Once you decide to take a contract role you will then need to decide whether you want to go down the LTD company or PAYE route. Those who choose the LTD company route are often those on the higher end of the rate scale, where it makes more financial sense to take this option. LSC recommend you get in-depth advice from your accountant or from a specialist contractor accountant (i.e. Icon, Contracting plus or Fenero) before making a decision on which route is right for you.
The below chart gives an overview of some of the key differences between the LTD company or PAYE route.
If you choose the PAYE route, you will become an employee of LSC for the duration of your contract. You will be based on site with the client company, who will set out your working hours and you will report into a client designated Hiring Manager. LSC will manage your payroll, holidays, contract extensions, rate negotiations and any other issues that might occur during your contract.
If you choose the LTD company route, you have the option of setting up your own LTD company through an accountant where you are the appointed director and fully responsible for all financial affairs. The information we will need in LSC to set you up as a Limited Company on our system are as follows;
- Name of company and registered address
- Bank details IBAN and BIC
- Certificate of Incorporation
- VAT Confirmation
- Letter from your accountant confirming tax compliance or Tax Clearance Certificate
- Copy of company insurance
Alternatively, you can contact a specialised contractor accounting company who have umbrella companies in place, to which you can become the director for a monthly fee. The umbrella company manages all taxes and invoices on your behalf. You will not be an employee of LSC rather a contract will be agreed between LSC and your company to carry out the job outlined by the client. LSC will manage payment of your invoices, contract extensions, rate negotiations and any other issues that might occur during your contract.
If you are considering switching from PAYE to LTD, you can contact the below specialist contractor accountants and they will be able to better advise you if you wish to proceed with the switch.