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How To Save Tax as a Producer or Director Contractor Consultant

Many Self-Employed people who want to work in the Producer or Director Sector work as contractors or consultants to save tax and national insurance, rather than work as employees. How does this work for an Producer or Director Contractor? Well they normally get a contract role through Producer or Director contract agencies who setup a contract for services with the Client. Some Producer or Director Agencies like to meet the candidate first. The client signs the timesheet and the agency pays the contractor. I have never known a client not sign a timesheet, actually one time in 19 years of contracting. It was a client who was trying to rip me off during the 2002 recession. He did sign it in the end but I have never trusted an accountant since.

Anyway, Some Producer or Director Contractors work directly for the client. The advantage of this is a higher rate, though they will have to wait longer to get paid normally. Though without the protection of an agency there is always the danger of the client trying to rip you off. Therefore if you work directly for a client the paperwork has to be water tight and certainly worth getting it checked by a lawyer. With an agency a contractor knows they will get paid on time.

The Producer or Director Contractor normally works through a limited company paying himself a salary and dividends. The problem with running a limited company is the amount of paperwork that is required in terms of vat returns, minutes, tax forms etc. There are also a lot of expenses to be paid for such an accountant, though there are many items that can be tax deductible like business telephone, business travel, stationery and insurance.

The problem with running a limited company as a consultant is that because of the expenses there is only a certain amount of money you can take out as dividend, as a limited company is not allowed to have a negative balance sheet. You also pay many different types of taxes, Income Tax, employers and employers national insurance at 10.4% (last time I looked). Plus there is corporation tax to pay. In fact running a limited company may mean paying more tax than an individual. So whereas a self employed person initially set out to save tax, he is in fact paying more tax, and drowning in paperwork.

So How can an Producer or Director Contractor Maximise His Income and Pay less Tax?

One option to reduce tax and national insurance as an Producer or Director consultant is to use an umbrella company to channel earnings through. Once an agency has found a client for you, the agency can then setup a contract with the umbrella company. The umbrella company then sets up a contract of employment with you, as an employee of the Umbrella company.

The advantage of this is there is no more worries about running a limited company. No more worries or sleepless nights about IR35 or S660a, as you are now an employee. 

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