Contracting as a sole trader

**Clare@InTouch** · 6 September 2013, 10:36

Originally posted by bikeman View Post

Sure it's been asked lots of times but why do agencies insist that I contract through a ltd co or an umbrella co? I run my own business as a sole trader and am happy to invoice/pay tax/NI as a sole trader. Why can't I contract as a sole trader? Thanks

Transfer of Debt Regulations. Agencies are concerned that if you don't pay your taxes the debt will be transferred to them.

**northernladuk** · 6 September 2013, 10:41

Originally posted by bikeman View Post

Sure it's been asked lots of times but why do agencies insist that I contract through a ltd co or an umbrella co? I run my own business as a sole trader and am happy to invoice/pay tax/NI as a sole trader. Why can't I contract as a sole trader? Thanks

So why not try a search then?

**eek** · 6 September 2013, 10:54

Originally posted by Clare@InTouch View Post

Transfer of Debt Regulations. Agencies are concerned that if you don't pay your taxes the debt will be transferred to them.

Actually its from Employment Protection (Consolidation) Act 1978 is the law we are looking at.

The tax issue is a different reason introduced far later down the line.

**Clare@InTouch** · 6 September 2013, 11:00

Originally posted by eek View Post

Actually its from Employment Protection (Consolidation) Act 1978 is the law we are looking at.

The tax issue is a different reason introduced far later down the line.

The tax reason was just the one I'd heard most commonly - agencies just worry about it so much that they won't risk it.

**bikeman** · 6 September 2013, 11:04

So it's against the law? But how is a contract obtained through a recruitment co (and requires a ltd co/umbrella) so different from a contract that I obtain directly and operate as a sole trader? What is the key differences between these contracts that causes it to be caught by this legislation?

I don't really understand the issue around agencies and tax. Whether I pay tax as an ltd co or a sole trader, they aren't responsible and have no visibility of it anyway.

**Clare@InTouch** · 6 September 2013, 11:12

Originally posted by bikeman View Post

So it's against the law? But how is a contract obtained through a recruitment co (and requires a ltd co/umbrella) so different from a contract that I obtain directly and operate as a sole trader? What is the key differences between these contracts that causes it to be caught by this legislation?

I don't really understand the issue around agencies and tax. Whether I pay tax as an ltd co or a sole trader, they aren't responsible and have no visibility of it anyway.

It's no illegal at all, agencies just don't want to allow it.

It's not the contract, it's the vehicle you're trading through. The regulations that allow debt to be transferred do not apply to a Ltd or a Brolly in the same way as they do to a sole trader (I've not read the actual legislation for a while, but that's the general gist)

**malvolio** · 6 September 2013, 11:17

Originally posted by Clare@InTouch View Post

It's no illegal at all, agencies just don't want to allow it.

It's not the contract, it's the vehicle you're trading through. The regulations that allow debt to be transferred do not apply to a Ltd or a Brolly in the same way as they do to a sole trader (I've not read the actual legislation for a while, but that's the general gist)

The liability for any unpaid taxes by a worker transfer up the chain to the next incorporated body; the underlying assumption is that all workers are employees (yeah, right...). The agency don't want that to be them.

**bikeman** · 6 September 2013, 11:18

Originally posted by Clare@InTouch View Post

It's no illegal at all, agencies just don't want to allow it.

It's not the contract, it's the vehicle you're trading through. The regulations that allow debt to be transferred do not apply to a Ltd or a Brolly in the same way as they do to a sole trader (I've not read the actual legislation for a while, but that's the general gist)

ok thanks

**eek** · 6 September 2013, 11:36

Originally posted by bikeman View Post

So it's against the law? But how is a contract obtained through a recruitment co (and requires a ltd co/umbrella) so different from a contract that I obtain directly and operate as a sole trader? What is the key differences between these contracts that causes it to be caught by this legislation?

I don't really understand the issue around agencies and tax. Whether I pay tax as an ltd co or a sole trader, they aren't responsible and have no visibility of it anyway.

Agencies cannot employ people on a self employed basis they have to either employ you under PAYE or employ you via a separate legal entity. The 1978 law I referenced above enforces that to stop agencies forcing people to pretend to be self employed.

The issue around agencies and tax is entirely separate to that law. The fact that people assume its due to tax just shows the lack of knowledge most people and agencies have around this area. But as a clue:-

You can work for the BBC or any company directly as self employed provided the company is willing to accept you working in that way (many people won't and its a pointless exercise as a service company is more tax efficient).
That 1978 act stops an agency letting me be self employed while they pay me to work for a third party.

Contracting as a sole trader