One of the big benefits of contracting is that you can choose which work you take on and work for several different people from month to month.
However, when things work out well with a client – or there’s a particularly large job – some contractors may end up working for a particular business for a long time. Likewise, a business may decide to keep using a contractor if they know the quality of work is high and the delivery time is quick.
However, that can leave both parties wondering how long a contractor can work for the same company. Read on as we take a closer look.
For some people, the first hurdle is figuring out where you stand. Are you a contractor or something else? In simple terms, a contractor is anyone who sells their services to another party. While they’ll always need clients, they are technically self-employed. According to Gov.uk, this means they ‘run their business for themselves and take responsibility for its success or failure.’
Contractors carry out their work under special contract agreements and invoice the other party for their services. They are not a permanent employee for the company, which is important for tax purposes. And as they are not employed, they are not entitled to the same benefits that permanent employees get.
Contractors who have their own limited company or work as a sole trader are also responsible for their own taxes which employees are not. Employees are paid through the PAYE (Pay As You Earn) system, which deducts tax and national insurance contributions from their pay before it’s sent.
Is there a time limit to how long contractors can work?
The question of how long a contractor can work for the same company has a surprisingly simple answer. There is no maximum time limit. If a contractor and a company are both happy to continue working with each other then that’s perfectly fine.
However, you may want to renegotiate your contract after a while as you build up more experience. After a year of working with a company, for instance, you will have much more value for them – not least because you’re familiar with their business. With that in mind, you may want to use a shorter contract and renew it, rather than immediately signing up for several years.
All that said, the time on its own has no implication for tax or any other legislation. Problems occur, however, when it is not clear what the work relationship is and whether the person providing work is a genuine contractor. If the person providing services is an employee in all but name, this can cause complications and potentially serious consequences. To prevent this type of sham contracting, HMRC devised a set of laws to tackle this and separate fake contractors from real. These laws are known as IR35.
Also known as the ‘intermediaries legislation’, IR35 refers to a set of tax laws that came into effect in the early 2000s and are part of the Finance Act. It was designed to stop people claiming to be legitimate contractors while working in the same way as employees.
Because employees typically pay a higher amount of tax and insurance than contractors, people were essentially trying to fool HMRC before IR35 was introduced. They would not pay the right income tax and national insurance in accordance with how they worked.
Similarly, companies using them were not providing them with the statutory benefits that employees get and were not paying the correct National Insurance contributions. HMRC refers to these people as ‘deemed employees’ or ‘disguised employees’. It’s worth noting that in 2020, the responsibility of IR35 will be passed to the company hiring you, including recruitment agencies – as is already the case in the public sector.
IR35 tries to determine if a contractor is legitimately paying a reduced tax rate by examining several factors, including:
Although there isn’t a definitive way to determining genuine contractors from employees, these questions are a good way of making the process easier. While this doesn’t include how long you’re doing the work, ‘disguised employees’ will typically work longer ‘contracts’ as they are essentially full time employees.
An umbrella company is a way of enabling contractors to work without worrying about IR35 or the administration of invoices and calculating taxes. Umbrella companies act as an ‘employer’ for their contractor ‘employees’. This means that contractors have the correct amount of tax taken from their pay by the umbrella company. The umbrella company also takes a small fee from the total pay for the cost of using its services.
By using an umbrella company, contractors are paid using the PAYE system just like standard employees. IR35 is no longer relevant to them, as they are just an employee rather than being ‘deemed’ or ‘disguised’.
Working with the same company can make contracting a lot easier as you no longer need to negotiate new contracts and spend time marketing your services. However, you still need to complete those burdensome tax returns and keep money set aside for unexpected sickness or an annual holiday.
Want to get rid of the hassle altogether? That’s where Umbrella Supermarket can help. Using our umbrella comparison tool, you can compare a selection of leading providers in just a few minutes. Enter your details and get multiple quotes based on your income, then choose the best fit for you.
Any contractor considering switching to an umbrella company will want to know how to find the best provider to work with.
Although you could spend your precious time and energy searching the web for the best umbrella company, there is an easier way – using an umbrella calculator.
In this guide, Umbrella Supermarket explains why every contractor should use an umbrella calculator in 2021.
If you are considering contracting you will need to decide on PAYE or umbrella.
It can be a difficult decision to make and contractors will inevitably be questioning which option will be the best for them.
To help every contractor get on the right track for them, in this guide Umbrella Supermarket looks at PAYE vs umbrella, outlining the key differences and how this will impact you.
There are many reasons that contractors across the UK opt to work under an umbrella company.
Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.
For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.
Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.
In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.
If you’ve made the decision to contract through an umbrella company in 2021, you will next need to find an umbrella company that’s right for you.
After all, there are lots of umbrella companies out there, so how do you know which one to choose?
To help you find the best umbrella company for you, in this guide Umbrella Supermarket outlines what makes a good umbrella company, so you can rest assured you’re making the right move.
One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.
In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.
To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.
If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.
After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.
PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.
To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.
One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.
To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.
Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.
One way that contractors can work is through an umbrella company.
Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?
To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.
There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.
After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.
However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.
To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.
If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.
To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.
