In my early days of contracting, I will be honest, I really didn't fully understand expenses. I was booking expensive hotel accommodation, eating hotel breakfast and didn't really grasp that my own company was picking up the bill. After experience in contracting I learned more about this. So my aim is to help you save the headache I had learning, without the years of contract experience, with this article.
So the important question that we are going to discuss is can IT contractors claim expenses? And the short answer for it is yes, IT contractors can claim business expenses. As a matter of fact, it is one of the main benefits of an IT contractor.
Business expenses are the money or costs incurred while doing business and these can be claimed as an expense. You don't have to pay tax on the amount. You will have to pay some money at first for your business, but then your company will reimburse you.
So let us begin with discussing 5 reasons why you should consider software testing contracting as a career, of course, basing our arguments on the possibility of claiming their expenses.
Can Contractors Get A Mortgage?
Contractors face difficulty in getting a mortgage when compared to the full-time workers, but of course, you can get a mortgage as an IT contractor. When you walk into a high-street bank for a mortgage, you will more than likely have a sad experience, because they focus more on full-time job workers. Even if you have a large income and solid documentation for that income, you will not be able to get a mortgage from that bank.
But then, some banks are still prepared to give you a mortgage agreement in Principle. The mortgage providers calculate the annual income from the money you get per hour or per day, and with that income, they come to a choice of a contractor. Select the best scheme for you. Some mortgage schemes allow you to overpay while you work and then to use the equity when you are not working.
Can Contractors Get Maternity Pay?
Just as in the case of a mortgage, it is unlikely for IT contractors to get maternity pay, when compared to normal workers. In fact you may as well assume that will never happen.
While you enjoy the full freedom as freelancers, life takes a twist and turn when you decide to settle and have a family. According to Victoria Phillips, head of employment rights at Thomsons Solicitors, you can get maternity pay only if you are entitled as an employee rather than a contract worker.
Can Contractors Get Bonuses?
Contractors can receive a bonus while staying outside IR35. However, a simple word in the documentation can ruin your IR35 investigation. For example, according to contractorcalculator, if you mention bonus as 'bonus', it is deemed as a term for regular employees.
So a contractor needs to be careful with their paperwork.It is also important to professionally review your IR35 status by experts.
Apart from the terminology, it is important how you accept a contract with an automatic payment of 'bonuses'. Another thing to note is that you can't get bonuses in the period of the contract because it is implied that you are doing work in exchange for the incentive payment. T
Can Contractors Get Redundancy Pay?
Yes, contractors can get redundancy payment. The ruling can be used by IT contractors with fixed-term contracts of four or more years. If the employer fails to renew the contract after four or more years, then the contractor can get redundancy pay. An employee has to be made redundant by the employer, for getting redundancy. Just understand that a fixed term contract is different to the conventional contractor with his own company.
A contractor with his own small company or director of a company can claim himself as redundant but is still not going to work. And if the contractor agrees to the contract with a higher payment, they should agree upon not leaving or resigning to claim the redundancy pay.
These are the conditions to get redundancy pay:
Evidence that the contractors were expected to turn up at work and be provided with work Proof they were only allowed to work for the same employer
The existence of an employee working for the same employer in a comparable job Agency workers are unable to claim redundancy under the regulations
Can Contractors Attend A Work Christmas Party?
Attending a Christmas party is a potential issue with IR35. There has been well-known test cases that tend to suggest that this simple invitation can be be deemed as an invite to an employee.
Politically, it is good to accept and network at a Christmas do. It makes you feel like part of the team and build a bond with your co-workers. But it may be worth considering paying for this, so it is not seen as a an employee benefit.
Being a contractor is very lucrative, but you have to understand that the negatives are you really don't get any holiday or sick pay, along with other employee benefits. That is the risk vs reward of being a contractor.
A great benefit for contractors is claiming allowable expenses. This is a great way to reduce your tax and cover your expenses.
I had the feeling that everyone should know these best practices. Because there are very few articles or blog posts available on the internet based on this topic.
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