Self-employed

[Danila]

I'd say that IR35 would be irrelevant in a Sole Trader situation.

as far as I understand it is irrelevant, but they recommend to check carefully if you are truly self-employed or just employed, according to the contract and the nature of work you do. I have no idea what is the implication of it and how anyone is going to check if I'll just submit my tax return in April.

[TykeMerc]

Question... does IR35 apply to true self-employment? You're not trying to 'evade tax' by taking 'income' as dividends after all. We don't see much on this topic since in the UK most agencies won't work with sole traders, but it would be interesting to know the specific legal/tax issues for those who do work this way.

I'd say that IR35 would be irrelevant in a Sole Trader situation. Unless things have changed drastically in the last 7 or so years since I packed in sole trading it's a simple income - expenses = profit = personal income, pax income tax and NI on all the income less allowances, no employers NI.

[d000hg]

Question... does IR35 apply to true self-employment? You're not trying to 'evade tax' by taking 'income' as dividends after all. We don't see much on this topic since in the UK most agencies won't work with sole traders, but it would be interesting to know the specific legal/tax issues for those who do work this way.

[TykeMerc]

thanks for the answer. i guess my main stupid question now why cannot i be self-employed sole trader for this contract? i read tax authority website and don't really see any reason why i cannot just register myself as a self-employed and fill in my taxes in April? if there is an absolute No and i am missing something, i'll go Ltd or umbrella route i don't mind, just wanted to do it simplier at the moment.

I'd say that since you haven't got a UK agency involved there's nothing to stop you trading with your client as a Sole Trader.

So long as you put cash aside for tax and NI it's perfectly workable.

[Danila]

Just remember not to spend it all so you can pay your tax and NI...

that is a good point! i'll be tempted i know

[Moscow Mule]

You will be receiving funds directly from China, You probably don't need to worry about a limited or umbrella and you can just declare the income on your self assessment as a proper self employed person. Just remember not to spend it all so you can pay your tax and NI...

[MPwannadecentincome]

interesting that you have exported your services to China. Get a tax accountant who has expertise in international taxation to check your contract, I recall from working at a company before something about with-holding taxes and certificates and trying to claim the tax back etc.

[LisaContractorUmbrella]

IMHO the points from the contract that you have raised would indicate that you are likely to fall inside of IR35 and therefore your income would be liable to income tax and national insurance deductions through PAYE. You can ask the client to reword the contract but if all the points you mention would still remain in reality it would made no difference to your real status as the contract must be a true reflection of the working practises.

HTH

[Danila]

Talking to mate down the pub, contractor is "Self Employed" (because it's simpler to explain)

In all other situations (Tax/Contracts so forth) we describe ourselves as Employee/Director/Owner/Shareholder (one or all as appropriate) of our own Ltd's. (unless gone umbrella route, something doubt you will be able to do in this set up), never "self employed"

thanks for the answer. i guess my main stupid question now why cannot i be self-employed sole trader for this contract? i read tax authority website and don't really see any reason why i cannot just register myself as a self-employed and fill in my taxes in April? if there is an absolute No and i am missing something, i'll go Ltd or umbrella route i don't mind, just wanted to do it simplier at the moment.

[Danila]

"Self-employed"? Do you mean "Work as an employee of a LtdCo of which I am a shareholder", or "self-employed"?

Are you thinking of IR35? That has nothing to do with being "self-employed" except in the building industry. IT contractors are not "self-employed", they are employees of their LtdCo or the agency or a brolly.

Definitely. You have no idea what you are doing!

i mean self-emlployed sole trader who is responsible to submit self-assesment tax papers. why cannot i be a self-employed IT contractor if the client doesn't care?
thanks for your answers

[Not So Wise]

However, after reading all the forums and the tax office website, I figured there can be some problems with defining my status for the purpose of tax, because, if I understood correctly, a self-employed person does not take instructions from the client and there is no mutual obliations involved (in opposite to an employee).

As Richard said, this is IR35 issue, which while it will have an impact on your tax status is not really a tax issue (confusing i know).

Honestly if client are in China and you are in UK unless you have very strict T&C's in the contract doubt this will be to much of an issue for you

Maybe I should negotiate the re-wording of the contract, or how self-employed contractors would usually do it?

You are confusing the technical language with the layman's.

Talking to mate down the pub, contractor is "Self Employed" (because it's simpler to explain)

In all other situations (Tax/Contracts so forth) we describe ourselves as Employee/Director/Owner/Shareholder (one or all as appropriate) of our own Ltd's. (unless gone umbrella route, something doubt you will be able to do in this set up), never "self employed"

As not seen whole contract not going to comment on the points you raised but one thing you need to understand and make sure contract is worded accordingly, contract is between client and your Ltd, not between you and client, so it needs to be worded accordingly (see a lot of Client/consultant references in your points) also make sure substitution clause is in there

I seriously suggest you read all the guides on the main site here, after doing that if you are still not clear on why contractors are not "self employed" (and should not register as such even though they can) I suggest you contact a lawyer and an accountant

[RichardCranium]

I am very new to contracting, but want to try if it's for me and was offered a 6-month contract with a company registered in China - not a UK-taxpayer. They want to hire me as a contractor - not an employee, and gave me a sample contract to review. I want to start with a self-employed option, as it looks like the easiest at the moment.

"Self-employed"? Do you mean "Work as an employee of a LtdCo of which I am a shareholder", or "self-employed"?

However, after reading all the forums and the tax office website, I figured there can be some problems with defining my status for the purpose of tax, because, if I understood correctly, a self-employed person does not take instructions from the client and there is no mutual obliations involved (in opposite to an employee).

Are you thinking of IR35? That has nothing to do with being "self-employed" except in the building industry. IT contractors are not "self-employed", they are employees of their LtdCo or the agency or a brolly.

give your opinion if I should worry about the contract wording

Definitely. You have no idea what you are doing!

[thunderlizard]

I would disagree. Very often clients get hold of a standardish contract, aren't especially attached to it, and are happy to change it if there's a proper reason.

[northernladuk]

Very little, if nothing you can do about it. They aren't going to reword your contract just because you want it, especially if they are new. If you had good position power you might have the odd tweak but not in your position.

Suck it up and get it signed imo. Get some contracts under your belt before starting to cause ripples with agents/clients imo.

[Danila]

Hi guys,

I am very new to contracting, but want to try if it's for me and was offered a 6-month contract with a company registered in China - not a UK-taxpayer. They want to hire me as a contractor - not an employee, and gave me a sample contract to review. I want to start with a self-employed option, as it looks like the easiest at the moment.

However, after reading all the forums and the tax office website, I figured there can be some problems with defining my status for the purpose of tax, because, if I understood correctly, a self-employed person does not take instructions from the client and there is no mutual obliations involved (in opposite to an employee). Maybe I should negotiate the re-wording of the contract, or how self-employed contractors would usually do it?

The main points in the contract, which I am worrying about in relation to look like an employee rather than self-employed:
1. guaranteed 6 month work, based on 5 day working week, 7.6 hrs a day.
2.Should the Consultant wish to take unpaid leave this shall be agreed one week in advance or by mutual agreement.
3. Consultant shall provide the Client with services relating to ......and report to NAME
4. . Any overtime (over and above 38 hours) shall be paid in addition with the caveat that overtime work shall need prior approval by the Client from the Consultant prior to being charged to the Client.
5.Termination of this agreement can be executed by the giving of one month’s notice by either the Consultant or Client

They also want all fees paid by the Client to the Consultant shall be inclusive of taxes and other similar local or international charges.

Can you advice please and give your opinion if I should worry about the contract wording, or it is not that complicated in real life? Thanks a lot!