Want to start contracting need help!!!

Hi

I recently obtained my HSMP visa and now I want to start contracting in the UK. I am an IT consultant.

I have read through various posts and guides but I am not sure how to start. Can anyone here please tell me

1. What is the difference between an Ubmrella company and a Ltd. Company and which one is better?

2. Would I have to leave my current job (in the UK) before I can form a company?

3. A list of trustworthy accountants which you might have used in the past and who can be relied upon. Since I am absolutely new in this field I do not want to start with an unknown lawyer/accountant firm.

4. If possible a brief summary of the process ie. where to begin (forming a company or first looking for a contract), when and how to form a company etc.

I would be grateful for all help.

Regards
Nikhil

nikhil wrote:Hi

I recently obtained my HSMP visa and now I want to start contracting in the UK. I am an IT consultant.

I have read through various posts and guides but I am not sure how to start. Can anyone here please tell me

1. What is the difference between an Ubmrella company and a Ltd. Company and which one is better?

2. Would I have to leave my current job (in the UK) before I can form a company?

3. A list of trustworthy accountants which you might have used in the past and who can be relied upon. Since I am absolutely new in this field I do not want to start with an unknown lawyer/accountant firm.

4. If possible a brief summary of the process ie. where to begin (forming a company or first looking for a contract), when and how to form a company etc.

I would be grateful for all help.

Regards
Nikhil

No Longer Limited works for me, u become a partner in Limited Partnership, avoids all the dividend abuse the Chancellor is gunning for....


My net to gross is 75%, I don't think u can get much more without becoming a prime target for the Inland Revenue Investigation People. Some of the contractors I work with reckon they'e keeping 83% of gross but I can't see that kepping in the rules...

PM me if u want.

Wanderer wrote:

nikhil wrote:Hi

I recently obtained my HSMP visa and now I want to start contracting in the UK. I am an IT consultant.

I have read through various posts and guides but I am not sure how to start. Can anyone here please tell me

1. What is the difference between an Ubmrella company and a Ltd. Company and which one is better?

2. Would I have to leave my current job (in the UK) before I can form a company?

3. A list of trustworthy accountants which you might have used in the past and who can be relied upon. Since I am absolutely new in this field I do not want to start with an unknown lawyer/accountant firm.

4. If possible a brief summary of the process ie. where to begin (forming a company or first looking for a contract), when and how to form a company etc.

I would be grateful for all help.

Regards
Nikhil

No Longer Limited works for me, u become a partner in Limited Partnership, avoids all the dividend abuse the Chancellor is gunning for....


My net to gross is 75%, I don't think u can get much more without becoming a prime target for the Inland Revenue Investigation People. Some of the contractors I work with reckon they'e keeping 83% of gross but I can't see that kepping in the rules...

PM me if u want.

Hi Wanderer,
Iam in the UK under HSMP visa since 2 weeks and have formed my own limited company with an accountant.I need to open a ank account for my company.Since iam new to the UK i have no utility bills on my name.Do you know of any banks who can open a business bank account without much hassle?
Cheers
AJ

Hi Wanderer alf1977!

thanks for the replies guys. Wanderer I do agree with you on that. I recently met a friend of mine who contracts for investment banks and he mentioned that if I can get a perm job offer of 80-90k base I should consider that seriously.

Actually I do have an option where a firm is willing to pay me around the same amount of base salary + paid leaves and standarad benefits. I am really not sure which way should I go. You said 73% is your gross to net, can you please tell me how many average days in an year do you bill?

alf1977 you are atleast a step ahead of me. I havent even formed a limited company yet! Congrats mate, let us stay in touch and see where this takes us

Hi Nikhil & all,

I am an accountant and provide end to end limited company services for contractors working in the UK.

After the introduction of the finance bill of 2006 the only viable and tax efficient option for the UK contractors is the limited company.

We provide the following service:
- Limited company registration, PAYE and VAT registration
- Management accounts for your company
- Monthly/Weekly Payroll
- Business bank account help
- year end returns - company, employers and corporation tax

Essentially all the services a freelancer needs. And at a very affordable prices.. Its just £974. Also we are accountants with years of experience in this field and not an Umbrella or Composite company operator.

If you are interested the please contact me.

Regards,
Sandeep!

nikhil wrote:Hi Wanderer alf1977!

tYou said 73% is your gross to net, can you please tell me how many average days in an year do you bill?

I'd have to work it out but prolly the same as a permie, but I do work a lot of weekends cos as everyone knows, contracting makes you greedy!

The LLP solution means you do pay tax at 40%, but save NI, no employers and employees at 8%. It does mean the 40% u earn, the more ur nett to gross drops.

However, as an ex-accountant and one who got caught out when all this IR35 and disguised employee stuff started, it is a bit dodgy to pay urself a dividend every month as per the lid route. Dividends are a reward for risk not a salary distribution so I'm not surprised the chancellor is gunning this method..

Well I incorporate a ltd and the paperwork is atrocious
if you go through an umbrella company, then they will do all the work for you.
However it is only worth it once you start working, doing it any earlier then you are just paying them for twiddling their thumbs

SYH wrote:Well I incorporate a ltd and the paperwork is atrocious
if you go through an umbrella company, then they will do all the work for you.
However it is only worth it once you start working, doing it any earlier then you are just paying them for twiddling their thumbs

Not with the LLP I use!

1. I do zero paperwork!

2. If i'm out of contract - no fee

3. I get a proper payslip with a huge salary on it - show it to the bank/mortgage people they come in their trousers....

Wanderer wrote: Not with the LLP I use!

.

Wanderer are you trying to advertise. That is no different than an umbrella company that does your work. My point is that if you yourself incorporate and do not use and pay some "agency" so to speak. Sure there are umbrellas who will act as a LTD company but I think the author of the thread not understanding all these nuances is trying to get the lay of the land of what is the difference and the difference is normally if you do ltd, you do it yourself and the paperwork and the payments, etc while an umbrella whom you pay will do it all for you, you may not save as much money but it might be worth the headache so your ltd company doesnt do anything more than the umbrella.

SYH wrote:

Wanderer wrote: Not with the LLP I use!

.

Wanderer are you trying to advertise. That is no different than an umbrella company that does your work. My point is that if you yourself incorporate and do not use and pay some "agency" so to speak. Sure there are umbrellas who will act as a LTD company but I think the author of the thread not understanding all these nuances is trying to get the lay of the land of what is the difference and the difference is normally if you do ltd, you do it yourself and the paperwork and the payments, etc while an umbrella whom you pay will do it all for you, you may not save as much money but it might be worth the headache so your ltd company doesnt do anything more than the umbrella.

I'm not advertising at all. I mentioned the name once and that was an error I admit but I didn't post links etc. I have no connection with them other than a satisfied customer.

The point I was making is that an LLP is NOT like an umbrella or limited since there is no dividend abuse.

I agree I'm prolly confusing the the OP so I'll shut up now.......

Sounds like somebody has sold you a wrong product, Wanderer.

40% Tax you pay with your LLP and there you sit on the same seat and stand same chance nothing less nothing more as far as IR35 is concerned when compared to somebody operating an umbrella company (composite/ PAYE) or LTD and perhaps saving bit more money than you.
If IR35 unfortunately hits you, the Revenue doesn’t care whether you paid 40% and stood inside IR35. What I mean is, there is no "guaranteed" way of beating this as it is open to interpretations.

So why not pay your self a minimum wage and take the rest on shares and of course share the same chance (join the club!) but pocket something better than giving 40% to G Brown.

I would recommend going for PCG membership or IR35 insurance (both around £300 a year) it's still worth than paying net tax at 40% - as it comes with peace of mind.
Of course there are so many other ways including the well known "recycling" technique every 2 years. Again, no guarantee.

Dividend distribution has nothing to do directly with IR35. For example, I can pay myself £0 as dividend for the entire year and enjoy seeing the cash assets building up in the bank , but can still get caught by IR35 next term.
The term you used "reward for risk", I have seen it before, and is something like a catch phrase used by those providers use to net their preys.
Forget monthly, you can pay yourself a dividend for everyday of trading; chancellor has no provision to gun you down on that.

Also, do LLPs get professional indemnity insurance? I know for certain that some contracting agents wont sign you unless you have a Ltd company (Paye/Umbrella/Own) for their legal reasons.

Not with the LLP I use!

1. I do zero paperwork!

2. If i'm out of contract - no fee

3. I get a proper payslip with a huge salary on it - show it to the bank/mortgage people they come in their trousers....

The LLP solution means you do pay tax at 40%, but save NI, no employers and employees at 8%. It does mean the 40% u earn, the more ur nett to gross drops.

However, as an ex-accountant and one who got caught out when all this IR35 and disguised employee stuff started, it is a bit dodgy to pay urself a dividend every month as per the lid route. Dividends are a reward for risk not a salary distribution so I'm not surprised the chancellor is gunning this method..

What I lose with LLP on 40% tax I save on NI, only paying 8% Class 4.

As a qualified accountant, which is what I was before moving into IT, I find the payment of dividends as if salary uncomfortable. Just worries me that's all.

Yes the LLP provides all the insurances, it operates almost like a firm of solicitors or accountants.

I have had a limited (still got it in fact) it's just that for me, I like the zero-maintenance and less-worry I have with this LLP, the guys at work are all currently stood in huddles discussing accountants, limiteds, not doing any work!

I'm aware of IR35 and to be honest we are all caught, we are all disguised employees and no amount of contractual wording will change that.

As regards being the sold the wrong product only time will tell, but my particular LLP doesn't tie me in at all so I can opt out same week. For me that says they have confidence in their service.

I've been contracting since 1994 I still feel that it's the use of dividends to avoid tax that the Chancellery objects to. Just my opinion. I remember the first time the gov tried to close the door in 2000-ish when IR35 first came out. AFAIK the IR hasn't won a single IR35 case so who knows what the risks are.

Yeah I argee with wanderer there are not many instances when inland revenue has caught fishes with their IR35 net.. but with the recent legislation the number of companies being incorporated has gone up exponentially. So, there would be many more oppurtunities for the IR (now HMRC) to cash on fishes and fry them too...

But don't fret.. Prevention is better than cure.. Hence its always be good to prepare rather than get caught off guard..

A few tips which I give to all my clients, which might be helpful for you guys too...

- Be ready to prove that you are a business. And not an individual using Limited company to avoid tax.. How ?? Have multiple clients at any one time.. [there are other options for you also.. only for my clients ]
- Contract needs attention.. Make sure you have a substitution clause.. Also if you your spouse or partner is the secretary try to get paperwork done through her.. Signing contracts, raising invoices, communication with agencies/clients..
- Get IR35, Paye and PI insurances.. if possible.
- And the most important thing... don't miss any HMRC deadline and make urselves visible..

Also.. You should switch off thinking like an employee and start thinking like a business...

Hope it helps.

- Sandeep!

I don't think this has caused a concern for anyone. CH will accept registration as long as they get money directly or from their channel partners. £30 to £90 for storing a few lines in electronic form! Don’t understand your theory of how HMRC will tap into this source for opportunities?

Enough discussed about IR35 and thank those trading and flourishing by selling solutions to those 'uncertainty' clauses of IR35.

What they (IR35 proofing businesses) don’t understand is selling solutions for tackling uncertainty itself is an uncertainty! , they hardly try to put this message across to their clients... what an irony!

but with the recent legislation the number of companies being incorporated has gone up exponentially. So, there would be many more oppurtunities for the IR (now HMRC) to cash on fishes and fry them too...

Don’t understand your theory of how HMRC will tap into this source for opportunities?

Well all it will take is yet another change of legislation to close this new LLP "loophole" that has suddenly appeared, for example by increasing the rate of Class 4 NIC in certain specified circumstances ... such as yours.