We have helpful finance management advice on debt, loans and credit cards

Being a contractor has always had its advantages. Currently in this economic climate, people who are in permanent jobs are realising that their jobs might not be so ‘permanent’ after all – ergo turning their heads to contractual roles instead. Being a contractor ultimately brings a lot to the table career-wise. As a contractor, you have more control, flexibility, a chance to develop skillsets within a chosen field, financial bonuses and even scope to travel or even work from a home office – just to name a few aspects. What attracts people to permanent jobs is the perceived security combined with schemes for pensions and annual paid leave. Making the decision to turn contractor using a contractor accountant can be intimidating for some at first who like the comfort of their permanent job, but as once made it is really possible to reap the rewards in all terms of your career.

Making the move to Contractor

The first step into becoming a contractor is, as obvious as it sounds, find a contract. You may be sat at your desk thinking that this not a smart move, since there are not many jobs available – however, recent years have shown a rise in contract roles for companies are hesitant to employ permanent staff simply because they are not able to support them long-term. Important things to remember when getting a contract:

• Refresh your CV – Highlight key skills that help you look the best as a contractor whilst talking about recent employment and what you achieved.
• Find recruitment agencies that concentrate on your denoted field of work.

Types of Contractor

There are different ways that a contractor can work by – limited and umbrella. Umbrella companies are great for short term, smaller value contracts, whereas limited companies are ideal for longer contracts where the take home money is £25,000 plus.

• Limited – take home pay around 80% of your contract total value – lots of paperwork and legal technicalities to take care of.
• Umbrella – take home pay around 60%.

IR35

IR35 is something you need to take careful note of when you become a contractor. One of the first things you need to check is your IR35 status, find out whether you fall inside or out of IR35 legislation – before you sign that contract. If you don’t do this, you could potentially find yourself in a lot of legal trouble. If you are within IR35, you will take home less money; simple. If you operate through a limited company if inside IR35, there are true benefits to be had, including; Flat rate VAT scheme enabling you to pay only 95% of your contract. This is where working with a specialist contractor account comes in handy.

Contractor Accountants

It is important to select the right contractor accountant for you. Be specific, don’t just wander down the high street and choose a general accountant – find one in the same field as you who can deal with you on a personal level. Take your time, don’t rush the decision. Always look for accountants who look trustworthy – you can see this from how long they have been established and how many awards they have obtained from top organisations.

With the subject of IR35 feeling like a grey area for most contractors, it is recommended that any contractors unsure of their IR35 status seek expert advice from either an accountant or most of the time recruiters will also be able to advise you on this topic, however it depends how uncertain you feel about your IR35 status.

To avoid your contract and working practices falling inside IR35 legislation, you will need to clearly show that the way you are working is that of a self employed contractor. HM Revenue and Customs clearly define what in their eyes classes as ‘passing IR35’; visit their website for more information, but as ever it is worth speaking to a specialist contractor accountant who will be able to simplify things for you and discuss this topic further.

Some contractor accountants also offer free verbal IR35 contract reviews which is quite handy. You can also ask for a full written formal review with a report outlining areas of weakness; however nobody can guarantee or insure you against IR35. You can buy IR35 insurance which will cover the accountancy and legal costs to defend your case but nobody guarantee you’ll be inside as it’s based on what HMRC decide.

You can fall inside IR35 legislations and still work as a contractor through your own Limited company there are still tax gains to be had working this way, and you will only pay tax on roughly 95% if your tax able income rather than the full 100%. Again talking to a specialist accountant means they will be able to advise you on your current contracting situation and advise you on the best way to contract which will maximise your take home pay.

IR35 is in essence quite simple but just having a cleverly written contract isn’t enough, you need to also make sure your working practices reflect your contract.

“Small businesses are particularly vulnerable as they often don’t have the systems in place to protect themselves or the resources to draw on if they do become a victim. With identity theft on the increase, it is essential for SMEs to recognise the potential threat and take steps to ensure their business is protected. If they do suspect they have become a victim they should inform their bank or local police.”

- Danny Harrison, CPP Identity Fraud Expert.
Within the last year, 15000 businesses have claimed to have fallen victim to corporate identity fraud – showing a remarkable rise in crimes against SMEs. Within this article, the most common form of corporate identity fraud is explained – and ways of preventing it.
Companies House
SMEs are easily susceptible to fraud through criminals taking advantage of a small loophole within Companies House. Fraudsters can change the address of any business by submitting a false AD01 address, so they can apply for a company credit card or order fraudulent goods on the company account. This can be done without anyone noticing due to Companies House not alerting the company director or secretary that there has been a change of address. SMEs believe that corporate identity fraud is normally committed by previous employees of the business, working directly – or through an associate of theirs.
The majority (68 per cent) of SMEs are unfortunately unaware of this loophole, mistakenly believing that Companies House checks and verifies the details of documents filed with them. A recent survey of two hundred small and medium SMEs revealed that, through a combination of ignorance and lack of information given to them, 87 per cent did not have the adequate insurance in place – leaving them wide open to corporate identity fraud.

Protecting your Business

Companies House does offer some basic protection in the form of the ‘Protected Online Filing System’ (PROOF) scheme. The added security which PROOF provides is a way to stop the fraudulent change of the registered office address and change of director or company secretary, helping to reduce the risk of corporate identity fraud. However, there are other precautions which must be taken to fully protect your business against fraud.

CPP’s top tips on protecting companies from corporate identify fraud:
 Limit access to company sensitive information to only key employees
 Make sure all company sensitive information is securely stored and only transferred using passwords and encryption in case it is lost or delivered to the wrong recipient
 Ensure that company staff are not able to remove sensitive documents from the office
 At Companies House file information online (WebFiling), submit all papers online (PROOF) and subscribe to an alert system that notifies companies when changes to their details are made (Monitor). More information about these services and combating identity fraud can be found at www.companieshouse.gov.uk