As a contractor Accountants, you’ll face many challenges, and your ability to overcome them will determine how successful you can be as a self-employed worker. Preparation is key and making sure that you’re in a position to overcome any problems that come your way is paramount. Challenges can range from issues with clients, to managing your finances. If you are new to contracting, you may not have faced as many issues as those who have been self-employed for years, or you may have already been through the highs and lows of contracting in a short space of time. Recent stats have shown that more than 7 in 10 (74%) contractors are not happy working via umbrella companies. The research that was carried out by IPSE, a self-employment trade body, showed that despite an increase in the number of contractors working through an umbrella company, many believe there are no advantages to working this way. A lot of this stems from the IR35 reform that came into force in the private sector in April 2021. With the new legislation in place, a significant rise in freelancers and contractors began operating via umbrellas. More than three in five (61%) of those working this way do not believe it offers any benefits. With the majority (69%) claiming that they had no alternative. contractors stated A further two-thirds (63%) of contractors stated that while they had some level of choice, they were given a limited range of umbrella companies to choose from. However, 5% had no say and were allocated an umbrella company to work through. The main cause for being unhappy was that because of the need to join an umbrella company, they day rates for contractors has fallen. 80% of respondents cited that they now have to cover the liability for employer’s national insurance, and where applicable, the apprenticeship levy, through a reduction in their day rate. In addition, over half (57%) believed their role should fall outside the scope of IR35, but the supply chain would not allow them to take the risk of working through their own limited company. As a result, around 70 per cent reported having lost their independence. The report has been shared with the government following their recent call for evidence, in the hope that recommendations will stop freelancers from being forced into working for an umbrella company that limits independence and gives no real benefits. There is an option of switching between umbrella employment and PSC working. A dual approach means that contractors can work on contracts requiring employment through their umbrella company, while also taking on assignments that fall outside IR35 through their limited company. Since the rules were introduced, people are starting to feel more confident, however if you’re looking to work in this type of way, it is incredibly important to have a good accountant in place to ensure that your tax payments are being paid correctly. There is no doubt that the IR35 reform has had a significant impact on the way contractors work and the initial reaction from many businesses caused a huge shift to umbrella employment. But what else can cause a contractor to be unhappy in their work, and how can it be counteracted? We look at some other scenarios: Having too little or too much work Contracting comes in all different forms, and in a post-pandemic world, some have been more sought after than others. For example, Brits spent £110 billion on home improvements during the pandemic. As we spent more and more time at home, workspaces needed adapting and the same four walls became tiresome. Five million people redecorated rooms in their homes, 1.5 million built an outhouse and over a million built home-gyms and extensions. People were saving money on travel, and paid for home improvements instead of holidays. Others simply finally had the time to do it. According to research by Checkatrade, the most common purposes for home renovations over the lockdown period were for shed offices, home cinemas and snugs. As the property market continues to boom, more and more people are wanting home and garden renovations doing. In short, it’s been a great time for tradesmen, landscapers and builders. However, a term you may be familiar with is ‘being on the bench’ – what contractors call not being on a contract. It’s incredibly common to go through times where you’re quieter on the work front, especially if you rely on short-term contracts. If you are facing a quiet period, fill your days with networking events or email marketing, to help build your customer base. Write things down in a diary to keep motivated and show the day hasn’t been wasted. Just as too little work is a problem, it’s also common for contractors to take on too much. Initially, the prospect of more money is a great incentive, but overworking can see you providing a worse service than normal, and could potentially ruin the reputation you have built. Contract rates The rates you charge can vary from client to client depending on the situation, however building a skillset and reputation can ensure you are able to charge a rate in which you deserve. It can also depend on the different industries, and at quieter times you may end up accepting contracts that are worth a little less than you would like. Making sure you have a great reputation and reviews means you can stand out against a competitive crowd. Ensure you expand on your skills at any given opportunity and compare similar contracts available within that same industry with the aim to negotiate with the client. Not getting paid on time Working with a range of clients is great to have a varied work schedule, however you might find that some clients aren’t as timely in their payments. That can cause you problems with your cash flow, which can mean struggling to find funds to pay yourself. It’s difficult to deal with, however you can take payments or deposits up front
