Making the switch to contracting in 2014
If you have been unhappy with your work-life balance or are simply looking to take more control of the conditions surrounding your employment, you may well have considered becoming a contractor. However, it is common to have concerns regarding the change.
The big change is in terms of working conditions, as those who operate on a freelance basis have the ability to structure the jobs they do around their working life, leaving them with far more freedom when it comes to making arrangements for childcare, or just having the capability to pursue interests away from work.
Many people may well have used the start of 2014 as the motivating factor they needed to pursue alternative working arrangements, with some even making it their new year’s resolution to become a contractor.
However, the one aspect that often puts workers off making the switch to contracting is the perception that they will spend the majority of their time struggling with accounting books and chasing payments.
While it is true that limited company contractors are required to keep extensive, detailed accounts, this is not the only option when it comes to working on a freelance basis.
Indeed, many people who make the switch to contracting discover their circumstances mean they may not benefit forming a limited company and operating in this manner.
This is because of the IR35 regulation, which considers whether you are a ‘disguised employee’ of your client.
Unfortunately, the regulation revolves around HM Revenue and Customs’ definition of the term ‘self-employed’ and this is not readily available.
However, it is generally believed that if you are in complete control of when, where and how you complete your contracts, can substitute and there are no mutual obligations between you and the client, you may be deemed to be outside of IR35.
Those who fall inside IR35 can then either choose to operate on agency payroll, or take the employment of an umbrella company (find out more here).
Indeed, many of those who are not caught by IR35 still consider umbrella companies, as this company becomes your employer and takes care of the administrative side of contracting on your behalf. All a contractor is required to do is file a timesheet and submit an expense claim – which can often be done online.
The umbrella company will then make all necessary tax and national insurance deductions, leaving you free to concentrate on your life outside of work, or even just completing more contracts.