Going from PAYE to contract.Help please! : Wed Oct 17, 2012 5:52 pm  

Hi everyone.

I have got myself a new job. At the moment I am paid in the usual PAYE way but the new job is contract. The agency have said I can go through an umbrella company who will pay my tax and NI or I can do it myself.

Does this mean I have to set up a company? Am I just classed as self employed?

Does anyone work in a similar way? I havent done it like this before so I am a bit unsure to be honest. I am going to talk to an accountant on Friday but I just thought I would put the message to all you guys first to see if anyone had any ideas.

Thanks for any advice.

Re: Going from PAYE to contract.Help please! : Wed Oct 17, 2012 7:08 pm  

The employer will probably want / require you to set up a company, rather than just being self-employed. This is because they have the a legal duty to collect PAYE / NI and if HMRC challenge they could be stuffued for the tax asnd NI on the grossed up equivalent of what they pay you. As to having a company, sounds like there's a fair chance (although this will be dependent on the precise arrangements and facts) that you could get caught by the so called "IR35" rules. If so, a pain in the backside.

Re: Going from PAYE to contract.Help please! : Wed Oct 17, 2012 7:12 pm  

Congratulations on the new job to start with.

I deal with most of the largest agencies but don't have knowledge of how they pay their employees, but I'm pretty sure that they do pay them as employees, in other words they are not self employed but have tax and NIS deducted at source.

As an employer a few years ago I know I had to be very careful about employing self employed people on a full time basis, in that it couldn't be on a full time basis or we both had to show that they actually could work elsewhere and were truly freelance.

I'd be sceptical to be honest and an accountant would be a very good place to start when asking advice, also have you asked any other agencies what their policies are and is your agency one of the Nationals or just a small local one ?

Re: Going from PAYE to contract.Help please! : Wed Oct 17, 2012 7:36 pm  

JerryChicken wrote:

Congratulations on the new job to start with.

I deal with most of the largest agencies but don't have knowledge of how they pay their employees, but I'm pretty sure that they do pay them as employees, in other words they are not self employed but have tax and NIS deducted at source.

As an employer a few years ago I know I had to be very careful about employing self employed people on a full time basis, in that it couldn't be on a full time basis or we both had to show that they actually could work elsewhere and were truly freelance.

I'd be sceptical to be honest and an accountant would be a very good place to start when asking advice, also have you asked any other agencies what their policies are and is your agency one of the Nationals or just a small local one ?

It's not so much the full-time aspect, as whose direction you work under, whose equipment is used, who decides the hours, if the work is not to standard who rectifies it, can the "worker" substitute another person to complete the work for him if he becomes unavaiable, etc, etc. The particular facts determine the probability of employment or self-employment existing. Ultimately, if push came to shove only the legal system can decide. These people who advertise "IR35 proof" contracts, schemes, etc are doing nothing of the sort. Each case in law rests on the particular facts of the case.

Re: Going from PAYE to contract.Help please! : Wed Oct 17, 2012 7:45 pm  

I'd also add that going back the other way, from self employed to PAYE is a simple enough procedure made extremely complicated by the cretins employed by HMRC who seem to keep no records of the fact, even though seven years down the line you're sick and tired of telling them, although in their defence it is a different office and region of the country who write EVERY time.

Self employment is not to be entered lightly if you've never done it before, it takes a lot of discipline to do the accounting EVERY week and to ensure that you don't spend the tax set aside in lean weeks, I'd think very hard before going back there although I appreciate that in these circumstances you probably don't have much choice.

Re: Going from PAYE to contract.Help please! : Wed Oct 17, 2012 9:30 pm  

I dont have much choice really. I didnt want to go through the third party (umbrella ) really as im coughing up money for someone to make a couple of payments every week. Its just that I wasnt sure how complicated it all was. I will see the accountant though and see what he says and what he advises for the best.

Re: Going from PAYE to contract.Help please! : Wed Oct 17, 2012 11:45 pm  

Karlos wrote: I dont have much choice really. I didnt want to go through the third party (umbrella ) really as im coughing up money for someone to make a couple of payments every week. Its just that I wasnt sure how complicated it all was. I will see the accountant though and see what he says and what he advises for the best. An umbrella company will (or should) save you their fee every month, they will keep you 100% compliant with current legislation and do all your taxes for you, all you do is fill in the expenses forms and away you go. Piece of cake to set up and they deal with invoicing and contract details for you. As far as HMRC goes you appear to be working for the umbrella company and no yourself. I use http://www.orangegenie.com they deal with people in your situation everyday, I found them to be top class, in fact they chased one debtor all the way to the small claims court for me.

Karlos wrote: I dont have much choice really. I didnt want to go through the third party (umbrella ) really as im coughing up money for someone to make a couple of payments every week. Its just that I wasnt sure how complicated it all was. I will see the accountant though and see what he says and what he advises for the best. An umbrella company will (or should) save you their fee every month, they will keep you 100% compliant with current legislation and do all your taxes for you, all you do is fill in the expenses forms and away you go. Piece of cake to set up and they deal with invoicing and contract details for you. As far as HMRC goes you appear to be working for the umbrella company and no yourself. I use http://www.orangegenie.com they deal with people in your situation everyday, I found them to be top class, in fact they chased one debtor all the way to the small claims court for me.

Re: Going from PAYE to contract.Help please! : Wed Oct 17, 2012 11:55 pm  

Dally wrote:

The employer will probably want / require you to set up a company, rather than just being self-employed. This is because they have the a legal duty to collect PAYE / NI and if HMRC challenge they could be stuffued for the tax asnd NI on the grossed up equivalent of what they pay you. As to having a company, sounds like there's a fair chance (although this will be dependent on the precise arrangements and facts) that you could get caught by the so called "IR35" rules. If so, a pain in the backside.

When was the last time you worked as a contractor?

[Wanderer]

Re: Going from PAYE to contract.Help please! : Thu Oct 18, 2012 7:04 am  

Karlos wrote:

I dont have much choice really. I didnt want to go through the third party (umbrella ) really as im coughing up money for someone to make a couple of payments every week. Its just that I wasnt sure how complicated it all was. I will see the accountant though and see what he says and what he advises for the best.

Can't add anything to the discussion but Congratulations on the new job mate. See you at the Keepmoat next season (if not before).

Re: Going from PAYE to contract.Help please! : Thu Oct 18, 2012 1:00 pm  

Big Graeme wrote:

An umbrella company will (or should) save you their fee every month, they will keep you 100% compliant with current legislation and do all your taxes for you, all you do is fill in the expenses forms and away you go. Piece of cake to set up and they deal with invoicing and contract details for you.

I am always sceptical about these "contracts" that these organisations produce. Standard contracts will invariably fail if challenged robustly by HMRC.