Sole Trader with one client - problems?
Discussion
I'm about to start work for a very small startup company. The boss has informed me I can 'be paid how I like'. In other words, as a normal PAYE employee, or as a sole trader. Since the contract is likely short term, I don't want to go the hassle of a ltd company (some companies won't touch IT consultant sole traders but I'm not concerned about that in this case)
My question is will registering as a sole trader offer enough benefits to make it worthwhile, being that I'll be in the 20% tax bracket? I'll be able to claim some equipment as work costs (being in IT, I guess these might be expensive compared to other sectors). I read working as a sole trader for just one client might cause some problems if HMRC come knocking but I'll be working from home in my own hours.
TIA
My question is will registering as a sole trader offer enough benefits to make it worthwhile, being that I'll be in the 20% tax bracket? I'll be able to claim some equipment as work costs (being in IT, I guess these might be expensive compared to other sectors). I read working as a sole trader for just one client might cause some problems if HMRC come knocking but I'll be working from home in my own hours.
TIA
Marcellus said:
No the OP, but also not too much of a hijack;
> employed for 6months fixed term contract paid on a day rate plus expenses.
OK as a sole trader?
What are the terms and conditions of the contract?> employed for 6months fixed term contract paid on a day rate plus expenses.
OK as a sole trader?
What is the nature of the relationship?
Who is in control of the work being done?
Can you hire your own staff?
Have you an established place of business?
Dio you advertise your services?
Do you issue invoices for the work you do - including for the "expenses" you are claiming?
Do you have your own insurance to cover third parties and employees?
Do you use your own tools and equipment?
Are you paid sick leave?
Are you paid for time off?
Are you paid for holiday time
If something goes wrong, who bears the financial cost i.e. who is taking the business risk?
Have you notified HMRC that you are "trading"?
Cheers Eric, hopefully your checklist will be of assistance to the OP too;
What is the nature of the relationship? - person reports to the board
Who is in control of the work being done? - person has objectives set to review operations, how, what where, when is down to them.
Can you hire your own staff? - yes
Have you an established place of business? - no based from home.
Dio you advertise your services? - no
Do you issue invoices for the work you do - including for the "expenses" you are claiming? - invoices for days worked, invoice for "expenses" too but need to give client receipts.
Do you have your own insurance to cover third parties and employees? - yes
Do you use your own tools and equipment? - yes but also given laptop by client too.
Are you paid sick leave? - No
Are you paid for time off? - No
Are you paid for holiday time - No
If something goes wrong, who bears the financial cost i.e. who is taking the business risk? - person has insurance to cover negligence etc etc but being a "review of operations" ultimately the client makes the decision whether to implement.
Have you notified HMRC that you are "trading"? - Yes (btw it isn't actually me)
Eric Mc said:
Marcellus said:
No the OP, but also not too much of a hijack;
> employed for 6months fixed term contract paid on a day rate plus expenses.
OK as a sole trader?
What are the terms and conditions of the contract? - can send them through to you if you'd like but anything in particular that should/should not be there?> employed for 6months fixed term contract paid on a day rate plus expenses.
OK as a sole trader?
What is the nature of the relationship? - person reports to the board
Who is in control of the work being done? - person has objectives set to review operations, how, what where, when is down to them.
Can you hire your own staff? - yes
Have you an established place of business? - no based from home.
Dio you advertise your services? - no
Do you issue invoices for the work you do - including for the "expenses" you are claiming? - invoices for days worked, invoice for "expenses" too but need to give client receipts.
Do you have your own insurance to cover third parties and employees? - yes
Do you use your own tools and equipment? - yes but also given laptop by client too.
Are you paid sick leave? - No
Are you paid for time off? - No
Are you paid for holiday time - No
If something goes wrong, who bears the financial cost i.e. who is taking the business risk? - person has insurance to cover negligence etc etc but being a "review of operations" ultimately the client makes the decision whether to implement.
Have you notified HMRC that you are "trading"? - Yes (btw it isn't actually me)
Edited by Marcellus on Saturday 17th April 09:47
Marcellus said:
Cheers Eric, hopefully your checklist will be of assistance to the OP too;
What is the nature of the relationship? - person reports to the board
Who is in control of the work being done? - person has objectives set to review operations, how, what where, when is down to them.
Can you hire your own staff? - yes
Have you an established place of business? - no based from home.
Dio you advertise your services? - no
Do you issue invoices for the work you do - including for the "expenses" you are claiming? - invoices for days worked, invoice for "expenses" too but need to give client receipts.
Do you have your own insurance to cover third parties and employees? - yes
Do you use your own tools and equipment? - yes but also given laptop by client too.
Are you paid sick leave? - No
Are you paid for time off? - No
Are you paid for holiday time - No
If something goes wrong, who bears the financial cost i.e. who is taking the business risk? - person has insurance to cover negligence etc etc but being a "review of operations" ultimately the client makes the decision whether to implement.
Have you notified HMRC that you are "trading"? - Yes (btw it isn't actually me)
On the whole, I would suggest that you have most of the bases covered. However, from an HMRC point of view, I would be reluctant to pass over original expense vouchers to the the people you are doing the work for. These expenses are the expenses of YOUR business, and ,as such, should be retained by YOUR business as documentary evidence of the costs YOUR business has incurred. This would be even more vital if you were or become VAT registered.Eric Mc said:
Marcellus said:
No the OP, but also not too much of a hijack;
> employed for 6months fixed term contract paid on a day rate plus expenses.
OK as a sole trader?
What are the terms and conditions of the contract? - can send them through to you if you'd like but anything in particular that should/should not be there?> employed for 6months fixed term contract paid on a day rate plus expenses.
OK as a sole trader?
What is the nature of the relationship? - person reports to the board
Who is in control of the work being done? - person has objectives set to review operations, how, what where, when is down to them.
Can you hire your own staff? - yes
Have you an established place of business? - no based from home.
Dio you advertise your services? - no
Do you issue invoices for the work you do - including for the "expenses" you are claiming? - invoices for days worked, invoice for "expenses" too but need to give client receipts.
Do you have your own insurance to cover third parties and employees? - yes
Do you use your own tools and equipment? - yes but also given laptop by client too.
Are you paid sick leave? - No
Are you paid for time off? - No
Are you paid for holiday time - No
If something goes wrong, who bears the financial cost i.e. who is taking the business risk? - person has insurance to cover negligence etc etc but being a "review of operations" ultimately the client makes the decision whether to implement.
Have you notified HMRC that you are "trading"? - Yes (btw it isn't actually me)
Edited by Marcellus on Saturday 17th April 09:47
Employers are perfectly entitled to ask employees to pass over expense vouchers and receipts. They are definitely NOT entitled to ask another business to pass its receipts over to them.
Engineer1 said:
Surely the issue is actually whether you have an intention to have one client or if you are unlucky and haven't got additional clients, after all a business only needs one client to start and getting additional clients may be difficult or take time.
See my list.You need to have an overview of the situation to come to a conclusion.
Having just one customer is not helpful in arguing your case for sole-trader status - but it is not a show stopper. All the other other criteria mentioned by me should also be considered.
As someone once said on a PH thread a few years ago, being in business is as much a frame of mind as anything else.
ladedah said:
Thanks for replies.. hmm well I'm really only have the intention to have one client and not to look for others. Even if this wasn't too bigger barrier to the sole trader route would the benefits be worth the extra hassle?
No point in looking at so called "benefits" if the option isn't open to you.Forget the term "Self Employed" (which is really an oxymoron) and substitute the terms "sole-trader" or "trading on one's own account". These are the terms HMRC will use if disputing your status. Are you genuinely running a business? Do you consider yourself to be a businessman?
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