If you’re considering becoming a construction contractor, then you’ve probably already thought about all the benefits it can offer. From greater flexibility to a higher wage, a move to contracting can improve your working life.

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You may also find yourself looking to contract work if you’re an experienced construction worker who can see how the field is changing. With more and more clients looking to employ workers on a contracted basis, there has never been a better time to get involved.

This guide takes you through the main steps you will face when moving from permanent work to contracting.

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Quitting Your Current Position

As a wannabe construction contractor, you’re probably highly skilled in your area of work, meaning it technically shouldn’t take you too long to find a client. However, because of the nature of contracting, you may want to give yourself a few weeks break before you agree to start your first contracted job.

As contractors are in high demand, the offers tend to come and go fairly quickly and clients will want you to interview and, if successful, start within a week or two. Therefore, once you have said goodbye to your permanent position, you’d better be ready to hit the ground running.

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Getting Your Contract

You can normally secure a contract in two different ways. First, you can opt to go directly to a client or alternatively, you can secure a contract through an agency. Both construction contractors and their clients usually prefer the agency route, as there is more protection on both sides.

Even with many industry contacts, it can be tough to set up contracts directly. To ensure you have the best chance at getting work, you should sign up and apply via online job boards, keep an eye out on social media and make sure your LinkedIn page is professional and up to date.

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Dealing With IR35

Essentially, IR35 rules begin to affect you when your role as a contractor does not meet HMRC’s definitions of self-employed. If you fall victim to IR35, you will be liable to higher tax and N.I. contributions.

Every contractor is different so to understand more about whether IR35 will affect you, you should dedicate a reasonable amount of time to reading up the rules here.

With regards to IR35, there are a couple of things you can do.

  • You can bite the bullet and cough up for the extra contributions, which could result in a pay cut of around 25%.
  • You can create an ‘IR35 friendly’ contract, which will need to be professionally reviewed by a contracts specialist.

Of course, it is in your best interest to avoid IR35 if you can, but this must be done legally and it is strongly advised not to simply ignore it.

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Deciding On A Structure

When becoming a construction contractor, you have to make the decision whether to work as a Limited Company or work under an umbrella company.

As a Limited Company owner, you will have to take on all the administrative duties yourself, which can be a deal breaker for those short on time. However, if your contracts are outside of the IR35 rules you’re likely to be better off financially but if not, you’ll have to pay up and take on administrative duties.

Under an umbrella company, you’ll be free from the constraints of time-consuming admin but depending on your IR35 status, you may be worse off financially. Under legislation introduced in 2007, umbrella companies are made to deduct PAYE income tax from contractors, which is similar to carrying out a contract under IR35 rules.

Everyone is different, so weigh up the pros and cons and pick a route that is best for you in the long term.

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Getting Help

Whilst it will cost you extra money, it pays to get outside help to ensure your contracting not only runs smoothly but is completely legal too. You can be heavily fined for not following the rules, so considering an accountant and contract reviewer is highly advisable.

Whatever path you choose, you should avoid getting caught out over silly mistakes and most importantly, enjoy your transition into construction contracting.