First Time Contractors

The rewards for moving from employment into working as a contractor can be significant, but there are also risks to taking such a step.

It is important that you understand what is involved and what is expected of you. An excellent source of practical advice for new contractors is available from the Professional Contractors Group (PCG), which represents the interests of contractors, and offers a range of services to members to help them establish and grow their businesses. We particularly recommend their guide PCG Guide to Freelancing, which offers a step by step guide to the process of starting out in the contracting business.

  They can be reached by clicking the PCG logo.

If you wish to contract through Computappoint, then you will need to work through a limited company.

We do not accept directly employed contractors (under PAYE).

We cannot offer self-employed status. (There is a piece of legislation Section 134 ICTA 1988 that effectively prevents individuals from being self-employed where an agency is involved).

We can support a number of ways that you can operate as a contractor through Computappoint:

1 Your Own UK Limited Company Within IR35

We have an employment style contract, which we use for those contracts that fall within IR35. Even though this will result in you paying more tax than if you fall outside IR35, you should still keep your limited company, as it is more tax efficient than straight PAYE. We do not run PAYE contracts.

The advantage of this route is that you will know exactly where you stand, and will have no unknown potential tax exposure arising out of IR35. It also offers you some of the protection offered by employment, although in fairness nothing like that of a full employee. Your accountant will be able to advise you of the tax impact of this route, and the associated tax planning implications.

2 Your Own UK Limited Company Outside IR35

If you can satisfy the existing Schedule D/E tests for self employment, then you can operate through your limited company, and IR 35 will not apply to you. The range and implications of these tests are discussed on the web sites above, and it is up to you to decide whether or not you feel that you can pass these test at present, or whether by making changes to your present working practises you can then qualify.

We have a Provision of Services (PS) contract that reflects this form of working.

We have a similar contract for our clients. However you should be aware that in many cases we do not control this contract, we have to use a contract supplied by the client. We can tell you whether or not our standard contract applies with the client in your specific instance. Where we work from our clients contract, we can make no commitment to negotiating any specific changes with the client, so you should take this contract at face value. There are a number of commercial pressures that may influence the client's response to IR35, however at the end of the day, if we are working from their contract, we will ultimately have to abide by their decision.

If you decide this may be the option for you, then it is important that you take advice from your accountant and your solicitor before making a decision. Please contact your Computappoint Account Manager for specimen contracts.

It is important that you understand that this option contains a high element of risk for yourself. Because it is based on new law, which has not been tested, nobody can be sure how it will work out. Once again you should take specialist advice if you are looking at this area. Our pragmatic advice is that you have a contingency savings fund, into which you put money aside, just in case your position is challenged in the future by the Inland Revenue, and you fail to pass that challenge.

For a fuller explanation of the impact of IR35, once again we guide you to the web sites for the Inland Revenue and the PCG.

3 UK-Based Umbrella/Composite Companies

There are a number of companies who purport to offer a tax efficient service for IT contractors which will stand the test of IR35. If you are looking at this option, then we would be asking them to sign our new PS contract.

They take away the need to administer your own company, but do charge for their services. In addition you cannot build up your own business.

4 Offshore Companies

We will not take on contractors who are working in UK operating through offshore companies (including Isle of Man and Channel Islands).

Summary

The final decision on the way forward is up to each individual contractor. We have outlined a number of options above and we will try to help you implement the option you feel is most appropriate to you. Since the introduction of IR35 this is still a fluid situation, so you should take up to date advice from your professional advisors or by utilising the services available through the PCG, click on the PCG logo below.