Here’s the story of a bankrupt contractor and what happened to him when he went into bankruptcy.
I declared myself bankrupt.
I currently work in a permanent role within the financial sector.
Whilst I am fortunate to have not lost my job I am considering leaving to go contracting.
Does anyone know how many companies credit check contractors and whether joining an umbrella company is a loop hole to not being able to be a director of a company?
Dr. McLaughlin’s Contractor Surgery
Firstly, it is almost unheard of for companies to credit check contractors.
Secondly, amongst the safer of the Umbrella Companies you would be considered to be an PAYE employee of the company and so the fact that you are barred from being a director of a company wouldn’t apply.
Of course, there are ways around being banned as a director of a company for a limited number of years.
I’m not a lawyer and cannot talk about the legality of such things but only what I’ve seen happen from experience.
Banned from Being Company Director
What I have seen happen in the past is that contractors who cannot be directors simply open up companies whether their wives or husbands (or partners or even parents) become the director of the company and the contractor becomes an employee of the company.
I’m not an expert on this but I would venture an opinion that this may put you beyond IR35, as the director of the company is not the only one putting effort into the company as the main person bringing in the income is not a director but an employee of the company.
Bankrupt Contractor Work Around
However, you have the obvious dangers here.
The money you are building up is legally owned by someone other than yourself.
Spouses and partners are not forever nowadays.
It might well be tempting for them to take off with a whole pile of your money.
Of course, parents are a better bet – as long as they stay alive.
However, you could find, in event of them passing on, that your brothers and sisters are claiming that money in the company as theirs and should be split X number of ways.
Umbrella Company Solution
If you are young enough and confident enough in your spouse or partner then this may be the way ahead.
However, there is always the option of the Umbrella Company if you are a bankrupt contractor.
After you become a discharged bankrupt, after a number of years, you can become a director again and work through a limited company.
Welcome back to contracting!
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