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Contracting doesn’t suit everyone, but it can offer a very rewarding, flexible and challenging lifestyle where you get to undertake projects in a wide range of clients globally.
If you’ve never contracted before, or would just like to review your options, here is some general information. If you would like to have a more detailed conversation please just give us a call and we’ll assist as much as we can.
Limited Company or Umbrella Company ?
If you secure a contract with Blue Pelican, how do you intend to work?
There are two ways of working with us as a professional freelancer (contractor), either through your own limited company or using an umbrella company.
First time contractors need to be mindful of the fact that there are a number of responsibilities involved with running a limited company. If this is what you choose to do, you will need to ensure you are fully compliant with paying all of the relevant taxes and National Insurance contributions. You would need to be producing invoices for time worked, receiving payments and you are likely to need an accountant to help ensure you are doing everything correctly.
If you intend to be contracting on a long term basis or if you are earning a high daily/hourly rate, it can often be more advantageous to set up/use your own limited company.
However a number of contractors prefer not to deal with these obligations when they are just getting started, so they choose to work through an umbrella company, who are responsible for all of those details on your behalf and allow you to focus on the client without having to deal with the paperwork.
It is worth noting that if it is a one off, or short term contract assignment, then it is usually a preference to use an umbrella company for ease and speed.
In the end there are advantages and disadvantages to both ways of working.
Our Compliance Officer will be happy to discuss options with you but the final choice must be investigated and decided by you. As long as the solution you choose is compliant, we will be happy to proceed in either way.
The below link may be useful in helping you determine the benefits and disadvantages to using an umbrella company or a limited company.
Blue Pelican only encourage fully compliant solutions. If we feel a company is not operating in a way in which we are happy to do business with them, we will refuse to work with them.
Blue Pelican would like to confirm that we do NOT accept referrals from umbrella companies, we have your best interests in mind.
What is IR35?
Since 6th April 2000, limited company contractors providing personal services, have been required to pay to HMRC tax and NICs, on income received from “relevant” engagements. Those engagements, which are considered to be relevant, are those which indicate a relationship between the contractor and the Client, and which, in all the circumstances would amount to employment but for the existence of the limited company.
In determining whether an engagement is a “relevant” engagement, HMRC looks at all the facts of the relationship between the contractor and the Client and the contractor and the employment business (if they are supplied to the client through one). Their investigation will include a consideration of the terms of any contract(s) in existence, but will not be limited to the contract(s).
Therefore, if the facts of the relationship indicate employment, but a consultancy agreement has been issued indicating a self-employment relationship, this will not protect a contractor from any claim for PAYE tax and NICs, on income received from that engagement.
It is worth noting that HMRC have extensive investigative powers, as well as powers to impose penalties on those who have failed to pay tax due for many years after the tax becomes due.
Contractors may be considered to be employed for tax purposes in relation to one or more engagements, but yet self-employed for tax purposes in relation to others. However, a contractor engaged on an assignment of one month or more on standard contract terms, that appear to meet the definition of self-employment, may be treated as employed unless he can demonstrate a recent work history of engagements with characteristics of self-employment. Contracts of less than a month, and cases where there is a pattern of other work, may indicate self-employment, but each set of circumstances must be considered on its own facts.’
The Agency Workers Regulations 2010 came into force in England, Scotland and Wales on 1 October 2011.
The Regulations will give agency workers the right to the same basic working and employment conditions they would receive if they were engaged directly by an end user client to do the same job; this is limited to conditions that relate to pay and working time. Agency workers will also be entitled to access on-site facilities that an end user client provides to its own workers and to be advised by a client of vacancies which arise in the client’s business.
What is the “12 week qualifying period”?
After a qualifying period of 12 weeks – (working ‘in the same role’ with the same hirer for 12 continuous calendar weeks) any agency worker will be entitled to the same basic working and employment conditions as if they’d been recruited directly by the end client to do broadly the same job.
From day one of an assignment as an agency worker, you will be entitled to the following two rights:
The right to access information on job vacancies and the right to access collective on site facilities such as crèche and childcare facilities, canteen facilities and car parking.