Deciding to make the leap to contracting is one of the most exciting things you can do. However, waving goodbye to permanent employment is easier said than done, with many phrases and terms being thrown around. We’ve created this one stop jargon buster to help you get your head around things.
- IR35: Tax legislation which is aimed at eliminating tax avoidance. Don’t panic – as an employee of Parasol you don’t need to worry about this, however it’s something worth being aware of.
- Expenses: Any costs incurred in your efforts to generate revenue. For example, if you travel to your contract then this could be claimed back as an expense
- Day rate: The cost of your services for the duration of your working day.
- Umbrella company: These act as employers for contractors working in fixed term contracts. As such, they pay you as though you are a PAYE employee, deducting tax, national insurance contributions, and their margin. The remainder is then paid to you as your take home pay.
- Limited company: A limited company is an organisation which you can set up to carry out your services. Limited companies also have their own legal identity, meaning they can own assets and are responsible for their income and outgoings. This can be an extremely tax-efficient, compliant, way of operating.
- Autumn Budget: Since 1976, on a yearly basis, the Chancellor of the Exchequer updates MPs on the government’s spending plans. Taxation updates are also announced.
- Loan Charge: A retrospective tax, applying to contractors who took out ‘disguised remuneration schemes’. These schemes were upsold to contractors, on the basis that they did not need to pay income tax and national insurance contributions on their earnings. HMRC have since announced that these schemes were non-compliant and are recovering missing taxes.
- Preferred Supplier List (PSL): A PSL is a list of approved, compliant suppliers, who are committed to an agreed level of service which recruitment agencies have. Clients are encouraged to use or consider a provider that is on a specific recruiter’s PSL.
- Agency Workers Regulations (AWR): AWR are designed to ensure contractors and temporary workers are treated fairly.
- Personal Service Company (PSC): A common type of limited company, that is established by a self-employed worker. It sells the services of an individual.
- Onshore Intermediaries: This legislation was introduced in April 2014 and means recruiters can now be liable for paying the employment taxes of any contractor your supply. The only exception is if this is carried out by an umbrella company.
Guiding you through your journey
We hope our quick jargon buster has helped you to understand some of the common terms used in the world of contracting. With Parasol, our unrivalled support team is on hand to explain any further jargon you come across. Give our Best Advice team a call on 0800 464 0632 to get started.