colleagues. I would say I was literally the only person I know (of say, 20 colleagues who's affairs I was aware of) who paid tax the entire time. Most never paid any.

An absolute majority of my colleagues entered into the following arrangement, which will be completely familiar to anyone who worked as a contractor in the UK finance sector between 2000/2010:

1. Invoice via an umbrella company which is based offshore 2. Umbrella preferably based inside Europe outside the EU, Northern Cyprus was very common 3. Umbrella company is owned by a trust 4. As a beneficiary of the trust you will be paid a 'loan' roughly every six weeks, since that's not a salary, right? 5. Loans are not taxable. 6. HMRC completely, totally aware of these arrangements. 7. Figure it out, everyone not on PAYE was in on it.

Via this arrangement you can often get 85%+ of your date rate returned to you as 'loans'. I know people who were on these schemes for a decade and dodged in the hundreds of thousands of pounds in personal income tax.

HMRC has sent letters offering to settle cases with 16,000 people, of the people I know I assume they got caught with their hand in the cookie jar for a couple of years, but overall are supremely better off for never having paid tax for the most productive times of their lives.

These are people who often came through state education, drive on state roads, use public services, in the UK which has a rich left/socialist history and have absolutely compunction whatsoever in shirking all and every responsibility they have to contribute in any way.

And as some people in this thread comment - "well, if I wanted to I could write a check to a charity". I heard that so many times from colleagues who had children at local schools, born in the NHS, earning £150k a year, for ten years, who had never pay a cent in tax.

Enjoy being poor plebs, tax is optional. I chose to pay mine.

In the end, some of these people are still my closest friends, we just have very different principles.

I'm relatively wealth in my peer group (disregarding the non-tax-payers who I'm clearly behind). I could be wealthier, but I'm not a fucking parasite.

Re: Becoming a contractor programmer in the UK

#158

What this does not touch on is be prepared to be a grease monkey, roll your sleeves up and get your hands dirty and most importantly learn how to make recommendations but not take it personally if they’re ignored for seemingly irrational reasons. Organisational dysfunction is the norm, not the exception. Broadly speaking I’ve seen most of my work fall into these categories: a) Help we need someone competent to aid us…

This is incredibly accurate, and applies equally well to contracting in other roles than as a developer.

Re: Becoming a contractor programmer in the UK

#159
post #148
post #135

Earlier quoted context omitted.

London is a world of her own, my advice relates to her. The only thing you need to be an IT Contractor in London (other than some skills) is confidence. I worked a number of contracts over ten years in the finance sector in London. I never had a client pull a contract on me, I always left on my terms. On average I lasted two years until I moved on. Major Retail, Funds management, Investment banking was my progression…

Can you be more specific about the useful skills? Like a list, out of which you need 2 or 3. Would be good to know what specifically companies want you to be confident about :)

Are you a passable Java programmer? Can you speak english to a business level? Can you wear a suit?

Congratulations, you're qualified to work as a contract programmer at a bank in the City of London.

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