In order to register your company as a private limited company you would need the following:
- Open a business bank account – any business bank account would do
- Create a company – takes few days and you could ask your accountant to do it for you
- Register for VAT- again you can ask you accountant, this takes time, couple of weeks
- Register for Flat VAT- this is essential. The accountant didn’t tell me anything about this. This is designed to simplify VAT calculations, you get a flat VAT rate to pay. In my case of an IT Consultant it’s %14.5 with a 13.5% discount in the first year. This mean while you’re charging you clients the full 20% you get to keep 5.5%
- Make sure the name of the company is not your own name.
- Choosing an accountant
This guide is based on my own experience of contracting in the UK as an IT consultant. I think it’s a must to have an accountant unless you feel you are knowledgeable enough to do it yourself. There are many accountants these days that cater for the needs of contractors. I went with SJD Accountancy, which now, I don’t think is a best choice. Their system is based on excel spreadsheet while others used specially written software and cost much less. I reckon these days you can find an accountant much cheaper, somr of them even take a feed from your business account. So do you own research.
Dealing with Agents
Don’t stop looking until you get contract signed
I first started contracting when I resigned from my positon at RBS, I have resigned before securing a contract. This was because that the notice period at RBS was 3 months and I thought no one’s going to wait so long for a contractor. Immediately I started going for interviews and the first one I secured was with Barclays Capital within commodity derivatives. My agent back then told me that I can now stop worrying and take it easy. After 2 weeks he called me again to say that the budget has not been approved.
I had another interview after two weeks with Rule Financial and the same thing happened again. Then again with UBS and then with Barclay’s.
This tought me a very important lesson – don’t consider you got the contract until everything is signed even if your agent says it’s a done deal, in most of the cases it’s not and they are just want to make sure you don’t interview with anyone else. In the last case I had to wait for 4 weeks until the agent declared that there was a contract freeze at Barclay’s Capital. If I knew I would’ve applied for other jobs. Don’t accept a verbal yes; carry on applying for other positions until you get everything on paper.
In the end I had to grab the first opportunity that came along, which was a permanent position, paying less than 30% of my salary at RBS.
Agent is not your friend, but not your enemy either – even though agent says it’s in their interests to get you the highest rate possible it’s not often the case. Their client is not you, but the banks. If they manage to provide banks with good candidates, which do not ask for too much, they are going to keep using that agency. So the agent doesn’t care about their cut but rather the volume of the candidates they place – this is more important to them. If you feel that the agent is offering you the rate which is too low, just insist that you want X. But you have to be reasonable!
Also some agents would want to pay you 30 days after receiving your invoice. I have always managed to persuade them to switch to a 2 week payment. There is no good reason the agency should keep your money for longer
Checking Contract for IR35 status
Once you have secured the contract and it makes sense to check it for IR35 status. Some accountancy companies do it for you. Do it as soon as possible, or may be ask for the text of the contract before everything is finalised and run it pass you accountant. If there is something in the contract that puts you under IR35 legislation you have a change to get the agent to rephrase the contract.
Most agencies ask for Professional Indemnity and Public Liability Insurance. Ask the agent what amount the insurances should cover. It will probably cost you about £50 a month and can be done online in few clicks
I also have a Total Liability Cover which insures for the following:
- Covers all legal costs and liabilities if you’re caught by IR35
- If you are found to be ‘inside’ IR35, the policy pays out all backdated tax, NI, interest and penalties
- Covers all retrospective tax years
- Standard policy provides £50k of legal costs and £50k of liabilities (can be increased if required)
- Buy online in minutes – no contract review required
- Just £30 per month or £360 per year
In terms of working as a contractor I didn’t find it different to being a perm.