Consultancy work - Ltd Company or Self Employed?

[anonymous-user]

Hi all,

I currently own/run a Limited company within the automotive sector.

I have now been offered potentially lucrative consultancy work in a completely different field, and I am unsure if it would be better to set up a new limited company for this, or just work as self employed.

I would just be working on my own and not employing anyone. Expenses would be pretty limited to car/travelling, phone, laptop, stationary, use of home office etc.

Opinion amongst my friends seems to be 50/50. A couple of them consult and have set up limited companies, yet another couple have just remained as self employed as they say it's better because they really take the piss and apparently put all their family cars through as expenses (as pool cars/salesmens cars), all their clothes, plus they claim you can't put a price on 'not having people looking at your public accounts to see how much you earn'.

Lastly, are there any implications from a legal point of view from not being a limited company? I would have professional indemnity insurance, but should the advice I provide turn out to be a disaster, and the client gets legal, is it better to be limited or does this not really matter? I think this is extremely remote, but I'm just being cautious.

Thanks

[Countdown]

There is nothing to stop you running the “new” consultancy work through the same company. Why do you need to set up a separate company?

[Mr Pointy]

To take your last point first, yes there are legal liability implications of being a Sole Trader (There's no such thing as being self employed). You personally are the business so everything you own (more or less) could be on the line, even with PI insurance. Being a Limited Liabilty Company restricts that, as the name implies.

Other issues:

• will your potential clients use a ST? Many won't due to them having liability if you don't pay the correct NI deductions.
• What do you want to do with the profits? Operating as a limited company can be more tax efficient until you want to get the money out.
• How will your contracts be affected by IR35? Clients are now having to assess if you are inside or outside. This isn't an issue if you are a ST.

You can claim for any necessary business expenses as a ST but only you can judge if you want to be dumb enough to falsify your accounts by acting as your friends do.

[anonymous-user]

Countdown said:

There is nothing to stop you running the “new” consultancy work through the same company. Why do you need to set up a separate company?

Because the other limited company is owned 50/50 by myself and another guy.

I wish to keep them separate because it wouldn’t make sense for me doing additional consulting work for the money to then go into a company partly owned by someone else.

Also, I don’t really think it would be professional to invoice the NHS for Asset Management advice via a company called ‘Automotive vehicle repair services’ (the company isn’t called that but you get the idea).

[anonymous-user]

Mr Pointy said:

To take your last point first, yes there are legal liability implications of being a Sole Trader (There's no such thing as being self employed). You personally are the business so everything you own (more or less) could be on the line, even with PI insurance. Being a Limited Liabilty Company restricts that, as the name implies.

Other issues:

• will your potential clients use a ST? Many won't due to them having liability if you don't pay the correct NI deductions.
• What do you want to do with the profits? Operating as a limited company can be more tax efficient until you want to get the money out.
• How will your contracts be affected by IR35? Clients are now having to assess if you are inside or outside. This isn't an issue if you are a ST.

You can claim for any necessary business expenses as a ST but only you can judge if you want to be dumb enough to falsify your accounts by acting as your friends do.

Thanks for that.

Some good points there to consider.

It’s looking like a new LTD company is probably far more appropriate.

[Countdown]

Lord Marylebone said:

Countdown said:

There is nothing to stop you running the “new” consultancy work through the same company. Why do you need to set up a separate company?

Because the other limited company is owned 50/50 by myself and another guy.

I wish to keep them separate because it wouldn’t make sense for me doing additional consulting work for the money to then go into a company partly owned by someone else.

Also, I don’t really think it would be professional to invoice the NHS for Asset Management advice via a company called ‘Automotive vehicle repair services’ (the company isn’t called that but you get the idea).

Fair enough. When you said you “owned/ran” I assumed that you were the sole owner. There’s nothing to stop you being paid for your fair share of the profits just because the Company is paid 50/50. Although if you want to keep it separate because you don’t want your fellow shareholder to know anything about it at all then yes, it makes sense to do it separately.

With regards to LtdCo or Sole Trader it depends on various things. Both aspects have their advantages/ disadvantages, Is this going to be regular and/or long term or is it a one-off? If its the latter I genuinely wouldn’t bother setting up a LtdCo.

[Countdown]

Mr Pointy said:

• How will your contracts be affected by IR35? Clients are now having to assess if you are inside or outside. This isn't an issue if you are a ST..

AIUI the IR35 issue isn’t affected by whether somebody operates via a LtdCo or as a sole trader. The Employer makes the assessment based on the nature of the work and if it falls within IR35 then they would check to make sure the Person is PAYE somewhere along the line.

[Mr Pointy]

Lord Marylebone said:

Mr Pointy said:

To take your last point first, yes there are legal liability implications of being a Sole Trader (There's no such thing as being self employed). You personally are the business so everything you own (more or less) could be on the line, even with PI insurance. Being a Limited Liabilty Company restricts that, as the name implies.

Other issues:

• will your potential clients use a ST? Many won't due to them having liability if you don't pay the correct NI deductions.
• What do you want to do with the profits? Operating as a limited company can be more tax efficient until you want to get the money out.
• How will your contracts be affected by IR35? Clients are now having to assess if you are inside or outside. This isn't an issue if you are a ST.

You can claim for any necessary business expenses as a ST but only you can judge if you want to be dumb enough to falsify your accounts by acting as your friends do.

Thanks for that.

Some good points there to consider.

It’s looking like a new LTD company is probably far more appropriate.

Given you mention the NHS I think you need to look very carefully at IR35. There is a lot of information over on the ContractorUK forums:

https://www.contractoruk.com/
https://www.contractoruk.com/forums/

[Mr Pointy]

Countdown said:

Mr Pointy said:

• How will your contracts be affected by IR35? Clients are now having to assess if you are inside or outside. This isn't an issue if you are a ST..

AIUI the IR35 issue isn’t affected by whether somebody operates via a LtdCo or as a sole trader. The Employer makes the assessment based on the nature of the work and if it falls within IR35 then they would check to make sure the Person is PAYE somewhere along the line.

IR35 doesn't apply to sole traders, but that doesn't mean they can't be pinged for actually being a disguised employee. If they are judged to be so then HMRC can hold the client, not the contractor, liable for any NI (& maybe tax?) due. Hence many companies being reluctant/refusing to use STs.