Any accountants around?

vickster

Legendary Member
I'm thinking of quitting my current job and going back to my old company who have made me an offer. However, I'm wondering whether it might be worth talking to them about going back on a fixed term contract if this is an option. On the face of it, this looks rather more lucrative (50% more gross income). I realise that there are pros and cons to both, but don't fully understand how it all works on a practical level with HMRC etc.

I quite fancy being able to just do a job, get paid, go home without all the internal politics that inevitably goes with a seniorish role! Also, I know lots of people at other companies in the same field so could move around and try different companies etc. The variety would probably be good for me at this stage in my career/life. I've no one to support other than myself

Anybody out there have experience of such matters either from a finance perspective or because it's what you do

Thanks in advance
 

twentysix by twentyfive

Clinging on tightly
Location
Over the Hill
Err - current job and possible new job?

For what it's worth - do what makes you happy
 

PK99

Legendary Member
Location
SW19
Tis what Mrs PK99 now does, having been made redundant last year and wanting, like you, to be rid of the ongoing responsibilities and politics of a permanent role.

Issues, in no particular order:
Sole trader. Personal services ltd company or through an Umbrella company. All have pluses and minuses.
IR35 - the tax issue here is key. If the job looks, walks and quacks like a permanent job, you will be taxed as such and all the benefits of contracting evaporate.
Headline Day rate looks very good, but you need to factor in Days off (wife is at a funeral today = no pay), no sick leave, no holiday pay, gaps between contracts.
Cost of setting up and running ltd company vs cost of operating through an Umbrella company.
Commuting costs tax deductible (wife cycles and claims HMRC approved mileage from her service company)
your choice of days off and holidays - we are taking 6/7 weeks in the summer between contracts.
Close lap top walk out off office and forget work.
No staff appraisals.
No notice period if no longer needed.
Freedom to walk away.
Freedom to say what need saying without worrying about politics and career or next months appraisal.

It helps to be financially stable without the need for certainty of regular income

Find a local small trader accountant and book an hour - they will normally give that for free in the hope of getting your business. But do google around beforehand to get best value.
 

accountantpete

Legendary Member
Photo Winner
I'm not sure you mean fixed term contract- ie you become an employee for x number of years and then stop.

Do you mean becoming self-employed and then working for the company?

If so:

1) You can become self-employed, do the work and invoice the company at a rate to be agreed. You then file annual accounts with HMRC and pay the tax thats due.

The only problem is that strictly HMRC frown on this as you are just acting as an employee to all intents and purposes and they can challenge such an arrangement -see IR35. Most Companies are aware of this and will only deal with you if you are acting through your own Limited Company. So

2) Form a Limited Company and invoice the company through this vehicle. There are strict rules on what you can and cannot do as a Ltd company but basically you pay an accountant a grand a year for the accounts and advice and then they arrange for your pay from the company to be just under the personal allowances rate and declare a dividend to cover the rest of your wages so effectively you only pay tax at the small company's rate on the amount of the dividend.
 
OP
vickster

vickster

Legendary Member
I'm not sure you mean fixed term contract- ie you become an employee for x number of years and then stop.

Do you mean becoming self-employed and then working for the company?

If so:

1) You can become self-employed, do the work and invoice the company at a rate to be agreed. You then file annual accounts with HMRC and pay the tax thats due.

The only problem is that strictly HMRC frown on this as you are just acting as an employee to all intents and purposes and they can challenge such an arrangement -see IR35. Most Companies are aware of this and will only deal with you if you are acting through your own Limited Company. So

2) Form a Limited Company and invoice the company through this vehicle. There are strict rules on what you can and cannot do as a Ltd company but basically you pay an accountant a grand a year for the accounts and advice and then they arrange for your pay from the company to be just under the personal allowances rate and declare a dividend to cover the rest of your wages so effectively you only pay tax at the small company's rate on the amount of the dividend.

Due to the accountants fees this is only viable if you earn £25k+ a year.
Thanks, yes I would agree to work for them for a given period of time, six months for example. So not a permanent member of staff but employed for a pre agreed period of time. Paid a daily rate rather than an annual salary
 

PK99

Legendary Member
Location
SW19
Thanks, yes I would agree to work for them for a given period of time, six months for example. So not a permanent member of staff but employed for a pre agreed period of time. Paid a daily rate rather than an annual salary
That can still fall on the wrong side of IR35 - my understanding is that the revenue look very carefully at people going back to old company to do the same job they used to do. IT people were notorious for resigning a permanent job, starting a contract the next day to do the same work at the same desk and paying a fraction of the tax. IR35 is designed to catch and stop that.
 
OP
vickster

vickster

Legendary Member
Yeah I can understand that. I'm not looking to fiddle the tax, I just like the idea of flexibility to move around. In my business, market research, the skills are transferable and I fancy the potential to try different areas, Pharma, FMCG, retail, automotive, whatever. That's hard to do when permanent (my area is specialised and as a result better paid than some)

I have a small mortgage, no dependants and money in the bank. I could just do with doing a job without all the management stuff on top
 

PK99

Legendary Member
Location
SW19
Yeah I can understand that. I'm not looking to fiddle the tax, I just like the idea of flexibility to move around. In my business, market research, the skills are transferable and I fancy the potential to try different areas, Pharma, FMCG, retail, automotive, whatever. That's hard to do when permanent (my area is specialised and as a result better paid than some)

I have a small mortgage, no dependants and money in the bank. I could just do with doing a job without all the management stuff on top
Ah, that line of work could mean that you could do a number of contracts at the same time of a number of agencies = definitely outside IR35. The issue with IR 35 is that it can be triggered retrospectively and the penalty is up to 100% of the tax "avoided" plus the tax due (IIRC)
 
OP
vickster

vickster

Legendary Member
I think I'd be looking for 4-5 days a week in office rather than being completely freelance, however I could do that if needed for a little while. Can easily work from home as neexed
 

fossyant

Ride It Like You Stole It!
Location
South Manchester
If you are employed in both posts, then not much difference. Legally you are entitled to Pension at a point as a fixed term person, but you need to check it out.

You need to elaborate a bit more about each post. Are there any other differneces in your terms ? We don't need money, but it's key on terms. If the fixed term is treated as self employed then that's different.
 
OP
vickster

vickster

Legendary Member
I've not even broached the issue with my ex boss. We had an initial discussion on Friday about a return to the same role (a sticking point for me and my ego). I dont know whether the other benefits, like amount of holiday would be the same etc. I probabiy need to talk with her again, it wasn't the longest chat. Money is not actually the key point of discussion or reason for considering the contracting thing, more time flexibility and to get some head space :smile:
 

screenman

Legendary Member
I have been self employed 39 years, I have often wished that I had a job. Difference for me is that I have lots of customers and each and every one of them is my boss, no I cannot just take time off, I do have to work certain hours, I do not get sick pay, holiday pay, pension contributions or work mates. Also still at my desk and just about to pay the accountant, who I know is not at his as he is not self employed.
 
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vickster

vickster

Legendary Member
Bit of a resurrection on this. I had another catch up with my old boss, and essentially they are offering freelance as a day rate or a fixed term contract with some benefits. The FD will work up some numbers next week - apparently the company has a strong preference for fixed term contracts over day rates. I have said that either way I'd want commitment on a length of time, be it 6 or 12 months, which shouldn't be an issue

It is all confusing, but is quite appealing from a flexibility point of view. I have lots of ex colleagues now at different agencies, I doubt I'd struggle to find contracts elsewhere given my background and experience in quite a specialist field ultimately

@PK99 's points above certainly appeal

  • Close lap top walk out off office and forget work.
  • No staff appraisals.
  • No notice period if no longer needed.
  • Freedom to walk away.
  • Freedom to say what need saying without worrying about politics and career or next months appraisal.
If it doesn't work out, there's always permanent jobs, most always at the old company!
 

PK99

Legendary Member
Location
SW19
Bit of a resurrection on this. I had another catch up with my old boss, and essentially they are offering freelance as a day rate or a fixed term contract with some benefits. The FD will work up some numbers next week - apparently the company has a strong preference for fixed term contracts over day rates. I have said that either way I'd want commitment on a length of time, be it 6 or 12 months, which shouldn't be an issue

It is all confusing, but is quite appealing from a flexibility point of view. I have lots of ex colleagues now at different agencies, I doubt I'd struggle to find contracts elsewhere given my background and experience in quite a specialist field ultimately

@PK99 's points above certainly appeal

  • Close lap top walk out off office and forget work.
  • No staff appraisals.
  • No notice period if no longer needed.
  • Freedom to walk away.
  • Freedom to say what need saying without worrying about politics and career or next months appraisal.
If it doesn't work out, there's always permanent jobs, most always at the old company!
If you go down the limited company route (the beneficial tax treatment is there because there are uncertainties nd risks involved) you would need to be very careful if there are benefits attached in addition to the day rate, that begins to quack like an employee rather than contractor. If you go down the contractor/limited company route and are then caught by ir35, the tax penalties are severe.
 
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