Please help!!!

[material girl]

Ive been given an opportunity which I dont want to miss out on to work for a company as a freelancer.

How the heck do I set up as one of those?
Does it mean I have to start my own business?
Where do I go for information?
Do I have to register somewhere?
How much will it cost me?
How do I deel with wage tax and NI?

Please help!

[kyber]

Freelancer just means they can use you or not as they see fit and you do not get the same benefits/protection as a regular (full or part time) employee. If you "freelance" a lot for just one company though there may be some problems on their part with the tax man.

You do not need to set up your own company as you can just act as an individual (including as a sole trader) accepting contracts as and when you wish for rates you agree. Key issues will be though on where you do the work, whose equipment you use to do the work, and the level of responsibiility you have for the work (do you get commisioned to produce a certain number of products meeting a certain criteria - ie. design, quality, etc - agreed on a consultative basis. within an agreed timeframe OR would you be working more on a "peacework" type basis).

If you are going to do a lot of contracting work for a number of different companies then it is probably worth setting yourself up as a limited company and then you do get into paying yourself in various ways. A few people will be along shortly to tell you all about this. Again, if you working almost exclusively for one company then some of the tax advantages and protections you can benefit from as a limited company will be lost. [The dreaded IR45 rules if I remember correctly, anyone?] [I should have said IR35 as has been pointed out in subsequent replies - updated for reference]

It would help first though if, without giving away any cofidentialities, you could provide a little more information (covering some of the points I made above as a starter) about how you see yourself being used by this company and what other work you would be doing for them.

Stuart

[material girl]

Hiya Stuart

Are you following me!!

Weve agreed hourly wages
Id be working from home
As far as I can see Id only be working for the one company under an agreement ie what I can produce per week.
Id use my own equipment
I assume my responsibilities would be producing the correct amount of satisfactory work and sending it to the appropriate place on time

I see this small company expanding and Im willing to help build it up working business hours plus more if necessary.

My main concern is how i go about making sure I pay taxes, NI etc.I dont know who to go about starting that up.

How is being a freelancer different to having a business?

[kyber]

Are you following me!!
:lol: I seem to remember I pointed you to this forum in the first place and I found your corresponding post on The Sewing Forum (http://www.thesewingforum.co.uk) (the creation of which was inspired by this forum and is built is on the same underlying forum software) after I replied here.

I note you use the word "wage" - this suggests a casual employee basis. I shall sit back now as there others on here who know far more about this sort of stuff than I do.

Stuart

[material girl]

I was only being silly, thanks for recomending it and thanks for the info.

When you say wage,are you saying you think Il only be employed every now and again??!
I get the impression Im wanted full time as the owner wants a kind of business partner to build things up.

[Miss R]

Hi Materialgirl,

Just thought let you know that there is a PR guy on board who knows about freelancing, Andy from 10Yetis.

All the best

[material girl]

Thanks Miss R,just tried to email him but it wouldnt send,grrr.

Calling Andy..calling Andy....come in Andy.

[10 Yetis]

Sorry... I am down in the big smoke today, currently sat in a hotel trying to remember my passwords to sites like these and checking my mail... bit worried the email you sent has not arrived?

Anyway... to start with your name is great.

Righty ho, you need to ring Inland Revenue and they will sort it all out for you. People are scared of inland Rev, but if you are freelance they are ace... basically they will sort out your tax stuff for you, but you are best placed to also get in with a good accountant who can give you advice on how to take the rest forward. Us Freelancers at first are very wary of accountants cos we think they will charge the earth, not the case, get a good one and for the few hundred quid(usually around that figure, but depends on how much you are putting through the business) and they are worth there weight in gold, or should that be platinum.


As a guide, if you are freelancing whilst doing a full time job the you need to set aside roughly one third of any money taken for our friend at the tax office.

I can email more stuff to you, as I don't think the admins would encourage or want other sneaky tips being posted on here.

By the way, let me know if the beemail is not working.

[kyber]

Andy,

I am in awe of your PR and Marketing skills. Within a short space of time on the forum, people are recommending you and others are shouting for you.

Wow! :lol:

Stuart

[10 Yetis]

Stuart,

Its amazing what a splash of colour, a sprinkling of wit (sometimes it works, sometimes it doesn't) and a commitment to keeping it real... can do.

Hopefully, intermixed is the readers belief that underneath all of that is a little fella (me) who vaguely knows what he waffles on about?

Cheers for your comment Stu, and from an IBM guy as well!

[material girl]

My name is inspired by the one......the only.......Madonna!!!!
Im also into sewing making the name very appropriate(material/fabric)

Pleeeeeeeeeeeease send me any information you can.

I tried to add colour to this post but I just ended up having to wipe felt tip pen off the screen(brrr..tssshh)

Im fine when people explain things to me in simple terms.
From what I can understand I reap money from any work I do and instead of paying tax etc each month I pay it in one go in a big horrid lump sum which they are gona have to pry out of my hands with a pitch fork.

Am I allowed to post my email address on this site or is there a private messaging system you can use?

Thank yoooooooou.

[kyber]

Cheers for your comment Stu, and from an IBM guy as well!Mavericks like me that joined from PricewaterhouseCoopers Consulting are not necessarily representative of blue blood feelings :wink:

Stuart

[gj]

I guess I am one of the guys Stuart said would be along in a minute

Stuart very close - IR35 in fact
Again, if you working almost exclusively for one company then some of the tax advantages and protections you can benefit from as a limited company will be lost. [The dreaded IR45 rules if I remember correctly, anyone?]


Info so far posted is helpful - can I summarise it like this:

OPTION 1 SOLE TRADER
Tax and NI is payable on profits - ie income less allowable expenses. You have to put your tax aside to be paid in two lump sum instalments in January and July (bit more complex than that but on an ongoing basis that is roughly what happens)

OPTION 2 OWN LIMITED COMPANY
Tax and NI is payable on profits - ie income less allowable expenses, but NI saving available by paying a small salary and balance as dividends

A limited company will generally give you a better net income than a sole trader, even after slightly higher accountancy fees. :!:

OPTION 3 OWN LIMITED COMPANY ADMINISTERED BY AN ACCOUNTANT - generally referred to as a "managed company".

THIS WILL GIVE YOU SLIGHTLY LOWER INCOME BUT NONE OF THE HASSLE OF ADMINISTERING THE COMPANY

OPTION 4 USE AN UMBRELLA COMPANY
An umbrella company effectively employs you and you also have a share in the company - company invoices the company you work for - you are paid a small salary, expenses and dividends. Tax is deducted on your income each week/month.

TYPICALLY AN UMBRELLA COMPANY WILL GIVE A SIMILAR NET INCOME TO BEING A SOLE TRADER BUT MEANS YOUR TAX IS PAID AS YOU GO AND YOU HAVE NO RESPONSIBILITY FOR ACCOUNTING/ADMINSITERING YOUR OWN BUSINESS.

For a fun look at sole trader versus limited company, take a look at this Business Link Website http://www.businesslinksolutions.co.uk/downloads/seminars.asp?mid=5
and select the Jaffaland presentation - this is an animated version of presentation I do - hope you like it! You will need to register with business link but that is no bad thing - there's some good info available on thier site anyway.

If you want to call me I can talk you through the options in a few minutes and recommend a logical way forward.

If you send a PM with your email, I can also send a summary sheet with graphs showing the different net income as a sole trader or limited company.

It sounds to me as though the nature of the work you will do will fall outside of IR35 even though you will be working for one company almost exclusively. I could also give you some guidance on the wording of a contract for your services.

Hope the above is helpful

Regards


Graham

[Ian J]

Weve agreed hourly wages
Id be working from home
As far as I can see Id only be working for the one company under an agreement ie what I can produce per week.
Id use my own equipment

There is a possibility that the Inland Revenue may view you as an employee of the company in the circumstances that you have outlined

[gj]

Ian J has a point that there is a danger, but I think it is small, if I have interpreted the relationship correctly.

The agreement you have between yourself and the company you are doing the work for should make it clear that you are not an employee. Working for only one company does lead the Revenue to assume that you are an employee. However, this is not the only factor - you will be using your own equipment, you will be paid on production, you will have to make good any poor work at your own expense or not get paid for it (I assume), I guess you could if you chose to, subcontract the work out, and the company you do the work for will not control when and how you do the work.

All of these factors clearly point to the fact that you are not an employee - but getting this in w ritten contract is the key.

As is happens, if you operate as a sole trader, it is the company you do the work for that runs the risk of the Revenue treating you as an employee, if you do not get the above sort of points into an agreement. The Revenue would seek to collect tax, NI and interest and penalties from the company for failing to operate PAYE correctly.

If you operate through a limited company, then IR35 could apply, and it is your own company that runs the risk of additional tax. However, the contract between your limited company and the company you do the work for, should have the factors I listed above included, so that IR35 will not be an issue. It would also be good if the contract did not name you, but simply said that your company will provide production services (or whatever) to the other company.

One small point, you say you have agreed an hourly wage, but you indicate elsewhere you will be paid based on production. The hourly rate is not a problem if the other key factors are in place, but a price for the work would be an additional element to the argument that you operate your own business, whether this be as a sole trader or limited company.

Regards


Graham

[Alpha]

After belatedly following the thread I thought I might as well add a couple of comments.

1) IR35 legislation applies not only to limited companies but can also be applied to sole traders and partnerships, it is the relationships which are considered.

2) Do I remember correctly material girl that you are already currently employed and therefore this would be additional work? In which case there would probably be no requirements for class 2 NI to be paid - only class 4 on the profits of your 'trade'.

3) The Inland revenue would look at the employment contract as a whole and would need to consider -

whether you would only be able to work for one company
Whether you decide how and when you work and the number of hours per week/month.
Are you paid by the hour/week/month and can get overtime/holiday pay
How you are remunerated for the work
Whether the risk is essentially yours(eg you are responsible for providing the quality of the output and have to put right any quality issues at your own expense)

Any contract that you enter into should address these issues providing that it correctly describes the business realtionship.

[winton50]

Can I suggest trying to get at least a little work from other companies. As I understand it this is one of the keys to the IR35 relationship test i.e. do you work essentially as an employee (whether casual or permanent) or are you an individual or company trying to attract work from a variety of sources?

I think the IR would be happy if you started off with only one client as many businesses do but if you continued to work only with that one customer then questions would be asked.

[material girl]

Just to fill in some details which I cant remember if Ive mentioned-A lady with her own ecommerce fashion company would like me to make her clothes designs for her.
The lady Il be working for has said she will draw up a contract.I assume it will deal with what she expects of me.
I would definately take responsibilty for any work i ruined.I wouldnt expect to be paid for it.

I realise it seems a bit wishy washy at the moment but at least I have someone to work for that likes what I do and wants me to join her building up her company.There are a couple of companies I can approach near me where I could see if they would be interested.
Depending on money/time depends on wether I need to approach other companies.

Yes Im at work right now trying to work out the best way to quit today.

Thank you so much for the advice youve given.Im in a bit of a tizwas about it all and dont know exactly what to go for.

Would my first port of call be to phone Inland Revenue and tell them what Id like to do and go from there?But then again I like the idea of an umbrella company!!!!!Help!

[winton50]

Yes phone the inland revenue.

As previously stated they are not the ogres that they are often made out to be.

You may also find that one or two local accountancy practices will offer a free or low cost initial chat to go over your ideas in the hope that you will sign up with them.

I would also echo the idea of contacting your local business link because they should be able to help you if nothing else than with links to the two above.

[Mole End]

If you are concerned about IR35, the PCG can help, they have researched wording for contracts etc and can also help you get reduced insurance rates, mortages etc. Their website is :

http://www.pcg.org.uk/

I find it useful.

Regards,

Jan Strassen
www.integratedlabels.co.uk

[material girl]

Me again.

Just reread some bits.

Can I do a full time job AND work freelance?

I have another question but Ive forgotten it.

[Mole End]

Yes you can, unless you contract of employment says otherwise. Just make sure that you save the right amount of money from your wages to pay the tax/NI bill at the end of the year - the amount of this figure will depend on how you decide to operate and how you pay yourself.

Regards,

Jan

[material girl]

Excellent!Thanks.

Ive saved up quite a bit over the years so Im safe in knowing il have enough money to cover most things tho its gona be odd handing out a lump sum of 'my' money.
I know money may be a bit up and down for a while but as you say itl make me decide how to operate.

[Alpha]

So MG are you now saying that you will remain employed and work freelance in your own time or are you going to concentrate on your own work and get some part time work to fill in?

If one I presume you will not need that money saved to pay tax bills as it will be paid out of the additional income.

[material girl]

Id like to give up my current job(as Ive sat here for 1 and a half hours and done nothing but email friends,its that busy!)so I can spend working hours focusing on the new job, but if I needed extra cash Id like to know i could go get a job working in a bar in the evening if i needed to.

[gj]

Sounds like you may be getting to information overload on this now!

You are clearly serious about doing this and I think that once you have decided on the way in which you will trade, lots of other things will fall into place.

It is usually very clear to an accountant what the best method is going to be, and we include our opinion on this within our initial free interview - accountants in your area may well do so too.

If you want to give me a ring on 01908 630230, I can probabaly take you through the decision making process within 10-15 minutes. That may help clarify your thinking and then you could go and see a local accountant for a free initial consultation for further advice (or go see 2 or 3 - contact your business link for some names - they may operate a supplier matching service as our local business link do and this will give you the chance to see which firm suits you best etc)

Just a quick point on whether you could take casual employment to top up your income from your business - there is no problem with that at all.

HTH


Graham

[material girl]

It is a humungoid information overload especially for someone who is still tied to apron strings.

Im such a fraidy cat to contact anyone, which is why I like email coz I can think in my own time and not actually have to speak.

Thanks for the info, Il get off my butt soon.

Im a good advert for myself arnt I!?:o/

[gj]

You are npt alone in feeling as you do - it is a big decision you are embarking on and most people in the country will never know what it is like as they will never even try!

I will send you a PM with some questions, which, if you want to you, you can answer in your own good time and pm or email back to me and I can give you my opinion.

HTH


Regards


Graham