8 classic contractor mistakes

8 classic mistakes that contractors make and how to avoid them

Posted on 4th April 2019 by

It is almost unheard of for a contractor to forge a successful contracting career without having to negotiate some tricky situations along the way. Issues can arise with recruiters and clients alike. Administrative problems and a general lack of organisation can also cause more headaches than are necessary and result in contractor mistakes that can give rise to an insurance claim.


Here are a few classic contractor mistakes that you should try to avoid;


Starting work without a contract

Believe it or not, this is quite a common occurrence. It’s human nature to jump into a new project or job role ‘feet first’ in eagerness to please, especially if you’ve had to wait a while since you completed your last engagement.

It is vitally important you ensure you have a signed contract or other written agreement in place before you begin any work.

This ensures that all parties concerned are in full agreement with regards to the length of the contract, the rates of pay, and the location of the contracted work.

Disputes can arise in the absence of a signed contract, hence why it is necessary to get the full details in writing at the outset.

Do not rely on a verbal agreement as any of the involved parties can dispute what was said.

don't start work without a contract

Not dealing with IR35

You’ve got until April 2020 to ensure you are fully prepared for IR35 in the private sector.

Not thought about it yet? You’d better get your skates on.

You will pay significantly more tax if you are deemed to be working ‘inside’ IR35. To be certain of your IR35 status it is advisable to submit your contracts for professional review. This service is relatively inexpensive and will provide you with peace of mind so you can thrive in your contracting career.

You can also take out a tax enquiry and legal expenses insurance policy which will help cover any legal costs in regards of an investigation.

To find out how Caunce o’Hara can help contractors to navigate their way successfully through private sector reform click here to visit our IR35 Hub.


Spending money that isn’t yours

It’s far too easy to spend company funds and draw down income in the form of dividends. You must be aware that a limited company is a legal entity in its own right. Therefore, its funds are not owned by its directors.

You must ensure the company keeps sufficient retained profit within the business to cover any payments due. If not, any dividend payments can be challenged by the HMRC.

There are many stories of contractors and company directors not being able to pay their VAT or Corporation Tax as a result of spending company funds.

It is easily done, especially if you are paid the basic rate of tax allowance which is topped up by dividends, rather than a set monthly and taxable salary.

As a contractor, you should engage the services of a contractor accountant to ensure you manage your finances and taxes properly.

poor contractor accounting and bookkeeping is a common mistake

Poor accounting and record keeping

Accurate record keeping is vital to the success of any business. As a contractor it is advisable to hire a contractor accountant to ensure this is done properly for you.

Trying to keep your records yourself online and via mobile apps will only get you so far. Your accountant will need to tidy up the figures for you at some point anyway, so they are fit for submission to the HMRC.

Ask yourself if you really want to spend hours updating your books after you’ve already completed a long day at work?

Human error, tiredness and illness will play a factor and what you put off today won’t always be picked up and rectified tomorrow.

Make life easier for yourself and let an expert do the work for you.

contractor missing hmrc filing deadline

Missing HMRC tax filing deadlines

If you are a director of a limited company, you are responsible for meeting your company’s annual filing and tax deadlines. Your accountant is not responsible, so if you miss a deadline only you are to blame.

Make sure you know when your company accounts filing deadlines are. You must also know your confirmation statement.

To avoid penalties, ensure you pay your VAT within the first month of your VAT quarter end. For your personal tax, ensure you meet the January 31st filing deadline.

As a contractor your competition may pass you if you don't keep up to date

Falling behind the competition

Not keeping up-to-date with trends and changes in tax legislation will see you fall behind your peers. You could be missing out on tax savings and funding opportunities for study courses.

For example, if you are an IT Contractor, you could find your skills set becomes outmoded very quickly if you don’t keep your finger on the pulse and stay updated with new technologies.


Exaggerating the truth

Highlighting your achievements in your CV can be a challenge for some people.

If you are modest by nature, then you’ll naturally shy-away from self-promotion. On the other hand, there are those of us who thrive on self-promotion and want to get to the top of the ladder, no matter what it takes.

Stop! Take a good look at your CV.

  • Did you really climb Mount Kilimanjaro on your own?
  • Did you really ‘single-handedly’ turn around the processes of that fortune 500 company?
  • Are your qualifications correct?

Be aware that recruiters are not stupid and will use screening methods to vet potential applicants.

You should also look at all of your online profiles to ensure they match. At the very least you should match your CV to your Linkedin profile.

don't exaggerate on your cv

Lazy job applications

If you are serious about that job you saw advertised, then you should tailor your application to suit the specification detailed for the role.

Due to modern technology and our increasingly hectic lifestyles, it has become far too easy to load up your CV to a profile within a mobile App and send the same job application, with the same covering letter, to every role you see advertised.

If you don’t learn to promote yourself properly, you will miss out on the potentially lucrative opportunities and be left with those that may pay less and be less inspiring.


Avoiding these common mistakes could make a positive difference to your career and your lifestyle. We wish you luck.


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Author Phil Ainley, Marketing Manager