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Why cant i be a sole trader?!

Discussion in 'Employment & Jobs' started by alexdc12, Jul 27, 2011.

  1. alexdc12

    alexdc12 Kilobyte Poster

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    Ok so i started my first IT contract last week and its going great! But the agency said i need to use an umbrella company and he found me one to use. Now i got paid yesterday and wasnt too happy to say the least, there was a lot of wool pulling going on!
    I am still registered self employed and have been for years and that way seems so much easier to me then dealing with these umbrella companies. So why cant i carry on like this?
     
    Certifications: GNVQ Advanced IT, CompTIA A+, CompTIA N+, 70-680
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  2. Apexes

    Apexes Gigabyte Poster

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    You can, but you need to register yourself as LTD Company - and you'll need to pay an accountant to do your books, which won't be particularly cheap.

    Unless you're earning 40-50k and over, sticking with an umbrella company is your best bet.

    Which one are you with?

    Are you claiming mielage, subsistence allowance? this will offset your tax
     
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  3. zxspectrum

    zxspectrum Gigabyte Poster Premium Member

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    Maybe because you chose IT in stead of being a fish monger

    Sorry couldnt resist

    Ed
     
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    Apexes likes this.
  4. alexdc12

    alexdc12 Kilobyte Poster

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    Lol
    MSL Forza
    I claim mileage but they can only offset it to £5.93/hr cos its illegal to go below the minimum wage. i got £81 of mileage and they paid me £25 and the rest is carried forward?! Its all a strange matter of affairs.

    Apexes when i say Sole Trader i meant On my own without going limited, i used to do it when i was in contruction and it was so much easier!
     
    Certifications: GNVQ Advanced IT, CompTIA A+, CompTIA N+, 70-680
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  5. Apexes

    Apexes Gigabyte Poster

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    If you get paid weekly, you won't get all expenses in one go, they'll spread it out over the month.

    I use OrangeGenie, and they pay my invoices exactly 7 days after i raise them, so the carrying forward luckily isn't a problem for me.

    I claim around £120 per week on average for expenses, and you'll see the amount of tax you're paying is a considerable amount less than the average.

    On average each week i pay around £60 on tax, where as in a perm role i'd be looking at around 150 odd per week.

    How they calculate it, i have no idea - but there won't be any wool pulling on their part, they'll be regulated and won't be stifling you for something
     
    Certifications: 70-243 MCTS: ConfigMgr 2012 | MCSE: Private Cloud
  6. SimonD

    SimonD Terabyte Poster Moderator

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    Usually an agency will want you as a limited company or via an umbrella because of the limited liability insurance you need to have (as a Ltd company you need to buy it, as an umbrella they will be providing it). Essentially having the insurance in place ensures that no one loses out should you as an employee of a ltd\umbrella company accidentally **** something up, all that happens in that instance is that your insurance will cover the liability (upto a set amount).

    Have a chat with Paystream who I used when a contractor (I used them for about 5 years without any issues) as they are decent and on the ball.
     
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  7. j1mgg

    j1mgg Kilobyte Poster

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    Definately dont just use the one they want you to use, have a shop around as different ones have different amounts and charge different fees.
    Hopefully someone has answered the sole trader part though, but i cant see if it is good in the construction trade then why it couldnt be used in the IT industry.
     
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  8. alexdc12

    alexdc12 Kilobyte Poster

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    id of said id needed liability insurance more in the construction industry rather then sitting here at a desk! but hey ho. i have spoke to a few umbrella companies now and they say cos my rate is only 8.50 an hour they cant offset that much against it cos it drops below min wage. They are using my money to pay me my expenses so all this carried forward stuff that is rackin up i will never see!
     
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  9. Modey

    Modey Terabyte Poster

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    You work in IT but can't see the importance to a company if their IT went totally pear shaped? And if it was your fault, that's why you need the insurance.
     
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  10. dmarsh

    dmarsh Terabyte Poster

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    A limited liability company is a seperate legal entity, it means if your company goes bankrupt you as an individual are relatively unaffected. Thats why its called limited liability.

    You should have indemnity and liability insurance to cover various stuff, you could break a companies systems, delete a needed backup or create a security hole and get sued.

    Insurance tends to cost about 400 pounds per year, accountants another 600-800.

    Technically I'm not aware of any reason you couldn't operate as a sole trader. Just agencies don't like it very much. Ultimately since they are your customer, you have to fall in line.

    As a sole trader you have to do most of the same stuff as a limited company. Just you don't get separate legal status and you can use a personal account to store business funds.

    Don't count on it, I've heard of a few scams...

    Not sure how many times I have to say this, that makes you a TEMP worker.

    Temp workers are either people filling in for short periods, but the temp nature tends to mean they get a bit more money or in other cases they are a cynical way to get extra permanent staff without giving full employee rights.

    It makes no sense to contract for less than 25 pounds per hour. I've already outlined 1000+ pounds of expenses, add to that time out of contract, business overheads, tools, training, sick pay, pension, holiday pay etc. On 10 pounds per hour you will be working the first 4 months of the year just to break even with someone in a similar perm position.
     
    Last edited: Aug 1, 2011
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  11. alexdc12

    alexdc12 Kilobyte Poster

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    i know im a temp worker its a 3 month contract.

    Modey, fair play on the insurance comment, i just think about physical damage i.e hurting myself dont think about the bigger picture :D
     
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  12. SimonD

    SimonD Terabyte Poster Moderator

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    There is a difference between Temp worker and Contractor, until recently I was a contractor (having contracted for over 12 years). In that time I did have contracts that were 3 months in duration but at no time during those short contracts did I class myself as temporary staff.

    If you're earning a low amount of money (below £20ph) then you may well be better off in a PAYE scheme rather than Limited Company because as DMarsh said, you're going to be spending more than you like on paying various charges out.

    Temp Agency staff and Contracting really are in different leagues, as a contractor you want to be earning a minimum of £20ph, if you're earning less then that you want to see about changing to a PAYE contract as that will save you a little bit of money and hassle every year (all your contributions etc are already taken care of as a PAYE, whereas as a contractor you have to consider Corporation Tax, NI and Tax payments etc).
     
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  13. alexdc12

    alexdc12 Kilobyte Poster

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    The agency that got me the job for some reason claims he cannot pay me paye i had to go thru an umbrella or go ltd. The "agency" is a 1 man band this i know for sure! so thats prob why he cant do paye.
     
    Certifications: GNVQ Advanced IT, CompTIA A+, CompTIA N+, 70-680
    WIP: 70-685, ITIL v3 Foundation
  14. alexdc12

    alexdc12 Kilobyte Poster

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    The umbrella company are basically paying me the same i would get as paye but obv my tax is less but im still loosing that money in other ways like empoyers NI e.t.c
     
    Certifications: GNVQ Advanced IT, CompTIA A+, CompTIA N+, 70-680
    WIP: 70-685, ITIL v3 Foundation
  15. dmarsh

    dmarsh Terabyte Poster

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    Generally you have an 'arms length' agreement with your agency, thats why you need an umbrella. The umbrella is the limited company that the agency deals with. You are an employee of the Umbrella company.

    My point is you are not really contracting and therefore such a set up is effectively not desirable for yourself.

    You have all the drawbacks and none of the benefits, the employer is getting cheap staff with no need to pay
    benefits. The agency gets their 20%. The Umbrella gets another 5-10%. You get no training, no real expenses, holiday pay, sick pay, paternity leave, bonus, shares, pension, equipment, tools, yadda yadda.

    You are effectively probably 5k worse off than a permanent employee per annum at least, plus you have no legal safeguards.

    By being PAYE, we were infering that you should be directly on the employers payroll (not the umbrellas). No agent, no umbrella, this whole scheme is in effect you helping others to exploit you.

    It works well for contractors as they are skilled individuals that act as consultants and can charge themselves out at multiples of decent permanent rates. You are not even on a multiple of a poor rate, you are on just above minimum wage.

    As a lower rate taxpayer its highly unlikely there are any advantages at all to being paid in this manner. You will still have the same basic rate PAYE allowance. Your Umbrella will have to pay corporation tax on your earnings.You will still have to pay NI. You will get some minimal expenses but these will be paid out of your meagre temp rate making them pretty worthless.

    As you said yourself, it plain doesn't add up.

    Like myself and SimonD said, there is a break even point where it pays to contract, its around the 20-25 pound per hour mark for most people. Less than that and you should seek an equivalent permanent position.
     
    Last edited: Aug 1, 2011
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  16. alexdc12

    alexdc12 Kilobyte Poster

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    This company wont pay me themselves i doubt cos like i said its only a temp position rolling out all the new it euipment then i doubt ill be needed! but we'll have to wait and see!
    Thanks everyone for your comments been really helpful. roll on £25/hr lol
     
    Certifications: GNVQ Advanced IT, CompTIA A+, CompTIA N+, 70-680
    WIP: 70-685, ITIL v3 Foundation

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