[Closed] Self employed vs Ltd company

If work is not just from her, shouldn't be an issue (IR35).

Make sure you register with NI, self-employed, submit proper invoices, decide if you're VAT reg or not (and if fixed rate VAT or not)...

FWIW I'm self-employed / sole trader, and while client list is quite small, I'm confident I can pass the IR35 stress tests pretty comfortably (can decide if take on work, provide my own tools, choose hours to suit myself, employers are not obliged to provide me with work or materials, etc)

Edit - yes, home costs can be counted, several methods to calculate but I tend to count rooms, declare work from one room, and divide house costs from total..

What kCal says -- as long as you have other clients and aren't spending all your time in their office using their computers and stuff, it won't be a problem.

Yeah, she's mentioned the IR35 thing a few times. We both know my plan is to have several short-term/long-term clients therefore negating any full-employment related tax avoidance implications. Hence why I fail to see it being an issue. Okay, if I was to not getting any other work and had only once source of income, that might look odd. But surely that could be circumstantial?

Re home costs, are you talking of splitting based on number of bedrooms or total rooms? Phone, heating, lighting, utils only? I suppose there's no way to claim mortgage relief these days?

Ta

I spoke to an accountant when I went through my worries on only having one client (though it might help to have another, lavender client if you like..) His response was along the lines of "Mutuality of obligation" - i.e. are you obliged to be available for work set number of days/hours, do the work that is asked, and so on. Is your employer/client obliged to provide you with accommodation, tools, materials, work?

If not, then it's less likely to be an issue. That was my line of working anyway.

For rooms, yes, I decided to count number of rooms (bedrooms, living, kitchen as well as it's quite large) and then divide bills by that. Other option is possibly sq. footage, or see an accountant but TBH it might not be worth the hassle.

I take general household - power, heat, insurance as well (though you might want to look at business insurance) - phone. Also update your house insurance. Possibly let council know as well, not sure about that one.

http://www.hmrc.gov.uk/manuals/bimmanual/bim47815.htm
http://www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm

For banking I've got a simple internet RBS Business account, no fees and get paid interest on balance. Def. good to keep it separate.

I couldn't be bothered with the rooms/electricity/heating thing, but my broadband and mobile phone have always been down as an expense.

You can claim some of the mortgage as a proportion of your household costs:
http://www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm

As for the original question, sole trader is so much less hassle I'd start out like that. Shouldn't be a tax issue, just need to convince your boss/future client

Cheers chaps. Off out for a bit now so will go through those links this afternoon.

Remember there's a Capital Gains implication when off-setting some of your house costs. When you sell up and move HMRC will want tax on 1/(no of rooms) x gain on the house purchase price x prevailing CG rate.

Ah yes, I knew there was a good reason I didn't bother 😉

Sandwich - Member
Remember there's a Capital Gains implication when off-setting some of your house costs. When you sell up and move HMRC will want tax on 1/(no of rooms) x gain on the house purchase price x prevailing CG rate.

POSTED 9 MINUTES AGO # REPORT-POST

This - be VERY careful not to take the piss.
I charge the business something like £3 a week rent - there's a figure which HMRC are happy with.

Good luck with it - I did something similar and went through all that IR35 heartache. Essentially the rules are there to catch 'disguised employment' so if you operating on a freelance/Ltd Co basis is simply a way of avoiding PAYE, then you fall under IR35. I don't think your status affects this, it's to do with the relationship between you and your client, and making sure that isn't an employment-like relationship.

The way round it is to behave as an independent business would - bid for work from other clients, get a letterhead, biz cards, other clients, incur business expenses, ensure that any contracts between you and a former employer deal with things like right of substitution and mutuality of obligation. Use your own timesheets, and expenses forms (on that lovely new letterheaded paper you sorted out). Sign in as if you were a visitor. Get out of the office lottery syndicate and don't do the milk rota. Once you have two or three contracts under your belt it will stop worrying you!

In my view there were some advantages to operating a LtdCo - you gain the protection of limited liability, i.e. the company's money or debts are the company's, not yours. So if the company gets sued, you can keep your house! There's some benefit from distribution of profit at corporation tax rates, not personal tax rates. On the whole I am not sure the extra paperwork is particularly burdensome, but in either case try to get your head around the difference between 'you' and 'the business'.

I [b]strongly [/b]recommend that you find an accountant that you can work with, they'll save you far more than their fees in time and worry.

One thing to watch though is that if you designate part of your home as 'work space' you may become liable for business rates on that portion. I think the sums in my case worked out at about £4 - it's really not worth the hassle.

What line of work are you in/where are you based?

[url= http://www.freelanceadvisor.co.uk/go-freelance-guide/how-to-make-your-contracts-ir35-proof/ ]IR35 contract guide[/url]

[i]The MD, however, is asking me to set up a Ltd company as she believes there is a risk of her picking up a tax liability later. Is this correct? I can't see how me being self employed, billing monthly (or per project) and sorting my own tax is an issue.

[/i]

If your customer demands that you work in a certain way there is a risk that if you don't, they won't use you.

She is correct that there is a risk by you moving from perm to contract but still (initially) working only for her; this is HER risk and therefore needs mitigating by HER.

Her mitigation currently is to demand you become Ltd, if you have an alternative - talk with her.

+1 for an accountant. There's money to be gained or lost here.

Personally I would go Ltd and get VAT registered for the flat rate scheme but I guess it depends on your circumstances.

I am back as a permy at the moment but would not hesitate to so this again. Positive experience was had.

Be careful of claiming electricity and other house hold utilities this makes you liable for capital gains for the portion of house claimed should you ever wish to sell

As above - seek professional advice.

But worth mentioning that one of the key benefits of a ltd status is limiting liabilities to the assets of the company.

Be careful of claiming electricity and other house hold utilities this makes you liable for capital gains for the portion of house claimed should you ever wish to sell

http://taxaid.org.uk/situations/self-employed/use-of-home-as-office

Get a good accountant on-board as said above.
Sole traderships are cheaper for accoutancy, but I've always been keen on the limited liability of a Ltd company, plus larger company account departments generally want to deal with Ltd companies.

Mrs deadly does a lot of work for a large manufacturer of vacuum cleaners in the SW 🙂

They have recently told every sole trader who contracts for them (and not just "exclusively") to either go limited or use an umbrella company...or, pretty much no more work. I don't understand it myself, but from all her self-employed designer mates, it seems all the larger employers are pushing their contractors down this route. I can only assume there's a push from HMRC to do it. Corporations don't do stuff that's going to cost them money. 🙂

Danbro are very good at sorting out this kind of question - [url= http://Danbro.co.uk ]Link[/url].

I'm not an employee, just a (satisfied) customer.

deadlydarcy - Member
I can only assume there's a push from HMRC to do it. Corporations don't do stuff that's going to cost them money.

My guess is that large corporations want to avoid being investigated by HMRC for hiring individual who are self-employed. They want to avoid being accused by HMRC for giving money to Tom, Dick and Harry innit.

I mean HMRC perhaps cannot understand the fact that there are people who are self-employed by sub-contracting work form large corporations, but as you know the govt and all the bureaucratic zombie maggots cannot accept such facts in the business environment and with a political correct mindset decides that either you are another company (Ltd) company or you are an employees.

Damn! 🙄

I could be SE or Ltd.. I chose Ltd simply because of the risk, despite the perceived increased costs for accountancy.

Self employed, everything is on the line that you own, Ltd. fold, give them quid and walk away, if your FU properly like.

BTW, I build wind farms, roads, power plants, major earthworks projects so my financial risk on the jobs I'm responsible for are fairly expensive to put right if I get it wrong.

Remember there's a Capital Gains implication when off-setting some of your house costs. When you sell up and move HMRC will want tax on 1/(no of rooms) x gain on the house purchase price x prevailing CG rate.

The rules on this seem to have got a lot more favourable. The guidance from accountants definitely used to be that you could NOT claim any mortgage interest because of risk of CGT arising. However, I was reading up the other day and it seems HMRC issued some guidance about 4 years back and said that CGT would not arise and you COULD claim proportion of interest.

See the [url= http://www.hmrc.gov.uk/manuals/bimmanual/BIM47825.htm ]examples on HMRC website[/url]

Also, buy this book

http://www.amazon.co.uk/Small-Business-Tax-Saving-Tactics/dp/190730259X/ref=sr_1_1?s=books&ie=UTF8&qid=1402001279&sr=1-1&keywords=Tax+for+the+small+business