Limited Co or Sole Trader?

[Rob_S]

I've been working as a contractor under an umbrella company for a while and in the past couple of months i've taken on some freelance work and decided to ditch the umbrella company and go it alone.

I'm earning between 50k - 70k per year working for a single company (at the moment). It's on a pay per project deal.

I haven't yet decided whether to go sole trader route or limited company.

Any advice out there?

I realise i should probably be talking to an accountant.

[Rob_S]

How do you mean it was blocked?

[Darren@UptonAccountants]

Limited Companies

Limited Company without a doubt.

Client companies prefer the limited route as it gives them a degree of protection from the Inland Revenue if the come calling and start querying IR35, etc as well as ensures you have no employee rights, e.g. holidays, sick pay, maternity, etc.

[rootsnall]

I always thought the sole trader route was a no no but I'm currently working with someone who is set up as a sole trader. They are working direct to the client and I have since been led to believe that its the contractor to agency setup that is not possible via the sole trader route. Hence its not really practical for a jobbing contractor to be a sole trader but may be in your specific case if the client is willing to take you on directly !?

[malvolio]

Check with someone who really knows, but if there is an agency in the chain, the provisions of S134c from back in the 80's mean (in effect if not in detail) that you either trade via a limited company or become an employee of the agent. If you are dealing directly with end clients and will never have an intermediary company, sole trader is fine.

Which rather puts paid to the current Government's idea that we have Ltd Co's as a tax dodge, BTW - we have them because we have to!

[Rob_S]

To clarify slightly, it's only one company at the moment because, around a year ago i was working with them through an agency and after i finished they approached me afterwards (naughty yes) to price a completely different project (so i thought why should the agency take 10-15%..blah blah).

Anyway, that was 6 months or so ago and they keep asking me to do more work.

I'm very new to this so excuse my ignorance, but, doesn't limited company mean higher maintenance, ie. higher accountancy fees etc... ?

Is owning a limited co. a hassle over sole trader status?

Thanks for the advice.

[IR35 Avoider]

Have you actually asked the company if they will deal with you as a sole trader? There's a good chance they won't, since if the Inland Revenue decide you look like an employee they can treat all payments to you as net salary and tell the company to pay the tax and NI they should have deducted from the "grossed up" equivalent salary.

If you are earning 70K plus and don't look like an employee (i.e. pass IR35 test) then you can easily pay a lot less tax using a company than you would as sole-trader.