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Contractor News

News and updates from industry experts

By Contractor Hub, May 25 2016 06:00AM

Entertaining a prospective or existing client can be a great way to strengthen business relationships, but many contractors may be confused as to whether they can reclaim these types of costs.



What are expenses?


Contractor expenses can reduce your tax bill at the end of each year, as your company will not be taxed on items and purchases that were made for your business.


Typical contractor expenses include:

• Travel

• The rent, heating and lighting of an office used by your company

• Stationary and other office items

• Mobile phone or business phone bills

• Computers and software

• Accountancy fees


Many limited company contractors might not be aware that choosing to entertain people through your business can mean that you are able to claim some tax relief.


However, what are you are able to claim back on will depend on who it is that you’re ‘entertaining’ – this is where you need to determine whether you are providing ‘business entertainment’ for clients or ‘employee entertainment’


In order for entertainment to be classed as ‘business entertainment’, it must meet a certain number of conditions. For example:


• Entertainment must be provided. This includes any hospitality, such as food and drink, accommodation, theatre and concert tickets, sporting events and nightclubs.

• It is provided without cost to guests.

• It must be provided for people who are not employees of your business.



Corporation Tax


All limited company contractors will need to pay Corporation Tax on its taxable profits, which is any profits that your company makes from doing business, investing and selling assets for more than they cost.


You can reduce your overall tax bill by reclaiming certain costs, however, it is not possible to reclaim the cost of entertaining clients against your firm’s corporation tax bill.



VAT


Value Added Tax, otherwise known as VAT, is a business tax that is charged on all goods and services.


When an employer provides entertainment for the benefit of their staff, the VAT incurred for employee entertainment is input tax, and is therefore allowable for tax relief and for claiming VAT.


Unfortunately, this is not the case for entertaining clients; if for example you were hosting an event with both employees and clients, you would only be able to reclaim the VAT that was spent on your staff.



Is it worth putting business entertainment costs through my company?


Many limited company contractors may question whether it is even worth putting business entertainment expenses through their firm.


In the long run it may help you to secure a new client, in which case, this would be beneficial to your company.


Also, by getting your business to pay rather than paying for the costs personally, this will save you the income tax you would’ve had to part with otherwise.





By Contractor Hub, May 18 2016 04:00AM

A recent survey carried out by Weebly has revealed that as many as two-fifths of contractors have turned their hobby into a successful money-making business.


If you have a hobby that could potentially be turned into a business, why not look to see if you could make money from doing something that you love to do?



Is there a place for your business?


Firstly, you will need to do your research – is there a place for you in the market and are there customers out there who would want to buy or use your services?


You definitely don’t want to take a hobby or passion and then ruin it by turning it into something you no longer want to do. The added pressure of having to earn money may take away the fun you used to have, so doing your research and ensuring there will be paying customers at the other end should take away this added stress.


Although it will take up a lot of your time, it may be worth testing the waters before fully committing to being self-employed. For example, while keeping your current job, you could look to having a side project of selling and marketing your goods to see if there are potential clients out there.


Use your lunch breaks, weekends and/or evenings to arrange meetings, make phone calls and carry out contract work. This will involve good time management and organisational skills, but it will be useful in the run long and help you to decide whether this is the direction you want to go in.


It is very important to prepare yourself for the world of self-employment, and by doing it almost on a part-time basis along side your current job should give you a good idea of how it could be full time.



Make contacts


As someone who is self-employed, building contacts is vital for keeping a business going.


LinkedIn is a great way of reconnecting or meeting new business minded people who may be interested in your services.


Having your own website is also a must-have in this day and age, as it will work as your own personal CV and portfolio and is a good port of call for people who are interested in your line of work.


A few simple tips for having a good website is to ensure that it is:


• Professional looking

• Has a simple layout, avoiding too many pictures and words on one page, as well as making it easy to navigate.

• Full of plenty of keywords that are relevant to your trade, taking SEO into consideration and making sure that you choose your URL carefully.



Hire a good accountant


A contractor accountant is an excellent source of professional financial advice and guidance; there’s also the fact that a good, reliable accountant can save you money in tax savings, as well as ensuring that you meet all your legal obligations with Companies House and HMRC.


The key factors to consider when choosing a contractor accountant are:


• Whether they specialise in contractor tax. It’s really important that you choose an accountant who specialises in working with contractors, as there will be a number of legislations and taxes that will only concern those who are self-employed.


• Ensuring that they qualified and registered with a professional accounting body


• Checking whether they have a fixed monthly income and whether their package will be inclusive of everything you require, such as tax returns, self-assessment, annual accounts and VAT returns.




By Contractor Hub, May 11 2016 03:00AM

For some people, they may decide to contract through an umbrella company if they’re trying self-employment out for the first time and want to see how it goes before fully committing.


If this is you, and you’re considering making the full commitment to a limited company, here’s a quick look at the differences between umbrella and limited companies:



Limited Company vs Umbrella Company


Working through an umbrella company means that you have less control (and therefore less responsibilities) compared to a limited company contractor, but this also means having a lot less benefits.


Your client or agency will pay the umbrella company that you trade through, and the company will then pay you. Because of this, you are essentially seen as being an employee of the umbrella, which means that you will need to pay the same National Insurance Contributions as a permanent employee, of course there is also the issue with the recent travel and subsistence expenses, whereby expenses have been significantly restricted for umbrella contractors.


For many people, the idea of running their own business can be quite daunting, especially if they have no experience of working in the contracting sector. Trading through an umbrella company first can be a great way for contractors to gain some experience before taking on the responsibility of running a business.


By setting up your own limited company, you have complete control over the running of the business and any financial affairs, as you will become both a director and a shareholder of your company.


For many people, one of the main reasons why they decide to become a contractor is due to the fact that they can potentially earn more money than a permanent worker in the same job role.


When it comes to the earning potential of the two methods of contracting, running your own limited company means that you are more likely to take home more of your take home pay.


For example, on average, a limited company contractor can expect to take home around 75-85% of their earnings. This figure is much lower with regards to an umbrella contractor, where you can expect to take home around 60-65% of your earnings.



How and when should I switch?


If you have decided to move onto the next step of contracting and are looking to start up your own limited company, the best time to do this would be when you are in between contract renewals. This way you can get around any terms and conditions you may be tied to with your umbrella company, as well as avoiding any penalties for leaving the contract early.


Forming your own limited company is a fairly short process – to start a business you will firstly need to register your name with Companies House. You will to set up a business account, as you are seen as being a completely separate entity to the company.


It’s also worth looking into the different types of insurance that you may need – for example, by law you must have an employer’s liability policy in place once you start hiring staff. This will help you to pay compensation should your employee become ill or injured because of the work they do for you.


Many people also find hiring a contractor accountant extremely useful, as they can be an excellent source of professional financial advice and guidance that can save you money in tax savings, as well as ensuring that you meet all of your legal obligations.







By Contractor Hub, May 4 2016 04:00AM

A sole trader is someone who runs their own business as an individual and keeps all their business’ profits after the tax has been paid. Also, despite the name ‘sole trader’ it is possible to hire additional staff if they so wish.


Although life isn’t too complicated for this type of contractor, there will still be financial and legal responsibilities, such as filing out and returning a tax return each year and ensuring National Insurance Contributions are paid on time.


A sole trader will also be entitled to many benefits including being able to claim on a wide range of expenses for the running of a business.


As with most things in life, there can be some negatives with this type of contracting, and as a sole trader, you may find it difficult to secure contract work.


This is because recruitment agencies will only look to work with limited company and umbrella company contractors; this is due to the Income Tax Act 2003, which doesn’t allow an agency to become involved between a supplier and a client.


As a sole trader, this legislation would mean that the agency would have to treat you as an employee due to tax purposes.



Becoming a limited company contractor


Many people will decide to instead set up their own limited company, as not only will it be in some ways easier to find work, it also comes with many more benefits.


Setting up a limited company will mean becoming both a director and shareholder of your business where you will have complete control over the running of the company and any of its financial affairs.


Going down the limited company route is the most tax efficient method of working compared to working as either a sole trader or an umbrella company contractor.


Typically, you can be taking home up to around 75-80% of your earnings as a limited company owner.


Other pros to working as a limited company contractor include:


• Being able to claim a much larger and wider range of expenses – mostly anything that you have bought for the running of your business within reason.


• Having more tax benefits, such as having access to the Flat Rate Scheme – this basically means you can keep hold of some of the VAT you receive from your clients.


• Having complete control over your financial affairs.


• It’s not as much of a risk as some people may think, for example, you are seen as being completely separate from your business; so if your business should face financial difficulty, you won’t be at risk of losing your house etc.


• It’s also not as difficult as many people may think. There will be a certain amount of paperwork involved, however, as long as you have a good contractor accountant, much of the financial burden of can be taken care of by a professional, and it doesn’t have to be costly either.




By Contractor Hub, Apr 27 2016 05:00AM

Becoming a contractor and being able to watch your company grow and develop makes for an extremely rewarding career choice.


But in order to become a successful limited company, you will need to get out there and find clients, and the easiest way to do this is to ensure that you are marketing your business to all the right people.



What’s in a name?


When it comes to marketing your company, the first thing you will need to ensure is that you have the right brand for your business.


When thinking of what to name your company, decide on one that not only sounds professional, but is also memorable and related to your skill set or industry.


Design a professional logo that will catch the attention and be recognisable to any potential clients.



Connect with people


Keep connected to people who may need your services, whether this is previous colleagues, other contractors or clients past and present.


It’s important to never forget the power of social media – although it’s not always the case, social media sites, such as Facebook, Twitter and even Instagram can help you to get your name out there and attract new clients.


LinkedIn is a particularly useful tool, as it uses social media to connect with like-minded business people.


Just make sure that you always keep your profile page up-to-date and that all sections have been filled out to improve your chances of finding new clients.


Other useful hints and tips for using LinkedIn as a contractor include:


• Keywords – Make sure that your headline, summary and tags are full of keywords that are relevant to the type of field you’re in, that way potential clients searching for your line of work will find it easier to connect with you!


• Update regularly – Ensure that you update your status on a regular basis so that you’re always popping up on your connection’s feeds, putting you at the front of their mind.


• Join relevant groups – It’s really important to join groups that are to do with your line of work so you can see what’s going on in your sector and be made aware of any job opportunities that are about. By joining in with group discussions, you can highlight your skills and knowledge, which could very well make you stand out from the rest. If you can’t find a group that covers your particular area, then create your own!


• Sell yourself – Make sure that you have a great summary that sells you, your set of skills and achievements for other assignments; include anything that makes you stand out from the rest and show potential clients why they should choose you instead of others.



Create your own website


Having your own website will not only make you look more professional, but it will also work as an online CV, showing potential clients what you are capable of.


It doesn’t need to be expensive or difficult, and if you don’t know how to create your own, there are plenty of easy to use website builders available, some of which are also free.


Be sure to keep the layout simple, avoiding too many pictures and too many words on one page, and ensure that it is easy to navigate.


Include plenty of keywords that are relevant to your line of work, ensuring you keep SEO in mind, and choose your URL carefully, making sure the type of business is clear.


It might even be worth looking into guest blogging by researching other blogs in your sector that attract a lot of traffic and see if there is an opportunity to make a contribution. This is a great way of getting your name out there and can get you and your business maximum exposure.







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