IT Contractor Advice - Working As An IT Contractor

The following advice may be useful if you are considering working as an IT contractor for the first time.

Points to consider

The main advantages of contracting are:

  • greater earning potential
  • more control over the way that you work.

There are also potential disadvantages:

  • losing the security of permanent employment and benefits such as pension, private healthcare, paid holidays and training
  • periods of unemployment between contracts
  • costs and administration involved in running a business
  • you will no longer be part of a team in the same way that a permanent employee is.

Setting Up As An IT Contractor

You can set up in business in one of several ways:

Limited company

You arrange to set up your own limited company and are responsible for all associated administration, tax calculation and legal compliance.  If you own the company then you can decide the accounting split between profits and dividends, and you can reduce the tax bill by offsetting more business expenses than are allowable under the other options described below.  A limited company can be set up quickly and easily, but there are associated ongoing costs and legal responsibilities that must be considered.  Overall though, this is usually the most flexible option.

Umbrella Company

You become an employee of an umbrella limited company that looks after general administration and the calculation and payment of your income tax and NI.  Umbrella companies charge a fee for their services, either a percentage of your earnings or a flat rate.  You are free to make your own arrangements with your choice of company, but the following are links to some websites of companies that our contractors have used:

PAYE

Sometimes a PAYE contract can be arranged but this may restrict your freedom of movement and the value of your net income.

The Contract

In order to set up a contract you will need to provide the company name and registered company address as well as a copy of the company’s Certificate of Incorporation and VAT number. You will be paid after the submission of an invoice accompanied by a timesheet signed by you and the line manager.

The contract will be between your limited company and Blues Point Ltd.  It is important that you are happy with the contract terms and conditions before signing.

Limited Company Opt Out

The Conduct of Employment Agencies and Employment Businesses Regulations (the Agency Regulations), became law in 2004, replacing previous legislation.

Agency Regulations: http://www.legislation.gov.uk/uksi/2003/3319/contents/made

The Agency Regulations appear to focus on PAYE and payroll contractors, rather than the usual limited company contractor business format. As a result contractors wishing to register with an agency may now go through a much longer registration process, which involve a number of additional stages, including:

  • confirmation of the full type & nature of work sought;
  • identity verification;
  • model contracts (altered later) agreed prior to CV submission;
  • experience and training verification prior to CV submission.

The Government have recognised that contractors using either their own limited companies or umbrella companies are a special case. As a result contractors operating specifically via limited companies can opt out of the Agency Regulations.

Effects of opting out of the Agency Regulations

A contractor who operates as a limited company contractor will not be required to comply with certain procedural requirements of the Agency Regulations (e.g. identity confirmation).  There will also no longer be any procedural requirement for the recruitment agency to obtain certain information from the client before placement of the limited company contractor.  Also, certain contractual amendments need not be applied to the contract documentation to be agreed with both the limited company contractor and the client.

Why should a limited company contractor consider opting out of the Agency Regulations?

Some limited company contractors are taking the view that opting in to the Agency Regulations may place them at a disadvantage in securing a contract assignment with a particular client. In particular the additional procedural requirements imposed upon the employment business and the client may delay the evaluation of that limited company contractor relative to a contractor who has opted-out of the Agency Regulations. Also, some clients appear to be concerned about the additional employment risk of limited company contractors seeking to opt in to the Agency Regulations, and becoming treated in law as permanent staff. There have been a number of recent court cases where contractors have taken clients to court, when assignments have ended to obtain redundancy payments etc. Consequently, some clients fearing that a limited company contractor could be considered more akin to a temporary employee rather than an independent contractor may select only those contractors who have opted out of the Agency Regulations. Certain recruitment agencies are also suggesting that they will have to pass on additional administration costs directly to clients where there are additional administrative requirements for managing contractors who have opted in to the Agency Regulations. This would be handled in the form of a general increase in fees with a discount for those contractors who have opted out. As a result some clients may avoid the additional costs and have a preference to those limited company contractors who have opted out of the EAA Regulations.

The Professional Contractors Group – together with some other contracting groups – have suggested that those limited company contractors seeking to legitimately challenge the application of IR35 to their services could be more likely to be assessed within IR35 if the limited company contractor is subject to the Agency Regulations. This is because some view the Agency Regulations as principally applying to protect the supply of individual workers who are similar to temporary employees, which would undermine any arguments of a limited company contractor seeking to challenge IR35. The Professional Contractors Group has published a Guide to Agency Regulations; go to http://www.pcg.org.uk  for more information.

What is Blues Point’s view on deciding whether to either opt in or out of the Agency Regulations?

At Blues Point we are offering all of our limited company contractors the choice of opting in or out of the new regulations.

How should a limited company contractor opt out of the Agency Regulations?

Limited company contractors who wish to exercise their choice to opt out of the Agency Regulations must notify Blues Point in writing prior to their contract assignment or the renewal of their current contract assignment. Please email us stating your agreement to opt out. If you wish to opt back in later, let us know and we will then send you a revised contract and advise you of the additional procedures which will need to be applied.

Useful Links

The following links are potentially useful sources of further information.

Blues Point is not responsible for the content of external internet sites.

Contract Administration

We have a weekly or monthly payment cycle for contractors.  Below is the information that we need from you in order to set up a contract, plus details of our payment schedules.  Once we receive the information we need we will set up a standard contract that will remain in place until superseded or cancelled, and we will issue a separate assignment details form for each job.  The standard contract depends on your circumstances and the nature of the work, and will be either opt-in or opt-out, and IR35 friendly or not.

Setting Up A Contract

When we enter into an arrangement with a new contractor, we need the following information:

  • If you are employed by an umbrella company, please inform us of the name of the company and your contact there.
  • If you have your own limited company, please let us know the following details so that we can set up a contract:
    • Incorporation details: the name of your limited company, its registered number, address and contact details for whoever is administering the company.
    • Ltd company bank details – address, sort code and account number
    • VAT number (if applicable)
    • We also need to see a copy of the registration certificate – and if the company is registered for VAT we need to see a copy of the VAT certificate too.

Please let us know if you wish to opt out of the Agency Regulations or not. If not, please send a copy of the photo page of your driving licence, passport or other form of ID for confirmation.

Payment Process

Once you are set up as a contractor you will receive an email with the login details for our online payroll portal, Evertime. This is our online payroll portal where you can enter your timesheets electronically.  We no longer require physical timesheets. Once hours/days are entered the client authoriser will then receive an email advising them there is a timesheet awaiting authorisation. Clients will login in and tick ‘authorise’ and so the timesheet can be processed through payroll.

Use your Login Details email to log in to Evertime. The link for the website should be within the email along with your username and password. After you login you will see the screen below;

Screenshot of Timeout - IT contractors advice

To enter a timesheet you will need to click on ‘Manage Timesheet’. You will see a list of different Period Ending timesheets ready to be filled out. You just need to look for the correct week you need to enter and click ‘new’. You will then see a screen below;

Fill out your hours and then click ‘submit’ – this will then submit the timesheet to the authoriser. You will get an email confirming your timesheet has been entered and submitted to authoriser.

You can just close the Evertime portal now as this is all you need to do. If you are unsure or worried you have entered something incorrect, just click on the ‘Help for Candidates’ button when you log in and this should have all information you need.

If you want to see your payment history then click on the ‘My Payments’ button when you log in.

Notes

If you are employed by an umbrella company then the invoicing side will be looked after by them; you should already have an arrangement in place to let them know the number of hours you work each week.

We can also arrange self-billing if you prefer.  Please contact us for details of this.

Self Billing FAQ

Self-billing is an arrangement between a contractor (Supplier) and Blues Point (The Customer) whereby Blues Point prepares a contractor’s (supplier’s) invoice and sends it to the contractor (supplier) with payment. It means your Limited Company will no longer need to send an invoice to Blues Point’ Accounts Department along with your timesheet. You submit the timesheet and Blues Point sends you an invoice along with payment. Basically, it’s a more efficient payment process for contractors and Blues Point.

Self-billing has been operating for a number of years. It started with the automotive companies and is now widespread throughout industrial and service companies. Most of the large recruitment companies use self-billing.

Self-billing is more efficient:

  • You don’t have to produce an invoice
  • It speeds up payment process and you get your money more quickly
  • It reduces your administration

Self-billing benefits Blues Point as well as it reduces queries and we don’t need to check invoices to timesheet.

The rules are set out in VAT Notice 700/62. You can find this on http://www.hmrc.gov.uk/index.htm. Search ‘self-bill’.

No, self-billing has no impact on your contractual or commercial arrangements between Blues Point and your Limited Company and has no impact on IR35 considerations.

The invoice format is a standard format that conforms to HMRC regulations and this cannot be changed.

Self-bill is only used for contractors working through a Limited Company. It’s not relevant if you are a PAYE worker or student.

It is unlikely that your self-bill invoice is incorrect as it is taken from the timesheet that you submitted and the client has authorised. However, if you have a query, please contact us on 01283 530923.

The agreement is between the Limited Company and Blues Point Ltd.

You need to send us a copy of the new VAT certificate and to contact your Blues Point consultant to sign a new agreement. Blues Point will supply your Limited Company with a new self-billing agreement with the new VAT registration number, which needs to be signed by an authorised representative and returned to Blues Point.

If the Company has changed its name BUT maintained the same VAT number, send us a copy of the change of name certificate issued by the Registrar of Companies. Please email this to matt.byrne@bluespoint.net, quoting your name, date of birth and the old company name. You will also need to contact your Blues Point consultant to sign a new agreement form.

Instead of providing your own invoices, you can use the self-bill invoices as part of your Limited Company’s accounting records. This is accepted by HMRC for VAT purposes. However, we recognise that you may have your own system to provide invoices. If you want to continue to do this, we suggest you produce your invoice but do not send it to us; instead attach it to the self-bill invoice.

Please contact 01283 530923 and we will help resolve any problems.

Yes, you will need to send a copy of the new VAT registration document via email to matt.byrne@bluespoint.net.  You will also need to contact your Blues Point Consultant to sign a new agreement.

Please email matt.byrne@bluespoint.net advising the effective date of the change. You will also need to contact your Blues Point Consultant to sign a new agreement

After 1 year.  We will need to complete another agreement at this time.

  I’ve had a lot of experiences of agencies over the years, mostly from a recruiter perspective, rather than recruitee. Blues Point exceeded my experience of … Read More

Mandy F, Project Manager

  I found the test to be difficult but not impossible, and it correctly identified my technical strengths – and weaknesses! Overall, it seemed very fair, … Read More

Joshua, C# Developer

  Blues Point found me my ideal role shortly after being made redundant and their processes were second to none. I supplied Blues Point with the … Read More

Michael, Developer

View Our Current IT Jobs