Frank wrote:Anyone on here clued up with contracting?
I've just got a job offer from the company I used to work at, but rather than a permenant position it's a contractor role. I don't have a company set up or anything, so are there any easy-to-follow guides online for what I need to do? I know a little bit about company house from what I did with the Prince's Trust, but the first thing I've just been looking at also mentions a "Memorandum of Association", which I haven't got the faintest idea about...
I think you mean articles of association, but anyway, if you go through online registration with companies house and pay the much cheaper fee that way (15 snoops I believe) you can just adopt the standard articles which are basically a template upon which most simple companies are formed. I can probably step this through with you if that helps?
However, you will need to then process (1)(a) directors payrol using payroll software or (b) draw dividends (or both) and (2) keep thorough and proper accounts for the entire time that the company is trading and maintain these records with HMRC and companies house. It's not as hard or as complicated as it sounds once you get your head around the terminology but there are heavy fines if you fail to file in time and virtually no valid excuses besides serious health issues.
If you want less hassle you may want to look at a service like Crunch Accounting with a monthly fee and simply add this to your day rate or use an umbrella company that processes your payroll and takes of tax deductible expenses from your tax liability meaning you effectively get paid for those too. These solutions basically facilitate or deal entirely with your tax liability for you so you have nothing to worry about except doing the job and submitting your timeheets and expense receipts on time.
If you want to do entirely your own accounts which probably isn't worth it unless you really are running a business with loads of transactions and expense like mine then the best accounting software for you would be FreeAgent (I'm not biased here as I actually use Xero which is deliberate overkill).
Bear in mind you have an existing job your tax is going to be basic rate which is 20% until HMRC either issue a new tax code (coding notice) or refund it (I was refunded about £500 a year later), so you should contact them the day you start the job to get this corrected. If you run your own company with directors payroll then you can probably pay the correct amount of tax directly even before you get a coding notice as HMRC won't care provided you are paying the correct tax (this assume that at no point are you earning money from two jobs at the same time, you can also work around this by putting some tax liability aside in case you receive a tax bill next tax year because you or your company underpaid).
I found using an umbrella company relatively painless, the service I used was Exchequer Solutions, but they did short me on one or two small travel expenses and don't expect to claim anything that is really plant and machinery like power tools (I saw some builder types doing this, why they didn't have a limited company or go sole trader I have no idea). I didn't have any long term tax problems although I think maybe I didn't submit this form or that form or the umbrella company didn't about some £15 tax relief or whatever, I can't remember anymore as it was years ago.
You also want to consider that the conservative government are currently on assault over the contracting profession. Basically if you are only contracting for one company they want to consider that employment meaning that the client is meant to pay national insurance and pension etc, where half the attraction of contractors to clients is that there are no ties and no tax liabilities or employment rights (good or bad thing). So will need to do some other random work to avoid being caught in something called an IR32 conflict, you will also need to advertise your company as a business and not just effectively a shell company. Maybe set up a few fiverr gigs even if you don't do anything and do some design stuff for some friends of friends etc, make sure you haven the proper documents like quotes and invoices, bank statements etc.
You can also avoid that using an umbrella company. HMRC are still cool with them I believe, at least for now, because they don't care provided all the tax is being paid (I think you also pay employees national insurance if you set up a directors payroll so there's that solution too).
You would also need a business bank account for a company, you can't use your personal bank account for a company (but you can use personal banking for sole trader or both). I've heard both Barclays and Santander are good.
Basically pay ALL THE TAX and you'll be fine.