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Once you start working in the UK, and depending on the type of employment contract you are offered, you may be able to work under the structure of a limited company.
Known as contracting this means that unlike a permanent employee you may be able to reduce your taxable income and increase your after tax earnings. |
Broadly speaking, contracting refers to employees that are hired to work on a project defined for a set period of time - say a day, week, month, year etc or are hired to work on an ongoing project that will eventually be completed. Once the specified timeframe or project has been finished the individual's position at that company ends. This is opposed to being a permanent employee, where no time limit is imposed on his or her employment period.
It all depends on the nature the position you apply for and what your contract stipulates - anyone who works for an employer for a defined period of time is essentially contracting; these contracts exist in almost all employment sectors.
For example a supply teacher who works for a school covering an absent permanent employee would be deemed a contractor. An IT consultant who works on a project for 12 months would also be, even a temp working at different offices for an agency could be.
Your contract of employment will show whether you are a permanent employee or a contractor. A permanent employees' contract is ongoing - ie there is no mention of an end to your employment.
Firstly, contracting generally attracts higher rates of pay than permanent positions and contractors can further increase 'take home pay' by using a limited company structure.
Secondly, you have a much more flexible approach to work, enabling you to decide what holidays you want to take in between contracts and for how long - an attractive benefit for those who plan to use the UK as a base for travelling Europe.
Thirdly, because you tend to work for more employers in varying situations you will gain even wider experience and an increased skill set.
As a balance there are negatives to contracting that you should also consider - ie the length of time you are out of work between contracts because of market conditions.
One of the major benefits of contracting is that you have the option to work through a limited company structure.
A limited company essentially acts as an alternate payment vehicle to the PAYE structure that enables you to maximise your net pay.
Furthermore, working through a limited company enables you to utilise the tax breaks and savings available to companies that individuals working though a company PAYE structure are not eligible to take advantage of. Allowable expenses can be offset against your gross income to further increase your net pay.
Payment through the PAYE (Pay As You Earn) structure is the standard tax structure through which the Government levies taxes on all permanent employees and many contractors.
This is the most common payment structure in the UK because it is the standard way that you are paid as an employee.
This is the 'default' method by which your salary payments will be made to you whilst in the UK; however as a contractor the other payment option available to you is through a limited company.
Yes, you can and it is a good idea to do this.
Once you are offered a contract position and you nominate that you would like to be paid through a limited company, your employment agency will need the details of your Ltd Company in order to draw up your contract of work. Sometimes this is needed on a Friday so you can start on Monday.
BritBound recommends Consultants Exchange (CXC) who provide an effective salary packaging solution to minimise the amount of tax you pay therefore increasing your after tax earnings.
The provision of limited company services is a highly competitive market in the UK with many and varied companies operating throughout the UK.
Previous feedback from BritBound members has highlighted some questionable practices and prompted us to recommend one preferred supplier.
We have chosen CXC because they have a strong global identity with offices around the world and have a strict policy of working completely within the legal boundaries of each country in which they operate (including the UK).
Furthermore they meet all of the compliance and administration requirements set out by Inland Revenue (the UK Tax office).
If you choose to compare the services of CXC with others in the market, then we suggest you choose a service provider carefully to ensure you select one that is reliable and compliant with Inland Revenue.
CXC provide a 'Managed Limited Company Service', as opposed to managing your own limited company.
This structure enables you to take advantage of all the tax savings available to someone working through a limited company, without any of the director's liability or the accounting and administrative responsibilities of running your own limited company.
Under this structure you become an employee and in some cases a shareholder of one of CXC's managed limited companies, but not its director or secretary. CXC takes on these roles, and the legal responsibility for the company, as well as the administrative and accounting functions.
This means that you won't have to stress about submitting end of year accounts, completing your tax return and so forth; you simply submit your timesheet and allowable expenses to CXC who will calculate your net pay and deposit it into your nominated personal bank account.
CXC works on a fixed percentage fee, which is calculated based on your gross salary. By taking their fee in this manner it not only means that it treated as a tax deductible expense, but it is also means that when you are not working (for eg in between contracts) CXC is not charging you a fee.
All the services provided to you by Consultants Exchange are included in their fee - there are no additional [hidden!] charges - many other companies charge an attractive low fixed fee but then add on costs for everything else you need.
. Payment by CHAPS - means that you receive your pay the same day that CXC is paid by your agency /employer. Most companies pay by BACS which could mean that when your fellow PAYE colleagues are celebrating Friday Payday with a beer - you will have to suffer out the weekend until your pay goes in on Tuesday!!
. International Money Transfers - sending money home is never easy - nor cheap but you'll be able to do two free transfers per month which can be a godsend if you want to pay off your credit card!
. Comprehensive Insurance Cover for Public & Employers Liability & Professional Indemnity. A costly element to include but extremely important and for many employers a compulsory requirement.
This is completely up to you, in order for them to set you up to be paid through their managed limited company structure all you will need to complete a one page registration document. You won't be able to complete some sections until you arrive in the UK - such as your employment and bank details. It is still worth returning these forms partially completed, as it will speed up the set-up process when you have secured a contract position. Many agencies will require the details of your Ltd Company to be provided so that your contract can be finalised.
If you would like to receive an Information pack including the registration form then submit your details below.
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