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Becoming a contractor programmer in the UK

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Re: Becoming a contractor programmer in the UK

#41

Post by boothead »

zimpenfish wrote: post #40
boothead wrote: post #26

Earlier quoted context omitted.

You disagree with following the letter of the law and taking home extra thousands of pounds per year? Personally my attitude it that I'll apply whatever optimizations my accountant says I can without being too creative :-) Also, some companies that masquerade as umbrellas are doing some pretty shady things. If they promise some un-feasibly large percentage of take home pay (over 80%) they're probably doing some dodgy…

It's a moral/ethical stance, I guess - tax funds social infrastructure and I think we need more of that. Good point about the shady "base pay + loan you never* have to repay" shenanigans - I suspect HMRC will be onto them soon enough though.

I agree that we do need more of that. I balk at the bombastic talk from the government, (who make the laws in the first place) that it's somehow immoral to optimize your tax affairs. I would much rather see them put simpler legislation in place that means that large companies pay their "fair" share of tax, and tax is easier to deal with for small companies. If I ended up paying a bit more tax under that regime and the current large tax avoiders ended up paying a lot more that could be put towards social infrastructure, that would make me happy.

Re: Becoming a contractor programmer in the UK

#43

Post by Nursie »

zimpenfish wrote: post #40
boothead wrote: post #26

Earlier quoted context omitted.

You disagree with following the letter of the law and taking home extra thousands of pounds per year? Personally my attitude it that I'll apply whatever optimizations my accountant says I can without being too creative :-) Also, some companies that masquerade as umbrellas are doing some pretty shady things. If they promise some un-feasibly large percentage of take home pay (over 80%) they're probably doing some dodgy…

It's a moral/ethical stance, I guess - tax funds social infrastructure and I think we need more of that. Good point about the shady "base pay + loan you never* have to repay" shenanigans - I suspect HMRC will be onto them soon enough though.

I get calls about these every so often, people who sound lot like recruiters but give away the fact they're selling dodgy schemes after a while.

"We can enable you to take home more than 90%!"

"Err, Right, how can you do that then?"

"By structuring your profits through our scheme! We use a combination of tax-haven bank accounts and directors..."

"I'll stop you right there, isn't this what Jimmy Carr off the tv just got spanked for? No thanks, sounds highly unethical to me."

That said I do do things the 'usual' way and pay myself a small salary, with the rest coming in as share dividends. I'm not sure exactly what proportion I pay in taxes vs a salaried employee, but it's non negligible - 20% Corporation tax on all profits (before I get paid), and 25% dividend tax on anything I get paid over the Higher Rate threshold.

Re: Becoming a contractor programmer in the UK

#44

Post by new299 »

Nursie wrote: post #15
new299 wrote: post #7

It's probably worth noting that you only need to register for VAT if you're expecting to make > 82KGBP in VATable sales per year. If you're contracting is mostly remote and outside the UK, you don't need to register, or charge VAT (as I understand it).

There is a financial incentive to do so, you charge VAT at 20% and you pay it at 14.5%. I.E. I do £100 of work, I charge £120 and pay the government 0.145 * 120 = £17.4 Further, for the first year, you get to pay at 13.5%, £16.20 in the example, effectively boosting company revenue by 3.8% for the first year, and 2.6% thereafter.

Specifically I was talking about the situation where your clients are outside the EU and you wouldn't be charging them VAT anyway.

If you are working with UK clients I'd imagine it's most likely in your interests to be VAT registered.

Re: Becoming a contractor programmer in the UK

#45

Post by ticksoft »

I notice that business bank accounts are always mentioned in these sorts of lists. To me they seem like an extra overhead for no reason. You essentially have to ask a bank's permission and pay them just so they can accept your payments? So weird.

I could understand it if you had a business with employees and you sold products on a daily basis with loads of transactions, or if you plan to get into debt... but for invoicing someone every month? Personal account seems fine, and I'm sure people have several of them already.

Re: Becoming a contractor programmer in the UK

#46

Post by aaren »

wumbernang wrote: post #23
rossriley wrote: post #10

In terms of the recruiters section, whilst I appreciate you may not have had a good experience, this is probably the way a lot of people get contracting work, at least until you have a fairly big network of contacts. I'd be more interested in knowing what agencies do have a good reputation / good developer experience along with the note to beware of the cowboys.

They're all pretty good as an ex-contractor in the UK. Even getting paid is quite easy if you sub your timesheets quickly. The killer is simply making sure that if you do the entire 6 month contract in 2 weeks that you still get paid for the rest or have a massive termination fee in the contract. The agents don't care; they pass all costs on.

Any more specific advice on enforcing payment if you deliver the contract early?

Re: Becoming a contractor programmer in the UK

#47

Post by new299 »

Nursie wrote: post #17
tonyedgecombe wrote: post #14

Earlier quoted context omitted.

On the other hand if you do register then you can claim back the VAT on any expenses.

Not quite that simple, unfortunately. You can only claim it back on large expenditures if you're on the fixed-rate scheme (I think that's what it's called). Computer equipment is the prime one, but it has to be over £2K in a single spend. AFAICT most VAT on everyday expenses doesn't come back to you. OTOH you can charge the company for your lunch every day, which means you get that paid for before corporation tax, in…

> OTOH you can charge the company for your lunch every day, which means you get that paid for before corporation tax, income tax or anything else...

Hmmm. I think my last accountant told me things like lunch every day were not billable to the company. But they weren't very good accountants. :)

I didn't realise it was only spends over 2K that could be claimed back. Do you have a reference for that?

Overall, VAT registration didn't seem to offer me much (given that my clients are all outside the UK) but I'm curious to know if there are circumstances where it might make sense.

Re: Becoming a contractor programmer in the UK

#48

Post by Nursie »

ticksoft wrote: post #45

I notice that business bank accounts are always mentioned in these sorts of lists. To me they seem like an extra overhead for no reason. You essentially have to ask a bank's permission and pay them just so they can accept your payments? So weird. I could understand it if you had a business with employees and you sold products on a daily basis with loads of transactions, or if you plan to get into debt... but for invo…

The business is a separate legal entity to you. A business bank account clearly demarks what is your money and what is not. I wouldn't be at all surprised if it's a requirement to work with a lot of companies, if not a legal requirement for working with a ltd company.

Business bank accounts can be had for free - most contractor-friendly accountants have an arrangement with Cater-Allen, for instance.

Re: Becoming a contractor programmer in the UK

#49

Post by monkeyprojects »

As a contractor of many years standing (I started contracting when the internet appeared in 1994) I started reading the article hoping it was correct and finished it with my fingers covering my eyes in fear. Sadly I don't have time to correct many of the misconceptions and total inaccuracies it contains.

Its a shame really as good articles are hard to find and I'm sure many americans would find the differences between the UK and US markets very interesting...

However if you really want to be a contractor https://www.ipse.co.uk/advice/articles/starting-out has a lot of advice on starting out.

http://www.contractoruk.com/first_timers/ also has a lot of advice although as a new starter I would avoid the general part of their forum...

And there is a reason why people use limited companies. You can work as a self employed person but many clients stop when HMRC come knocking while agencies have been legally barred from employing people as self employed since the 1970s...

Re: Becoming a contractor programmer in the UK

#50

Post by framp »

ticksoft wrote: post #45

I notice that business bank accounts are always mentioned in these sorts of lists. To me they seem like an extra overhead for no reason. You essentially have to ask a bank's permission and pay them just so they can accept your payments? So weird. I could understand it if you had a business with employees and you sold products on a daily basis with loads of transactions, or if you plan to get into debt... but for invo…

Agree, after all it's just a way to keep expenses and earnings separated from your everyday transactions.

They are not required by law (here in UK) but they're suggested by pretty much every accountant out there. I don't use a business account when working for myself, but I do use one for a company I've founded with other people.

I'd say it's more useful when it's not a one-man ltd.

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