The rules for contractors, agencies and end-clients feel like they get tighter every year, but remaining compliant is a simple case of informing yourself, and sticking to the rules. As recently unveiled in the new Budget, enablers of tax avoidance could face fines of up to 100% of the tax that the scheme’s user has underpaid.
One of the key things to remember is that many recruitment agencies will be geared up for this already. For example, here at Adam, we are sticklers for compliance; we find this approach keeps our contractors and clients reassured and happy as well as simplifying the process for all parties. Having never received a single HMRC query or challenge is evidence of the quality and robustness of our approach.
If you are thinking about going into contract work, or are already a contractor but want to refresh yourself on things to bear in mind, here are the things you should consider:
- Be sure to form a limited company rather than a sole-tradership. Real-time tax reporting to HMRC means that agencies need to be able to demonstrate that their contractors are paying correct levels of tax throughout the year and the only way to do this is for contractors to have auditable accounts.
- Relevant insurance is a must. Public liability insurance for up to £1m is very affordable and fairly easily sourced. As part of the package, many providers offer Employer’s Liability insurance and Professional Indemnity as well as consultation about what you will and won’t need.
- Think about potentially having several clients at the same time. This approach lends itself very well to high level consultancy roles where you don’t need to be on-site all week.
- Make sure that your role cannot be viewed as disguised employment. If you leave a company on the Friday and go back the Monday after in the same role at the same desk as a contractor, you put yourself at risk. Advice should be taken as, under the correct circumstances, working with the same company is possible.
- When setting your daily rate, be sure to consider the costs for the following: Employer National Insurance, pension, holiday entitlement and potential sick leave. As a contractor, you are not entitled to employee benefits and if you are offered them, you should not accept.
- If you have any doubt, be sure to take professional advice from accountants or solicitors that specialise in providing advice to contractors. Do not rely on legal or financial advice in forums or online.
- Keep an eye on the Budget and any key points relating to contractors. Pay particular attention to any mention of changes to IR35 or SDC rules and then make sure you are compliant. If you are unsure, take professional advice.
- Be prepared for the fact that you may need to supply your own equipment. In some cases this isn’t practical but a laptop and mobile are reasonable expectations.
When you are choosing which recruitment agency to work through, make sure that they only operate with either fully audited umbrella company providers, or with limited company contractors that are correctly set up. You should be asked for evidence such as proof of your right to work, limited company certificates of incorporation, valid VAT and insurance certificates prior to your start date.
Here at Adam we seek regular advice on legislation changes to include the recent changes around legislation, making sure that the guidance our contractors receive is current and clear.
In light of the above changes, we are confident that our clients and contractors are compliant with new legislation and that we have the access to the right advice going forward to ensure as legislation is updated, we will remain compliant.
Are you looking for a new contract opportunity? Have a look at our opportunities here.