The life of a contractor can seem a long and lonely one. You are in the position of being your own boss, a company director, a financial whizz kid and a sales and marketing man. In addition, you must put on whatever hats your company requires you to wear, to deal with suppliers, purchasing and maintaining equipment and health and safety requirements.
Then there are the added challenges of adhering to the IR35 legislation which sets out a series of complex rules. These are used by the revenue to determine whether you are treated for the purposes of tax as an employee or as a contractor. Coupling the necessity of keeping to this legislation with the increasing media pressure surrounding high profile cases, contractors have had a lot to deal with. So how did this year fair?
The Christmas decorations have been put away for one more year and the New Year's resolutions are still being kept. So what has the last 12 months been like for contractors?
2012 was a busy year for contractors for numerous reasons. There were changes made to the profession, the number of contracts rose, and because of increasing scrutiny by Her Majesty's Revenue and Customs (HMRC), IR35 took centre stage throughout. As a result of increased activity and competition amongst the contracting community, sustaining contractor finance became essential, and although most contractors will make financial stability their prime motive, in a year of such a busy market, things are often liable to be put aside.
Information gathered by the Association of Professional Staffing Companies (APSCo), shows that the number of contract based roles rose by 4% in 2012 with permanent positions being reduced by 2% to make way for limited company contractors. This is reflected in an increase in both the number of contracts and contractors last year, making it a buoyant market for limited company professionals.
As a result of a greater demand for contractors among businesses, 2012 saw an increasing number of PAYE employees making the transition to limited company status. Limited company contractors, who are de facto company owners, have to sustain the upkeep and pay-outs like any other business. This can often be overlooked when making that jump to a limited company but it is an important consideration when comparing umbrella company versus limited company status.
In a period where the financial markets remain cautious, availability of financial products is lacking, and for contractors working on an invoice basis, payments can often not be received for months. UC Finance offers a unique Timesheet Finance service that purchases the timesheet from a contractor, giving them access to cash quickly. It is lifelines such as this that aid cash flow and financial stability in a busy contracting market. With HMRC influence becoming ever more apparent, keeping on top of finances should be a top priority for all contractors.
For contractors, finance control and liquidity is vital. With the New Year well and truly underway, it is an ideal time to consider moving to limited company status and to reassess your finances to ensure you're well placed to face the coming year.