How can I get setup as a UK Contractor for long-term contracts and be sure to cover all expenses and tax implications?

Question

I'm a SharePoint consultant, developer and trainer and have been asked if I was interested to work in Brussels.

I'm now researching what's involved in regards to taxes and living expenses to come up with an appropriate rate. It might be important to mention that these may be long term contracts, e.g. 12 months.

1. Am I better off going through a management company or can I invoice clients directly without losing out in the long run?

2. How can I come up with an appropriate daily rate which covers expenses and potential tax implications?

Answer 1

Managment companies will take all (or most) of the headaches away from you. To invoice companies directly you'll have to start up a company, do your own accounts and have an accountant. Also, as a contractor, you may fall foul of recent legislation aimed at people in long term contract jobs who should really be full time.

Have a look here for information on starting a business : https://www.gov.uk/starting-up-a-business

As for daily rates, maybe work out what monthly salary you need to live comfortably, add to it taxes, NI & overheads then divide it by the working days in a month - Hey Presto - daily rate :)

Answer 2

Going through a Management Company will mean you are required to be paid PAYE - unless they are using dubious avoidance schemes, in which case, steer clear.

IR35 (the attempt to clamp down on "disguised employment") applies if your contractual arrangements (or the reality on the ground) are akin to employment - ie you (personally) are under the direction and control of the client, and there are mutual obligations.

If you are truly freelance/self-employed, irrespective of the length of contract, then you are better off using your own limited company - perhaps with the services of an accountant.

Day-rate questions are akin to how long is a piece of string - you may have a different rate for different clients, depending on what, where, when etc... viewing sites such as Jobserve or Jobsite will give an indication of the going rate (after agency fees - you can add another 20% on top for the client rate)

Answer 3

A major cost in foreign client work is insurance. Ensure you have adequate insurance as a free-lancer to cover litigation in a foreign court over at least , payment problems, cessation of contract, (voluntarily or enforced dismissal) and any 'obligation to your clients customers' if your work is resold. I used a 25% uplift to get adequate cover for foreign work in 2000-2005. Ask you insurance company's advice.