consultancy advice

[uglygit]

Hi Guys,

New owners want to get rid of me back end Jan 2008, but they also want me to setup shop as a consultant and service their IT needs.

I haven't got a clue on consultancy IT services and on what to charge (hourly,monthly,by job etc), services they want me to cover are:-

firewall management
anti-virus management
server management (windows 2000,2003 & OS400)
physical network including 1 laser (cat5 & fibre)
notes database programming & administration
telephone system maintenance
printer & pc maintenance
erp database & system maintenance
remote warehouse printer maintenance
time and attendance maintenance

I'd appreciate any advice anyone has to offer on what to charge,when, whats best etc . thanks

 

[Admin]

£800 a day is my rate if you need any help

 

[monaghan]

Read up on IR35 as you'll almost certainly be caught under these rules if you have just the single client. If you can charge by the job, then this may help, but I'm not an IR35 avoidance specialist. There was also another bit of legislation introduced after IR35 which may also trap you, this should come up in a Google search on IR35 though.

 

[Jeewhizz]

Aye, IR35 is going to get you. I have a good accountant who can assist if you would like? If so, PM me, and i'll send over details.

In regards to day rates, just name a sensible figure. Just remember, you'll most likely need to VAT register (turnover>£65k iirc).

£800/day isn't bad!

 

[monaghan]

When you do your sums, remember that you have corp tax to pay, also employers NIC in addition to your own NIC. You will not earn whilst you are training, so add a float for an annual training budget for the cost of training and also loss of earnings whilst on the course. Also your holidays and sick will be a loss of revenue as well.

Open an interest paying deposit account and pop your VAT and other taxes away here routinely so that the cash is ring fenced but still at hand when the bills come in and you can also make a few quid from the interest.

It's also worth making sure that you have a personal "reserve pot" to pay the mortgage and other critical bills and feed the family in the event the company is not generating sufficient revenue.

 

[jwm]

IR35 can be avoided with a well worded contract, even with only one client

I would recommend joining the professional contractors group. As part of their standard membership fee (£120), they supply proforma contracts which are designed to combat IR35. You can then tailor these to your needs.

Link to the contracts is

http://www.pcg.org.uk/cms/index.php?option=com_content&task=category&sectionid=42&id=136&Itemid=401


If you decide to write your own contract then this should be reviewd by an IR35 expert, best in this field is Accountax (staffed by ex tax inspectors!), but this is pricey - £299 plus VAT. Accountax were involved in the drafting of the PCG template hence why I would recommend that as a cheaper option.

 

[uglygit]

Monaghan - I don't need training I already know that stuff

All this ir35 stuff , It's a bloody minefield, Contracts,Taxes etc

I think I'm going to sod that and tell em to hop it once they give me my redundancy pay and get your normal garden variety job.

Why should I go out on a limb to give them an it service if there getting shut of me.

anyway thanks for your advice guys.

 

[stevebrowne]

>>Why should I go out on a limb to give them an it service if there getting shut of me

Because you'll be amazed how much more they are able and willing to pay.

As other say, look out for IR35, although that concerns control. If you are able to say "No, not coming in today" and control your own hours, or use your own equipment etc. then IR35 is easily avoided. It is aimed at people who leave a job on Friday and come back on Monday as a freelancer doing basically the same job. Unfortunately as with most legislation by the current muppets it works like a blunder-buss and manages to catch lots more people than intended (or was it designed that way...? hmmm.)

The other one to look up is S660A, but this is when a couple are joint shareholders in a personal business and the revenue decide to suddeny tax it all as one person's earnings, meaning higher tax and NI. Completely immoral and simply more tax gouging. Reference: Artic (Artcic?) Computing

An alternative is for someone else to sign the contract and float you in as the contractor for a slice of the action. ie. Bill end client £800+VAT per day. You do the work and invoice the intermediary for £700+VAT per day for example. But there might be lots of strange laws around that area.

So:

Pros: Easy first contract, likely to pay better than currently, potentially more flexibility regarding working hours etc.

Cons: Might be tax implications, emotional feelings after they wanted rid.

Remember to not take it personally. It just like NOT reneweing a domain name - the budget doesn't work out. Contractors/consultants usually come from a (much healthier) different budget line

Depending what you do and where you are, daily rate should be from £400 - £1500+ per day. If lower, rememebr that YOU have to account for your own personal tax so 25%-40% of what they pay goes, along with 10% National Insurance and 12% employer's National Insurance. So 47% - 62% goes to the taxman straight away. Then you have accountancy costs and everything else. You need a higher rate to cover all of that. Permies don't realise that...

 

[uglygit]

Thanks for all your time and effort Steve, I really appreciate it.

I guess I really need to think about it, I should really be thinking with my noodle instead of getting angry with them but they really are evil bosses (when I die and go to hell I'm expecting these bosses to be running the show instead of old nick - 'we go rid of him , he was too soft ' will probably be the line they come out with).

I guess being my own boss means I would have hours to suit me as and when, and not get told off for not having 'office respect' (left once at 4:57, even though I come in half an hour early and work at home).

 

[monaghan]

Monaghan - I don't need training I already know that stuff

You may not need training now, however as a contractor, your knowledge & skill is your "product" that you are selling and you need to factor in an element of training (whether formal courses or self study) to ensure that you continue to have a relevant "product" to continue to sell over the years to come otherwise there'll be no demand for your current skill set and no chance of income. I was contracting in the last "boom" before IR35 and saw lots of people with no real forward planning (I got the chance to write my own job description and work as a permie 5 mins from home, so I got out before IR35 really started to hit home, but I still keep the company running and generate a bit of income this way)

The real "trick" in contracting is to gain a base skill and then get a contract where you can refine that skill and then move on to a higher hourly rate as the demand for this new skill peaks, then repeat again for the next skill and so on.

Taxes & contracts can all be taken care of by an accountant (which you will be able to afford as your rates will factor all this in) and if you pick the right one, then you'll simply get a list each month along the lines of "sign this, write a cheque for £xx to y and post this form".

All the best whichever route you choose. Working for yourself can be a hugely rewarding, it can also be a nightmare. My advise would be to give it some serious thought if you don't have a family, if you are a family man, then it's more of a jump to make as the little ones won't understand the fact that there's no money comming in on occasions.

 

[retired_member3]

If it's not VERY worthwhile I wouldn't do it. If you know all that stuff you can earn a good wage without the stress of being responsible for it all.

 

[olebean]

Much of what people suggest is reasonable advice. What you should remember is why they decided to get rid of you in the first place.. perchance a cost cutting exercise? then asking a naive business individual to start his own business with one contract? Becareful of that strategy, it could be things start ok then squease you. When you start jumping up and down, they might squease you even more in hope you pop...

 

[jwm]

>>

Depending what you do and where you are, daily rate should be from £400 - £1500+ per day. If lower, rememebr that YOU have to account for your own personal tax so 25%-40% of what they pay goes, along with 10% National Insurance and 12% employer's National Insurance. So 47% - 62% goes to the taxman straight away. Then you have accountancy costs and everything else. You need a higher rate to cover all of that. Permies don't realise that...

You can avoid the NI costs if you pay yourself the minimum salary - currently around £5k then take the rest as dividends. The dividends, come with a tax credit at the basic rate as well, so you don't pay any Income tax up to £42k (combined salary and dividend) as its covered by the company paying corporate tax at 20%.

Also remember that as a contractor a lot more expenses become tax deductible.

I have been contracting for about 5yrs now and am a lot better off than I was when I was a perm. So would highly recommend it.

Have a look through the PCG website I mentioned before as it covers IR35 in detail and also the Artic case mentioned above. Then get yourslef a good accountant to keep you right, you might even be able to barter your IT skills for some accountancy work!

 

[Jeewhizz]

You can avoid the NI costs if you pay yourself the minimum salary - currently around £5k then take the rest as dividends. The dividends, come with a tax credit at the basic rate as well, so you don't pay any Income tax up to £42k (combined salary and dividend) as its covered by the company paying corporate tax at 20%.

HMRC are clamping down on this. If you pay yourself a dividend monthly, they may see it as a salary, and you'll be charged tax on it (backdated). From what I've heard, this is mainly aimed at small Ltds where there are a few directors, and that's all.

It's fine to pay yourself a huge dividend every 3-4 months however!

 

[uglygit]

thanks guys, appreciate all the advice. I'm still thinking hard on this one.

We've all got our consultancy redundancy meetings today.

I've been trying to get the girls in the office jobs by ringing around all my contacts, I've got one of the girls an interview not far from where she lives so hope that turns out right for her.

 

[tifosi]

Thanks for all your time and effort Steve, I really appreciate it.

I guess I really need to think about it, I should really be thinking with my noodle instead of getting angry with them but they really are evil bosses (when I die and go to hell I'm expecting these bosses to be running the show instead of old nick - 'we go rid of him , he was too soft ' will probably be the line they come out with).

I guess being my own boss means I would have hours to suit me as and when, and not get told off for not having 'office respect' (left once at 4:57, even though I come in half an hour early and work at home).

just consider it well paid revenge...

S

 

[tifosi]

Much of what people suggest is reasonable advice. What you should remember is why they decided to get rid of you in the first place.. perchance a cost cutting exercise? then asking a naive business individual to start his own business with one contract? Becareful of that strategy, it could be things start ok then squease you. When you start jumping up and down, they might squease you even more in hope you pop...

Also make sure any potential consultancy position is totally seperate and not dependant on the consultancy phase of the redundancies, or on any statutory or company redundancy scheme. Effectively redundancy means that the job has now gone due to restructuring or whatever. The consultancy would not be a like for like job structure.

If it is, within 3 months I think, then they're breaking employment rules.

S

 

[stevebrowne]

What you should remember is why they decided to get rid of you in the first place.. perchance a cost cutting exercise? then asking a naive business individual to start his own business with one contract? Becareful of that strategy, it could be things start ok then squease you. When you start jumping up and down, they might squease you even more in hope you pop...

Of course, being an external party with a contract in place (and make sure the contract IS in place!), if they start to play silly buggers you can sue their ass off.

One client for a contractor is not uncommon at all. If you contract from 9am-5pm Mon-Fri, not many people want to pick up yet more hassle from other clients.

 

[olebean]

Of course, being an external party with a contract in place (and make sure the contract IS in place!), if they start to play silly buggers you can sue their ass off.

One client for a contractor is not uncommon at all. If you contract from 9am-5pm Mon-Fri, not many people want to pick up yet more hassle from other clients.

I agree and they can sue you..

 

[uglygit]

Just had the consultancy meeting, the enhanched package they offered to the four of us has been withdrawn. Although they have now promised a bonus if we help with the 'handover' - yeah like they'll stick to their promises.

Had some good news though they've failed the Tesco audit so they won't get the contract until they resolve all outstanding issues (one being underpayment of factory workers - less than minimum wage for all polish workers).