From Business to Business: When in Romania...
Former UK IT freelancer Edwin Thornber's last overseas contract expired at the beginning of 2002. In his determination never to swell the coffers of the British Treasury again and escape an uncertain marketplace, he has started a successful massage business in Romania.
Edwin said: "I was faced with a choice in January: Invest in an unrelated company in Bucharest, stay in Bucharest and try to find a new contract or go back to the UK and become a permanent employee. The choice was an easy one and what a breath of fresh air it has turned out to be!
"I opened a massage salon called 'Caresse Massage' with my wife in the middle of Bucharest. I know most British people would sneer at this, thinking we are an escort agency in disguise, but we are definitely not that. We do not allow any sex on our premises and sadly we lose a lot of local potential business because of this.
"Despite our strict policies, we have been averaging 16 customers per day recently (the largest number by far in comparison to our competitors) and we hope to surpass this figure after the 37-degree Bucharest summer has subsided."
Edwin Thornber: "We have been averaging 16 customers per day"
Edwin's company pays just 1.5 per cent tax on profits under $75,000 in Romania and he vouches Bucharest is one of the safest cities he has ever lived in, but he warned that starting a business up in the country is almost impossible without inside contacts.
"The bureaucracy is all it is made out to be in the British press," he said. "You need to know people here, people who you can 'hurry things along'. Having said that, I would still prefer to start a business here than in the Third World country they call the United Kingdom."
Edwin recounted the steps that led to him abandoning his IT contracting business he had strived to build up in the UK.
He said: "After starting out working for the public sector as a systems programmer, I went contracting around the UK using my Unix development skills.
"My main skill is in OpenVMS systems management, a bit of a niche market as most OpenVMS boxes are used to transfer millions of dollars an hour between banks; hence the market operates along a 'Without a previous contract you won't get the next one' ethos: a good thing to be on the inside of and a 'catch 22' if you're not."
Preparing for success
Edwin is typical of many freelancers who have moved from one business category to another in accordance with the demand for his services. When he was sitting on the bench prior to the pre-millennium IT boom he developed software whilst waiting for a breakthrough VMS systems management contract to be publicised.
He continued: "I set up a limited company in response to market demands from agencies. They basically told me I either had to set one up or they would award the contracts to someone else. I employed an accountant to do the bookkeeping whilst I went away and earned the company turnover. Perhaps I paid myself a lower salary than I could have expected as a permanent employee, but I saw that as part of the compensation for a lack of security; being a genuine company in a competitive market, paying for my travelling expenses, using the accountant and living out of a suitcase.
"My CV was always up to date because I knew that in another few weeks I would be looking for my next contract in the marketplace, when was the last time you heard that from a permie?
"In 1996, I had the chance of working on a contract in Holland with some of the best VMS system managers in the business. I jumped at the opportunity and found out how good life could be if you took it by the horns and controlled your own destiny using nothing more than your own skills set and wits. There I was, in a beautiful new country, working with some of the best people in the business, learning something new every day and getting paid good money for it!
"In those six months, while the market was still strong, I found myself turning down a lot of opportunities to return to the UK. I was asked to undertake work in Romania in April 1997 to install and manage an OpenVMS based Customer Care and Billing System for a start-up mobile phone company. The previous contracts gave me the confidence I needed to set up a whole network of machines, production, testing and development and I took pride in the fact my opinion was not only asked, but was respected and used in the final result. I have found this attitude prevailed in any work I did whilst contracting: take pride and care in your work and it will speak volumes in any references you may need in the future.
"IR35 was being mentioned in the press around this time and, fortunately, I foresaw the damage it would do and the real intentions of the Government behind all its business-friendly rhetoric. I travelled to Switzerland, Holland, Romania and Singapore before returning last year to Romania for my final contract. The market had already died by that point and I realised it would be almost impossible to find another."
Edwin has now left the country indefinitely and taken his entrepreneurial spirit, and tax-generating business nous with him.
Massaging profits
He said: "I have dissolved my UK company, paid all of my due taxes and now fill in a self-assessment form every year which basically consists of pages of '0.00's throughout. I really do want to keep out of the way of this Government and the 'politically correct' society it is creating.
"You might say that the Inland Revenue is not part of the Government, I would disagree. This Government would seem to take part of its budgetary advice from these guys, and good luck to them, but I can only see it all turning sour for them when the electorate finally wakes up to what is going on around them."
Edwin said the choice to remain in Romania if the market picked back up in the UK for his traditional skills would be a difficult one.
He added: "I definitely want to go contracting again and it does seem to me that the market will pick up again first in the UK but my dislike of this Government's hypocrisy and naivety makes me think twice about it; I would much prefer to wait for an overseas contract. However, I must be realistic and face the probability that if I don't get a contract soon, my age and the prevailing market conditions will compound to keep me out of computing for good. That would be a shame because I enjoy the work and like to think that I still have a lot to offer in terms of value and skilled advice.
"Your previous 'Business to Business' interviewee, Alec Jordan's comments about Mr Brown's attitude during their meeting also confirm my fears that New Labour is still governing by envy and has a very public-sector driven mindset.
"The Government seems to have forgotten the 'servant' part of 'Public Servant' and its interest seems to now lie in pandering to the public servants' needs and not to those of whom they are supposed to serve. IR35 was the most prominent example of this for me; Inland Revenue employees wanted their life made easier and hated to see what they considered outrageous money going to a small sector of the workforce. The resulting legislation, IR35, effectively dictated that everyone works PAYE or not at all.
"How many Directors of what this Government would call 'proper' (i.e. multi-national) companies are also shareholders and option holders? The natural extrapolation of IR35 is that no new large outsourcing companies can emerge in the future since by definition any one-man-band consultants are disguised employees attempting to evade taxes rather than attempting to be entrepreneurs and simultaneously controlling their futures. How did the Anderson's and EDS's of this world start out if not with this initial business model?
"All in all I would rather stay where I am, legally and reasonably escaping the UK taxman whilst trying to find new investors to start up another Caresse and discovering new skills which 'real' businessmen use every day, maximising profits and minimising costs (of which red-tape and taxes form the larger part for any company still operating in the UK)."