Contracting. Can I be a sole trader?
Discussion
zixujo said:
Let me rephrase that with more detail. A job that has recently cropped up is a supervisory role in the engineering sector as a contractor. My understanding is that I have to register as a business for contracting roles, but do I have to be a limited company?
I'm not sure what you are asking. If you are going to work as a contractor, ie not a permanent member of staff, then you will need to set up a trading entity. Now depending on how you want to operate & the requirements of your client that could be as a Sole Trader, or something else such as a Limited Company or a Pertnership. So no, you don't have to trade as a limited company but you will need to set up a trading entity. You can't expect your clients to simply send money into your personal bank account.zixujo said:
Let me rephrase that with more detail. A job that has recently cropped up is a supervisory role in the engineering sector as a contractor. My understanding is that I have to register as a business for contracting roles, but do I have to be a limited company?
There is no such thing in the UK as a "registered business". An individual can run a business as a person and that would be referred to as a "sole trader".Alternatively, a person can set up a limited liability company and run their business through that instead.
Organisations do not like hiring genuine sole traders because if their employment status is challenged by HMRC, the liability for underpaid tax and NI will be collected from the "employer" rather than the "sole trader".
With a limited company, the liability traditionally fell on the limited company. As a result, "employers" who want to hire a person but don't want an "employee", have tended to want the individual to operate through their own limited company.
IR35 was invented about 20 years ago to try and make these small limited companies less attractive from a tax and NI point of view but on the whole, it did little to change the practice. However, recent changes to how IR35 is applied have made hiring one man band limited companies almost as risky for an "employer" as hiring a sole trader.
Filing accounts etc is a faff, and being a company is much less advantageous from the individual's tax point of view than it used to be.
So if you want to keep things simple, being a sole trader is the way to go.
But depending on the business you are in, you may find that your prospective clients are unwilling to hire you as a sole trader and will only engage Ltd companies as suppliers.
There may be little more than custom and practice behind this, but if you want to work for them you have to toe the line.
So best to ask the client what their requirements are and make your decision on that basis.
I am still a sole trader 2yrs after going it alone, but I am always half expecting that a big client will decide they want me to be a company, and if/when they do I will set one up.
So if you want to keep things simple, being a sole trader is the way to go.
But depending on the business you are in, you may find that your prospective clients are unwilling to hire you as a sole trader and will only engage Ltd companies as suppliers.
There may be little more than custom and practice behind this, but if you want to work for them you have to toe the line.
So best to ask the client what their requirements are and make your decision on that basis.
I am still a sole trader 2yrs after going it alone, but I am always half expecting that a big client will decide they want me to be a company, and if/when they do I will set one up.
zixujo said:
So what is the best option in my case?
The contract work is 2-4 months. I hear that I'd have to pay an accountant and file regular accounts if I were to go with a limited company, this sounds like unnecessary expense to me.
Use an umbrella company then. It's not worth setting up a company for a couple of months.The contract work is 2-4 months. I hear that I'd have to pay an accountant and file regular accounts if I were to go with a limited company, this sounds like unnecessary expense to me.
No large company will deal with a sole trader. The umbrella company will act as the middle man.
dontlookdown said:
Filing accounts etc is a faff, and being a company is much less advantageous from the individual's tax point of view than it used to be.
So if you want to keep things simple, being a sole trader is the way to go.
But depending on the business you are in, you may find that your prospective clients are unwilling to hire you as a sole trader and will only engage Ltd companies as suppliers.
There may be little more than custom and practice behind this, but if you want to work for them you have to toe the line.
So best to ask the client what their requirements are and make your decision on that basis.
I am still a sole trader 2yrs after going it alone, but I am always half expecting that a big client will decide they want me to be a company, and if/when they do I will set one up.
The fact that a hirer can "force" an individual to operate through a limited company rings very loud IR35 bells straight away.So if you want to keep things simple, being a sole trader is the way to go.
But depending on the business you are in, you may find that your prospective clients are unwilling to hire you as a sole trader and will only engage Ltd companies as suppliers.
There may be little more than custom and practice behind this, but if you want to work for them you have to toe the line.
So best to ask the client what their requirements are and make your decision on that basis.
I am still a sole trader 2yrs after going it alone, but I am always half expecting that a big client will decide they want me to be a company, and if/when they do I will set one up.
Eric Mc said:
98elise said:
Use an umbrella company then. It's not worth setting up a company for a couple of months.
No large company will deal with a sole trader. The umbrella company will act as the middle man.
In other words, become an agency employee.No large company will deal with a sole trader. The umbrella company will act as the middle man.
The company I will be contracting for are fine with me being a sole trader. What do I need to do now?
They did ask about insurance/indemnity. I said I didn't have that but i'd be willing to take it if required. They didn't say anything so I assume I don't need it. Should I bother getting it anyway?
They did ask about insurance/indemnity. I said I didn't have that but i'd be willing to take it if required. They didn't say anything so I assume I don't need it. Should I bother getting it anyway?
Edited by zixujo on Thursday 27th December 14:51
Is this literally just going to be for two months or do you think you will continue to work in this manner? If it's going to be an ongoing thing then I'd suggest you find an accountant to assist you.
As far as insurance goes have a look here:
https://www.caunceohara.co.uk/
Don't forget that if you have car insurance that it may need to be amended to cover 'use in connection with your business'.
As far as insurance goes have a look here:
https://www.caunceohara.co.uk/
Don't forget that if you have car insurance that it may need to be amended to cover 'use in connection with your business'.
If you cock up up any of the work you do, who will be liable?
This is a pretty vital question.
Most employees are covered by the insurances taken out by their employer. A "sole trader" is technically running their own business. It is normally expected that a business takes out the necessary insurances for the work undertaken by that business.
This is a pretty vital question.
Most employees are covered by the insurances taken out by their employer. A "sole trader" is technically running their own business. It is normally expected that a business takes out the necessary insurances for the work undertaken by that business.
zixujo said:
It's 3-4 months. Is it worth getting cover is what i'm asking?
Answering on this thread is a bit like pulling teeth but as Eric says, what happens if you cause a loss or, even worse, an accident? You say the post is as a supervisor in an engineering business so might you have any H&S responsibilities for instance? If you make an error & someone is injured you could be liable for a very considerable amount & as a Sole Trader everything you own is on the line. It's not like a limited company where the liability is (broadly speaking) limited to the company assets.I honestly suggest you look at finding an accountant & getting insurance; the cost of both of these is a tax-deducible expense. Maybe speak to the insurers & see if they can bring the cost down by insuring for a shorter period if you aren't expecting to pick up more work.
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