I have some basic queries regarding contracting as I am planning a jump into contracting. Not thinking of starting a limited company for now, but do direct contracting via an agency or company. I have been a permanent employee for 5 years.In the case where I do many short contracts say 3 contracts each of three months duration with different employers. Do I still receive P45 from each employer at the end of the contract and I need to provide it to new employer at the start of the contract?Is this the same as permanent jobs or is it any different. How would that work if the position is being filled quickly and you are just moving from one to another the next day.Also, how are background checks conducted for contract positions? For permanent I have had CRB checks, employment checks, credit check etc. This usually takes more than a month. How does this work for a contract position thats starting in a days time and is only for few months ?

What you are describing is not contracting, but temporary permanent employment, and the tax man would probably describe it as such and expect you to pay PAYE and NI through the employer. Rates of pay in this model are poor – in line with permanent employment but with no benefits and no security. Yes, if you are an employee you will get a P45 each time (and an emergency tax code every time it is late – yikes!)I would advise against choosing this mode of employment. Why not set up a limited company? It costs £100 to set up, is substantially more tax efficient and easy to close down again. An accountant will charge you about £70 a month (£100 if the do you VAT return). You’ll need to work for no more than two hours to earn his fee. If you can fill in a timesheet and a excel spreadsheet of what you're spent and earned each month, then you have what it takes to run a limited company. Let the accountant do the rest.Irrespective of the mode of employment CBR checks are now the norm. Company policies differ (and application of them is varied). Most firms say you cannot start until the check is complete, but many bend their own rules if they desperately need you or if their CRB supplier is taking too long to complete thechecks.

Mr Cool.Thanks for your reply.Yes, that is what I have been told by others as well. But many have also suggested route of umbrella companies to start with if I am new to contracting.What do you think of that ?

There is nothing horrendously wrong with using an umbrella company but most people find their take home income will be higher if they have their own limited company. You simply have to ask yourself, is the umbrella firm doing this for charitable reasons, or are they skimming a margin from the overall transaction. Could that be going in my pocket?Also beware – some umbrella firms go bust – leaving you owed money.

Thank you once again Mr cool

By the way, can someone resign from a contract midway to take a permie role? sorry for the naive question.

Yes, although...1) It depends on the contract. In most cases a contract will be for your limited company or umbrella company to provide serviecs to the client for a defined period (which may subsequently be extended). If you fail to provide the services then the client can in theory sue your company for any damages they incur - e.g. hirign cost of another contractor, interviewing time, ramp up time, loss of work so far etc.In reality I've never heard of this happening.2) Many contracts allow the contractor to give notice (often just a week) in which case you will have no hassle if you choose ot leave. HOWEVER, you will almost definitely never get another contract job (or not easily). This is a huge NO-NO for contractor agencies, as it shows that you were only really contracting as a stop gap when you couldn't get a perm position.3) As most contracts are rarely longer than three months (and then three month extensions), its not really an issue. Accpet the new job and see out the contract - its not likely to be any longer than the notice period you would have at a perm job.

Thanks again Mr. Cool.very useful