WORKING AS A CONTRACTOR IN THE UK
Technically it is possible for a contractor, resident and working in the UK, to supply their services in one of three ways:

1. as a direct employee
2. via their own limited company
3. as a self-employed sub contractor

Following the introduction of IR35 regulations, contractors have been forced to reassess how they offer and receive payment for their services.

THE DIRECT EMPLOYEE OPTION
This is the simplest option: tax and national insurance contributions are deducted at source by the agency or client leaving the ‘net’ salary (take home pay). However, contractors could suffer up to a 20% shortfall in ‘net’ income when compared to the other two options.

OWN LIMITED COMPANY OPTION
In the past, the own limited company option was a financially efficient route for the contractor. Under the director/shareholder method a proportion of remuneration can be received by means of dividend payments, thereby significantly reducing national insurance contributions. However, ownership required considerable administration and legal responsibilities. Furthermore IR35, which contains a number of provisions aimed at restricting the use of the own limited company option, has ruled this out for the vast majority of individuals.

THE SELF-EMPLOYED SUB-CONTRACTOR OPTION
By becoming self-employed it is possible for a contractor to avoid the restrictive and costly limitations of the PAYE system and the high administration costs and legal obligations of limited company ownership. The contractor wishing to work through an agency is, however, restricted under Section 134 of the Income & Corporation Taxes Act 1988. This section of the Act explains that any payment made to an individual by an agency shall be assessable to income tax under Schedule E – forcing the contractor to use the direct employee option.

The Limited Company offered by Contractor Company Services Ltd offers the contractor all the financial benefits of a limited company structure without the administration and legal obligations associated with such a structure.