Top 3 reasons to be a Freelance Contractor Reply

Young woman with checklist over shoulder shot

PCG published this story on 3rd July 2013:

Demand from UK businesses for contract workers is continuing to rise in 2013, which could be good news for freelancers looking to get their foot in the door on a lucrative new project.

According to the latest Report on Jobs from KPMG and the Recruitment and Employment Confederation (REC), the appointment of temporary workers increased significantly during May and could be set for further increases in the future, while the overall jobs market continued to improve.

Despite the economic downturn, companies are still on the lookout for talented new employees, with demand surging after a slowdown in April. The findings pointed to more vacancies in the private sector than public sector roles.

So why would you want to be a Freelancer.

      1. Pay rates – generally contractors are paid considerably more than employees
      2. Flexibility – you are your won boss but the downside is that you have to find work
      3. Tax – the following is from Contractor Weekly and is a quote from Seb Maley (QDOS)

“Operating through a limited company as opposed to an employee brings significant financial benefits. By taking a small salary and high dividends you pay far less National Insurance, saving around 26%. There are obviously associated costs involved in running your own company, such as accountancy fees and insurance, but the overall ‘take home’ pay will still almost certainly exceed that of an employee.

But with the benefits there also comes risks. The IR35 legislation could affect any contractors working through limited companies and it’s vital that you take steps to ensure you are compliant. Contracting is also far less stable than permanent employment; you have been engaged as a temporary resource and your client can terminate the agreement at any stage. There is also the issue of illness; as a contractor you won’t receive any sick pay from your client, so any days not worked will hit your finances.”

But on a final note makesure you have the right equipment as explained in this sketch

Consultants beware of IR35 – use the QDOS Model Contract (Free) 2

IR35 came into existance in 1999,  it was created to prevent workers previously employed from creating a limited company and then benefiting from lower taxes and national insurance through the use of dividends and expenses.

HMRC believed that it would generate £220 million a year in National Insurance Contributions and £80 million in Income Tax, but it has actually only generated around £1.5 million a year and HMRC have brought a number of cases before the courts, the latest being MBF Design Services Ltd v Revenue and Customs (2011) and ECR Conculting Ltd v Revenue and Customs, the taxpayer was successful in both cases.

I was reading an article in Accounting Practice about the MBF Design case and HMRC assisted a Foreign Airbus UK employee to prepare his statement but apparently because the employee struggled to read the statement or be examined on it the tribunal were unconvinced.

I have always found QDOS to be an invaluable source of help in the field of IR35 and you can download free guides and contracts using this link