What’s in store for Umbrella contractors after April 2016?

Change is on the horizon for Umbrella contractors

Whilst the 2015 draft Finance Bill and Autumn Statement indicated less change is immediately on the cards for Limited Company contractors compared to their Umbrella contractor colleagues, there are still certain aspects planned for 2016 that all contractors need to be aware of.


What are these changes and how will they affect you?


Whilst no major changes were presented in the Autumn Statement, it’s likely that further announcements to IR35 will be made, post April. It was, however, announced that if you’re truly operating outside of IR35, then you are still able to claim for travel and subsistence (T&S), which is a major bonus for contractors that rely heavily on their T&S claims to increase their overall tax relief (after considering the 24 month rule).


Supervision, direction or control (SDC)

SDC will not apply to Limited Company contractors, if their contract is not caught inside IR35. So as a Limited Company contractor, as long as you ensure your contracts have undergone an IR35 risk assessment, you can rest easy knowing that SDC will not apply to you. With Intouch, you can have your contracts assessed as part of your all inclusive monthly service.


If your accountant doesn’t offer unlimited, free contract risk assessments, then it’s time to switch. With HMRC likely to once again sharpen their focus on IR35, it’s wise to be certain about the status of your contract.


The new SDC ‘test’ and the effects on Umbrella workers

April 6 will mark a significant change for Umbrella workers, as they will no longer be able to claim tax relief for their T&S expenses, if subject to SDC. It will be up to the Umbrella worker’s enlisted Umbrella service provider and end client to determine their SDC status, meaning that the Umbrella worker will not see a penny of their expenses until their status has been decided.


If you do pass the SDC test, you’ll then only be able to claim tax relief on your expenses via a Self Assessment Tax Return. You will have to pay your tax through PAYE throughout the year, then claim it back at the end of the tax year.


Whilst the finer details of SDC are yet to be announced, it’s clear that Umbrella workers are under the spotlight (with some industries more so than others), so make sure you keep an eye out for any further announcements that are to be made surrounding SDC.


Are you an Umbrella worker worried by SDC?

HMRC have provided some contractor scenarios to give you an indication on how certain careers may be affected. Whilst these scenarios can give you a good understanding of SDC, you should discuss it further with your Umbrella company to understand how they will support you during this time of change.


The Salary Sacrifice Test

If you’re an Umbrella worker that currently receives expense claims as part of your weekly / monthly payroll, then you’re going to notice a major difference come April 6. HMRC now view any form of expense payments within your salary as a salary sacrifice payment and are putting a stop to it.


This means many Umbrella companies will change their approach to how expense claims are paid to their contractors and, as explained previously, Umbrella workers can only claim expenses once a year through the use of a Self Assessment Tax Return.


What a load of kerfuffle for serious contractors still using an Umbrella company!

If you’re a serious contractor that relies on the tax relief from your expenses and you see contracting as a long term option, it make sense to check and be sure that working under an Umbrella is still right for you.

It’s clear that Limited Company contractors have mostly been left untouched (for the foreseeable future) to get on with what they do best, so why not join them and continue to enjoy the benefits from contracting that you rely on the most?

Join the contracting revolution with an accountancy that champions Britain’s contractors! Things are changing, don’t be left behind…


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Budget changes: IT contractor worries in 2016

Budget changes amongst top worries for IT contractors in 2016


With the 2016 budget just around the corner, we look at the key concerns of the IT contractor sector and the challenges that the new budget may pose.


When we talk about contracting, people often think about IT contractors first. This is in part due to the historical demand for contractors in the IT industry, who often amass a huge breadth of experience by working for lots of different clients.


Research by IPSE, the Association of Independent Professionals and the Self Employed, shows a 71% increase, over the past seven years, in the number of independent professionals working in Information Technology and Communications.


This steep rise in interest is likely to be thanks in part to the lucrative contracts often enjoyed by IT professionals, who tend to receive financial benefits beyond what their permanently employed counterparts receive.


Nevertheless, even the IT sector faces challenges ahead in 2016. According to CUK, demand for temporary technology workers has slowed over the last two years. However the market for freelance IT skills as well as hourly pay rates are still growing.


Another area of opportunity for the IT industry in 2016 is to promote itself more to women. In a previous article on women in contracting that I wrote for IPSE, I discussed how the IT industry is taking steps to attract more women to IT roles and to get more school age girls interested in coding.


The inaugural Women in IT Awards launched in London last year with the aim of celebrating the outstanding innovation achieved by women in the IT industry. Despite all this, more still needs to be done to remove the existing boy’s club reputation of the IT industry.


In an article on recruitment website Uniting Ambition, recruiter Tina Bicknell says it’s difficult sourcing women for programming roles and that this is a genuine issue for the sector. In her article, Tina believes women are drawn to management rather than coding – a product of industry stereotyping.


State of the IT Nation

So how are such IT professionals feeling about the state of the industry and contracting in general? We wanted to find out so, in December, Intouch carried out a survey – including both permanent employees and contractors – to get a better picture of the IT landscape.


Looking ahead to 2016, those polled who are already contracting or freelancing said the 2016 Budget, proposed changes to travel and subsistence (T&S) and the negative impact on take home pay were their top worries, each with 16% of the votes.


Many of our respondents had completed the survey prior to the publication of the draft Finance Bill, released on 9th December. Those who are Umbrella workers now know for certain that they will lose tax relief on T&S expense claims in April this year – a huge blow to them.


Those operating their own Limited Company breathed a huge sigh of relief as it was confirmed that if they are truly independent and are not “disguised employees” (outside IR35) they can still claim tax relief on T&S after April 2016.


These hot talking points were closely followed by changes to dividends, which was the main worry for 15% of temporary IT workers.


They are right to be concerned as Limited Companies have not escaped entirely unscathed by recent tax changes. From April 2016 the way dividends are taxed is changing to increase the amount of tax paid, although the first £5,000 of dividends will be tax free. Overall, post April 2016, most Limited Company workers remain financially advantaged over Umbrella company employees.


IR35 is another key worry for 13% of contractors. The proposed changes to IR35 (Intermediaries Legislation) is something I have discussed at length in a previous blog and although no announcements were made in the Autumn Statement it’s unlikely this debate is over.


Understanding the ins and outs of IR35 is certainly a complex issue. My advice to anyone who is concerned about the proposed reforms or their compliancy position is to speak to a contractor accountant to find out where you stand.


Another subject I have frequently discussed on the blog since the 2015 Budget was announced is the proposed changes to supervision, direction or control. This is a worry for 12% of IT contractors and freelancers.


The thought of HMRC investigations is keeping another 12% of IT professionals up at night. This is a worry we are well aware of at Intouch, which is why we now include professional fee protection cover in our all-inclusive monthly services – it means our clients are covered if HMRC raise an enquiry into their tax affairs or challenge their IR35 status.


Some of the IT professionals we spoke to are not currently contracting, although over half (56%) have done so previously. Of those we spoke to in permanent employment, nearly two thirds (60%), would not consider contracting in 2016, whilst one in five (20%) are very likely to take the plunge.


The number one concern preventing 29% of employed IT professionals from contracting is the perceived fear of leaving the ‘safety’ of permanent employment. This is followed by personal worries for 22% of employed respondents, such as family commitments, personal finances and keeping on top of mortgage repayments.


When speaking to IT contractors and freelancers about their trading model, over two thirds (69%) are using a Limited Company – a significant majority. Of the remainder, 17% are using an Umbrella Company and 11% are classed as self-employed, either as a Sole Trader or partnership.


Reasons for going Limited include having greater control and independence, tax efficiency and being able to operate as a small family company. Those operating through an Umbrella company said flexibility and low cost when not working were the main appeals. For the self-employed (Sole Trader / partnership), being able to spend more time at home with their children was a major benefit.


If you are unsure which trading model to use, our popular guide Limited Company or Umbrella – which is the right choice for you? explores the different trading models available to you and which is best for your circumstances.


When it comes to managing their finances, 44% of IT contractors and freelancers use a specialist accountant. Nearly a third (31%) are using a high street accountant and 13% are doing their accounts themselves. The survey also shows 6% of people are using online accountancy software to do their accounts.


Whether you’re an employed IT professional considering a move to contracting or a seasoned temporary worker looking to maximise your earnings, our team of expert contractor accountants can help you work out what trading model is best for your circumstances. Speak to us today on 01202 375562 or email enquiries@intouchaccounting.com


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Everything’s about to change for Umbrella workers – make sure you’re prepared

Calling all Umbrella workers

Are you currently contracting under an Umbrella? Have you considered how the changes coming in April will affect you?


Read on to know what’s coming, what you’ll be losing and what you can do to make the right choice for you.


Announcements made in the 2015 Budgets, the Autumn Statement and the draft Finance Bill shook the UK’s 200,000 Umbrella workers, as the feared changes were confirmed. Fundamentally, Umbrella workers’ take home pay is under threat from increased taxation. Come April 2016 strict new rules are to be imposed. How will they affect you?


Your professional life will change

In April this year:

  • Your tax relief on travel and subsistence expenses will be restricted, where you are subject to supervision, direction or control (SDC)
  • You’ll automatically be deemed as subject to SDC by HMRC and your Umbrella must determine otherwise with the help of the client
  • Greater compliance checks will be enforced
  • Other expenses you claim will be taxed under PAYE
  • By law you will have to submit a Self-Assessment Tax Return to obtain tax relief on other expenses
  • Umbrella charges may increase to pay for the additional compliance


So what are your options?

  • Be moved over into a Limited Company by your current Umbrella provider if (or when) they offer this service
  • Run the risk of other untested models designed to avoid the changes
  • Set up your own Limited Company
  • Return to permanent employment
  • Stay with your Umbrella and see if the model still works for you.


Many contractors work under an Umbrella because their services complement their professional requirements. But this is all about to change.


Umbrellas in their current form will need to implement major changes to the way they operate in preparation for April’s changes. What they will look like is as yet unknown, meaning they’ll be untested and unproven.


If contracting is a long term career choice, then it’s worth revisiting your options.


Tempted to go Limited?

If your current Umbrella provider is offering you their Limited Company services, it may be tempting (and seem easier) to stick with them. But you could end up paying more for a service that doesn’t meet your requirements. It’s worth checking out what specialist contractor accountants offer to make sure you’re getting the service you need to run your company smoothly and help you stay compliant.


We’ve compiled the essential checklist of what every Umbrella-to-Limited contractor should expect from their prospective service provider:



To help with your research why not download our essential checklist? You can do so by clicking on this link:  The essential checklist (91 downloads )


Final thoughts

Change is imminent, but it’s how you prepare yourself now that will put you in the best stead for April. Whatever decision you make, always ensure it’s the best one for you, both personally and professionally. Don’t be persuaded by your existing provider that their solution is your only choice.

Before you get caught up in your research, why not make use of our free take home pay calculator to give yourself an idea of how much you could be taking home as a Limited Company contractor.



This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

And the winner is…

And the winner is…

We recently ran a contractor insight survey with one of the UK’s top recruitment search engines for technology professionals.


The survey gave us a strong insight into the current contractor industry, from professionals who have either previously worked as contractors and are now back in permanent employment, or are currently contracting through their own Limited Company or using an Umbrella. The results from this survey will aid us in continuing to offer contractors the specialist advice, support and services they need in order to contract successfully.


Whilst we received lots of fantastic feedback, one lucky participant was picked at random to win £150 Amazon vouchers! We are pleased to announce that the winner is (drum roll please…..) Kulvinder Jhalli!


Kulvinder had this to say about winning, I’m so pleased to have won the vouchers! As a contractor it’s great to be able to give my feedback and feel like my opinions and experiences have been heard.


Congratulations to Kulvinder and a big thank you to everyone else who filled out our survey. We will be displaying the results in the upcoming weeks, so keep your eyes peeled.


Wishing you all a very pleasant and peaceful festive period and New Year!


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Contracting the key to a successful and family-friendly career

Contracting: the key to a successful and family-friendly career

Over the last month, I have been exploring the subject of women in contracting in conjunction with IPSE, the Association of Independent Professionals and the Self Employed (formerly PCG). The four-part series ran on the IPSE website and, I hope, has given a confidence boost to anyone considering making the leap into contracting.


I have long held the belief that women hold the key to a wealth of untapped potential in the contracting industries. From high-flyers in the IT sector taking advantage of a new recruitment focus on women, to the so-called ‘Mumpreneurs’ joining the 1.2 million self-employed women in Britain, it seems there’s never been a better time for women to start contracting.


Getting started

For anyone who has not considered contracting before, or is unsure where to start, in the first of our ‘Women in Contracting’ series, I outline some of the potential benefits and key advantages, including:

  •  greater freedom and control over working conditions
  • financially lucrative contracts
  • flexibility and more work-life balance
  • maximising take home pay through tax efficiencies


Of course, it’s important to do your homework. Anyone considering a move into contracting should first decide on a trading model. You may wish to remain employed and contract through an Umbrella company or set up a Limited Company and be employed by it. In both of these instances, you may still ‘feel’ as though you are self-employed even if you are not on paper. The alternative option is to go self-employed as a Sole Trader.


If you are unsure which is the right route for you, our popular guide Limited Company or Umbrella – which is the right choice for you? explores the different trading models available to you.


Life as a contractor can, at times, feel a bit remote. However, there are a large number of online business communities and support groups such as IPSE’s Women’s Freelance Network (WFN), set up to help, advise and encourage women contractors.


Family planning

If you are thinking of starting a family, or are currently on maternity leave, contracting can be a great choice for your return to work.


In the second article in the series, I discuss some of the advantages to planning ahead. By starting your contracting career before you have a baby, you can build up contacts, get your financial systems set up and take advantage of the potential for a higher take home pay.


According to the Equality and Human Rights Commission, around 54,000 new mothers are being forced out of their jobs in Britain each year. It’s perhaps no wonder then that the number of freelancing mothers is a growing UK trend, up 100,000 since 2008 according to IPSE research.


The key to juggling a contracting career with being a working parent is to find reliable support and put your business systems in place early on. Key considerations include:


  • You’ll need flexible childcare due to the often ad hoc nature of contracting.
  • A good contractor accountant will get you started off on the right foot financially, as well as helping to navigate the ins and outs of tax legislation.
  • By joining a membership body such as IPSE, you can help protect yourself or your Limited Company as well as receiving additional support and expertise when you need it.


We are an IPSE accredited accountant and any Intouch client who wishes to start a new IPSE membership can benefit from a 10% discount.


Back to school

As children grow up, parents often find their career needs change again. In article three, I explore the challenges faced by contracting parents once their children start school.


In some ways older children are more independent and, if you work from home, it gets a bit easier to juggle. In other ways, however, there are new challenges to navigate, such as the school run and fitting in extra-curricular activities to an already stretched work-life balance. This is where a career in contracting or freelancing really comes into its own, as you can usually dictate your working hours and location, enabling you to work around the school pick up or other family needs.


I spoke to Hannah Martin, co-founder of the Talented Ladies Club – a website for working mums wanting to balance career with family and which now has 30,000 visitors monthly.


Hannah said: “Freelancing is a fantastic career option for mums. It enables you to use your skills and experience on your terms – choosing who you work for and when and where you work. You can slow work down in the school holidays if you wish, and take on more contracts in term times. I can’t think of a more perfect set-up.”


Reduce work-family conflict

In the final part of the series, I show how contracting can be a future-proof career choice, adapting through different life stages to reduce the work-family conflict often experienced by working parents.


This is not just an issue affecting mothers. A new study by the British Sociological Association found around 58% of male breadwinners – those who earned more than their partners – would like to work fewer hours and spend more time at home, even if it meant taking a pay cut.


Contracting can help both parents to improve their work-life balance, enabling more time to be spent with the children or even freeing up time to retrain for a career change.


Make the change

If you are considering a switch to contracting or are already contracting and want to find out how you can get the most benefit from it, give our experts a call on 01202 375 562 or email us.


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Thinking of contracting or freelancing? Which trading model is right for you?

Limited, Umbrella or Sole Trader?

Are you thinking about making the move away from permanent employment to set up as a contractor? Sole Trader, an Umbrella or Limited Company? What’s the difference and which is best for you?

Read this blog to get to know your choices, then download our comprehensive guide to help you weigh up:

  • the things you need to consider
  • your options
  • the associated advantages and disadvantages
  • next steps.

Or give us a call on 01202 375 491 to chat through your options.


Why bother?

With the country’s top contractors reportedly earning around three times the average UK wage, why aren’t all permanent staff taking the leap into contracting? One reason may be the confusion surrounding available options. Our following example shows you how the options can affect a professional who is considering leaving permanent employment, and how certain factors can determine what is the right path for him to take.


Meet Peter

Peter works in IT and has been a permanent employee for 15 years. A few of his friends have recently told him about the benefits of moving away from permanent employment, and naturally Peter is curious, but unsure of his options. A friend advises him that he needs to establish if he should be a freelancer or contractor and how he will operate: as a Sole Trader; under an Umbrella; or as a Limited Company. These decisions are important, as they will have an effect on how he will pay the relevant tax due to HMRC in the future. What is right for Peter’s friend may not be right for Peter’s personal circumstances so he needs to make sure he is clear on what his options are.

So let’s take a look at each, and which solution will work best for Peter:

Freelancer or contractor?


While researching the marketplace, Peter finds a number of ad hoc jobs which are task-specific, and would not be extended once the work has been completed. For a number of these jobs he could complete them either in the client’s workplace, or from his home office. He could take on as many jobs as he likes from numerous clients, simultaneously, charging an hourly rate.

In this instance Peter would be a freelancer – an option popular among consultants, creatives and journalists.


Peter continues researching the market and finds work with a third party employer, whom he will work for exclusively for a fixed period of time. He will be paid a daily rate, and travel to the office each day to work a set number of hours. The contract can end or be extended at any point, and Peter could expect to earn approximately £600 per day.

As Peter will solely be working for this one client for the duration of the contract, he would be considered to be a contractor.

As Peter works in IT, being a contractor is a more viable option for him.

Now Peter has established what type of worker he is, he needs to select the right trading model for his situation.

Sole Trader vs Umbrella vs Limited Company

Peter now needs to decide how he is going to operate: as a Sole Trader; under an Umbrella; or as a Limited Company. These are the three most popular options for for knowledge-based, highly skilled workers earning well above the National Minimum Wage but are dependent on what solution suits an individual best, their daily rate and how they wish to operate:

Sole Trader: is a person who wishes to be the exclusive owner of the business, and is therefore entitled to keep all profits, after tax. A freelancer traditionally would consider themselves to be a Sole Trader, or self-employed. They are also liable for all losses so if the contracting business gets into financial trouble, the Sole Trader is personally liable and their private assets could be at risk. It is unlikely that an agency would take him on this basis and very few clients would allow this model so it is therefore impractical. For this reason being a Sole Trader isn’t the best option for Peter.

Umbrella: is a company which acts, for a fee, as an employer for a contractor who will have an agreed fixed-term contract. Traditionally contractors earning less than £30,000pa or who are new to contracting and are just dipping their toe in the water to see if it is the right option for them, are recommended to consider using an Umbrella company. Intouch do not offer Umbrella services, so we suggest carefully researching compliant companies offering this service and choosing one based on your personal preferences and requirements.

If Peter was earning less than the £30,000pa (on average £125 per day) or didn’t want the added responsibilities which come with running a Limited Company, then an Umbrella company solution would be best for him. He should also consider working under an Umbrella if contracting is just a short-term option for him and he doesn’t anticipate it lasting for more that 6-9 months in total.  But, as Peter is in this for the long-haul and charges a higher daily rate, he is confident he can run his own company.

Limited Company: is for a contractor or freelancer who is earning on average over £30,000pa. This is just a guide and setting up as a Limited Company can also potentially benefit those expecting to earn less than £20,000 in some cases, so if this applies check with a professional contractor accountant to ensure you get the best advice and choose the right option for you.

A Limited Company ultimately allows a contractor to take the highest rate of take-home pay and be your own boss, but there are a number of considerations and responsibilities which must first be explored, and subsequently be adhered to. Engaging the services of a reputable contractor accountant means that they should guide Peter from the offset so he is fully aware of his responsibilities and obligations. The added benefit is that often the tax savings realised with the advice of a contractor accountant out-weigh the costs as professional fees are tax deductible and, of course, Umbrella companies also charge a fee or percentage for their services (which is often more expensive). If, as expected,  Peter will earn £600 a day as a contractor, and is comfortable with the responsibilities, then he would be better suited to set up his own Limited Company. Using our free take home pay calculator Peter can compare take home pay based on several stated assumptions. He can input his personal contract income and contractor expenses to instantly see the difference being Limited makes.

There are other things to consider, from creating a company name and formation, to setting up a business bank account but working with a specialist contractor accountant such as Intouch Accounting means a lot of that is taken care of as part of our fixed monthly fee.

So once Peter has made his mind up about which solution works best for him and how he will operate, he is ready to make the move!

What’s next for you?

To help you think through your options we have written a new guide for contractors and freelancers: Limited Company, Umbrella, or Sole Trader – which is the right choice for you? available for you to download now.

Or contact us for a no obligation discussion to work through your options.

Intouch can help you

If the prospect of going contracting is still daunting and you are not sure where to go from here, or just need a chat with one of our experts, give us a call on 01202 375491  and we will happily discuss your situation and options with you. We are renowned with our existing clients for our dedicated service and account management, and we’re happy to take your call and assist you on this exciting new venture!

Call 01202 375 491

Email enquiries@intouchaccounting.com

Download our guide


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

[download_pdf file=”http://www.intouchaccounting.com/wp-content/uploads/2015/03/Car-and-Motorcycle-Expenses-for-Contractors.pdf” title=”Download our comprehensive guide”]

Moving from a permanent role to contracting

Moving from a permanent role to contracting

If you’re thinking of moving to contracting there are a number of practical factors to consider before making the move from a permanent role. Considering these points will help make your transition to contracting life easier and smoother from the start.

Leaving your current organisation

Make sure you confirm the notice period with your current organisation. In some cases this can be months, or there may be a stipulation that the individual cannot work for similar companies for a specified time.  Knowing these details helps avoid contractual issues with leaving your current employer. The majority of contract work requires the contractor to be available to take up their position within a few days of interview or a couple of weeks at most. This means you’ll need to make sure that you can be available at short notice before applying for contracting roles.

Choosing to set up as a Limited Company or using an Umbrella

You will need to decide whether you want to set up your own contractor Limited Company or to get paid using an Umbrella company.  This is an important consideration as there are several tax differences between these options which directly affect your net take home pay.

At its simplest the key difference between the two is in the amount of tax you pay on your contractor income. If you use an Umbrella company you are effectively an employee of the Umbrella with National Insurance Contributions being payable on your entire contractor pay. If you set up as a Limited Company contractor you can choose to reduce the amount of taxable salary you pay yourself and take the majority of your remuneration as dividends from your company. The overall result is that your post-tax take home pay will usually be higher. To give you an idea of the tax savings you might make as a Limited Company contractor take a look at the Intouch Contractor Take Home Pay Calculator tool.

If you decide initially to use an Umbrella company then change your mind, the Intouch team can help you easily and smoothly make the switch to becoming a Limited Company contractor.

Finding contracting work

Initially, registering with relevant contracting agencies, uploading your CV onto CV databases for recruiters to find, searching job boards and mining your contacts are good ways to find opportunities and keep up with what’s available.

As a contractor this is an on-going process. Over time you’ll build relationships with job agencies, clients and individuals which will make this easier.

Checking your IR35 status on contracts

Usually the aim is to have a contract which puts you outside IR35, meaning you’re operating ‘in business on your own account’ while working for the client. If your status is seen to be inside IR35 you are considered by HMRC to be a disguised employee of your client. This means you will have to pay more tax on the income.

Have every contract checked by your contractor accountants or lawyer before signing.  It’s better to be safe than get into difficulties with HMRC at a later stage. Find out more about IR35 by reading our frequently asked questions.

Networking and marketing yourself

Professional looking business cards are a start, but it’s helpful to be a proactive networker to keep your contacts growing and your portfolio on show. There are many groups and organisations which hold regular face-to-face networking events. Keeping your online profiles on LinkedIn and niche online communities active will also help to maintain your success.

If you decide to make the move you’ll be joining thousands who enjoy their contracting life with the variety and interesting challenges it can bring.  Our New to contracting guide will help you every step of the way or you can contact us to discuss your options.

If you’re considering moving from a permanent position over to contracting and thinking about work, take a look at our latest blog on How To Find Contract Work, where we list the top 5 tips on how to find contractor work.


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Dispatches: Low Pay Britain

Dispatches: Low Pay Britain

Last night Channel 4’s Dispatches investigated the reality of employment for many in modern Britain and how some big name brands utilise complex schemes to save hundreds of pounds on their wage bill. Intouch Accounting’s Managing Director, Paul Gough, watched the programme with interest to see what the future looks like for Low Pay Britain…

30 years ago it was commercially acceptable and almost socially acceptable to mitigate your personal or corporate tax liability based upon what an accountant might call tax planning. Tax planning in this context is a legal means of putting your business or employment affairs in good order in a manner which reduces your tax liability. (Lord Clyde agreed)

“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue”

Lord Clyde, 1929

In the past planning was an acceptable way to arrange your affairs in such a manner that reduced taxes so long as the loser was perceived to be HMRC and if, by a little imagination, you could derive a legal tax advantage, then good for you. Not so any more.

In 2015 Britain if a person or corporation arranges his affairs with the effect of reducing the amount of taxation payable by them, to the detriment of another (worker or supplier) then that is now deemed by HMRC and many other taxpayers as morally corrupt. In times of austerity the public needs the tax.

Dispatches correctly highlighted that the lower paid and vulnerable workers often do not understand the differences between being an agency employee or an Umbrella worker or even the full implications of being self-employed. These workers do need and should get protection from their unions, the GLA and HM Government and it’s politically and morally right to level the playing field making sure we all pay our fair share of taxation in order that we can protect our hospitals and roads and education. But how do you do it?

The programme’s use of the Only Fools and Horses theme tune and in using vocabulary like: corrupt, dodgy, tax avoidance and tax evasion present the case  that arrangements or structures designed to reduce tax payable to the Treasury are no longer acceptable means of keeping more in your pocket. Increasingly such avoiders are being seen as not making a fair and equitable contribution to the nation’s coffers and that is not the British way.

Who are the losers?

The losers are all of us. We work hard and pay our taxes and yet abuse of the low paid is allowed to continue in the largely unregulated temporary employment sector. From the political expediency of Job Centres pushing unsuitable workers into self-employment to end-hirers wanting to share costs reductions with agencies and Umbrellas who are willing to facilitate aggressive tax schemes to reduce the tax take.

The problem is that I and I expect you, do not know where the line is between normal business and personal objectives which use commercial good sense to reduce costs (of which taxation is one) and unlawful “wriggling” to the outside of tax legislation to remove or reduce a tax burden that would in part be used to pay for the things we all expect to have like a functioning NHS.

We understand legal boundaries and the need for protection of the vulnerable, but more and more the arguments being put forward are that it’s not fair, or the playing field is tilted, or the Nation needs more tax so dig deep.

I think abuse and exploitation are legitimate targets for anti-abuse legislation and punishment however care is needed in targeting only the guilty, for there a many organisations providing stimulus and jobs in the UK temporary worker, freelancer and contractor sector that do not deserve to be called guilty, even if the way they operate enables their independent Umbrella workers, the genuinely self-employed and those with personal service companies to utilise tax allowances, incentives and reliefs which only exist because they were created by the Government ! Let’s keep the debate about legality and not about morality.

Do you work for an Umbrella? Read our Travel and Subsistence: It’s robbery blog to find out what HMRC’s current review of T&S claims might mean for you.

 Time to switch to Limited? Contact us to discuss your options.


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Travel and subsistence: It’s robbery

The taxman is claiming that Umbrellas are trying to steal from him, but is it the other way round? Travel and subsistence: It’s robbery

HMRC is trying to reach the conclusion that overarching contracts of employment (OAC) are a form of underhand scheme designed by shady Umbrella organisations and other non-compliant employment intermediaries to avoid paying an estimated £400m in Income Tax and National Insurance.

There is no doubt that modern employment models have moved on since the original tax legislation was first drafted, but subsequent tax changes have simply not kept pace with current practice.

Nevertheless, for HMRC to contemplate removal of tax reliefs on previously acceptable expenses, which they introduced, based on an argument that too many people may be benefiting, is a poor argument that will not protect the interests of the vulnerable and lower paid.

Following the issue of a discussion document in December 2014 HMRC invited comment from stakeholders in the temporary labour market, to help the Revenue determine if some end hirers, agencies and Umbrellas, pressurise temporary workers to operate under OACs which in turn allows them to make claims for home to work travel costs that would otherwise be ‘normal commuting’ in order to reduce overall tax payable to HM Treasury.

What is really interesting is the reasons that HMRC have stated as to why they believe contractors should not be entitled to claim travel and subsistence from home to their place of work:

  • “It’s not fair” on other taxpayers who cannot claim, as these other taxpayers are effectively subsidising abuse.
  • “We want to level the playing field” and treat all taxpayers in the same manner
  • “Technically flawed planning schemes” being deliberate abuse especially of the vulnerable workforce.
  • “Because the Treasury wants to collect more tax” – to reduce public borrowing we could always collect more tax.

It seems most likely that if all of the reasons why HMRC want to change the rules are placed in order of importance, then the final one is the biggest driver and therefore highest priority, as they themselves confirmed. The remaining issues are the political justification for a very unpopular and ill-considered project.

Technical highlights

When a worker travels from home to their place of work, the primary assumption is that this is normal commuting and tax relief for the costs of travelling or subsistence is not allowable. However, legislation provides for an exception to this restriction if the travel is to a ‘temporary’ place of employment, rather than a ‘permanent’ one.

This ability (under certain circumstances) for the existence of an OAC to transform what would otherwise be a permanent workplace into a temporary one is what creates the tax relief for expenses.

Other types of workers not engaged under an OAC (permanent, or short term agency contracts), could sit next to an Umbrella worker, may make the same journey from home to the same place of work and are not able to claim tax relief for their travel costs. So there is a moral justification and a case for symmetry of treatment but that only carries weight if one assumes the risks, responsibilities and rights and obligations are also the same for differing types of worker. Which they are not…

HMRC wish to collect £400m more in taxation, remove this inequality, level the playing field and stamp out tax avoidance…and protect the vulnerable worker’s rights and income! (It is not disputed that within this figure some non-compliant business models exist, which rely upon an aggressive interpretation of how the tax laws should be applied. They may fail under anti-avoidance legislation and remain a legitimate target for HMRC.)

The alternative options suggested by HMRC to collect this tax are also open to comment and may even be extended to include personal service companies (PSCs). Today’s main targets seem to be Umbrellas and tax avoidance scheme users; tomorrow’s may well include an attack on the independence of PSCs and small businesses.

If we assume that the estimate of tax loss from HMRC is indeed correct at £400m and HMRC outlaw current tax avoidance models and legislate to make all travelling from home to work under OAC non tax deductible, who will be the losers?

Any increase in the tax take has to come from somewhere. Will contractors and temporary workers in general, but especially at the lower skilled end of the market, be able to afford this additional burden? Will they be able to pass it on to their employer (the Umbrella)? Will the Umbrella be able to pass it on (via the agency) to the end hirer?

Will UK plc be willing to pick up the costs of an extra £400m and in doing so accept this hit to their profits? If they do, the taxable profits of UK plc will fall by the same amount and reduce the tax they pay by approximately £84m…I’m not convinced.

Umbrella v Limited – what’s right for you? Understand your options and contract with confidence. Contact us  to discuss your options.


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.