Sole trader allowed to run 2 sole trader businesses?

jaimito

i will be doing some care work which is a self employed post at the local council so will need to set up a business accordingly. however, i also want to set up a web design business separately. it seems like i would have to set up 2 businesses for this. is this correct or is it possible to combine the two into one enterprise? if not [which i think isn't possible] i think i would have to set up 2 sole trader businesses but i am not sure if this is allowed?

can anybody point me in the right direction?

thanks!

jaimito

PlutoinCapricorn

As a sole trader, you are taxed as an individual, so combining your earnings and expenses is possible, especially if you earn under £30,000 in total. It is probably best to keep separate records for your own purposes though. Are you trading under your own name for both sources of income?

jaimito

Hi again plutoincapricorn,

Thanks again for your quick reply!

Yes, I will be trading under my own name for both sources of income. The combined total will definitely be under £30,000.

Do you suggest that I combine the 2 so that the setup costs of the web design offset the profits of the self employed carer income? From what you say, this is definitely allowed but will running separate enterprises pose any problems for me tax wise? if so, am I allowed to open 2 sole trader enterprises?

Thanks again!

Jaimito

PlutoinCapricorn

If you register with HMRC as a sole trader with your trading name the same as your own name, you can call yourself a portfolio worker. This is enough for HMRC: when you come to fill in the tax return they will ask if your total self employed income is under £30k, and if so all they want to know is how much income, how much expenses thus how much profit.

They don't think so much in terms of businesses, they think of you as a freelancer with one or more income streams. So you add the income from all sources to get total income, add the expenses from all sources to get total expenses, deduct to get total profit, which is what you are taxed on.

This care job may not be real self employment according to HMRC's definition though: is there a regular commitment? Will you be invoicing them? Can you turn any work down?

jaimito

Hi again PlutoinCapricorn,

Thanks so much for all the information, it really is proving invaluable to me! I didn't know about the portfolio worker status so that really is a great help to know that I can do that.

Regarding the care work itself, this is exactly what it says on the website:

"Providers are not employees of Manchester City Council but are viewed as self employed. Retainers are not paid between placements, but experience has shown that Adult Placement does provide a regular income for many people.

Adult Placement Providers are paid a set rate, which is regularly reviewed, for each particular service they provide. The payment rates are above the national minimum wage.

Providers are required to register with their local tax office and are responsible for arranging their own Income Tax and National Insurance payments. "

By this definition, would this suffice under the HMRC's definition? Surely if this is the local council then this wouldn't count as 'false self-employment'? with regards to the other questions (i.e. regular commitment, invoicing) I won't know until the post starts. But now that you mention it I will call them first thing on Monday to find out.

Thanks again!

Jaimito

fengirl_2

If the LA are advertising the positions as self employed, then you can be assured that they have cleared it with HMRC. If they havn't done so, then they would be in trouble with HMRC, not you.
I'm afraid I don't agree with Pluto's advice about combining both sourses of income. The two businesses are very different and HMRC would not accept one set of accounts for both. You need to keep separate records for both businesses, compile accounts for both and complete self assessment pages for each.

Debt_Free_Chick

fengirl wrote: »

If the LA are advertising the positions as self employed, then you can be assured that they have cleared it with HMRC. If they havn't done so, then they would be in trouble with HMRC, not you.
I'm afraid I don't agree with Pluto's advice about combining both sourses of income. The two businesses are very different and HMRC would not accept one set of accounts for both. You need to keep separate records for both businesses, compile accounts for both and complete self assessment pages for each.

This is my understanding too.

You have to correctly apportion the expenses to each business. You can't claim a website expense against the care worker income.

Fengirl
Presumably if one business makes a loss it can be set against any profit made by the other?

fengirl_2

Yes, if one business makes a loss, this can be set off against the profits from another business (or carried forward).

jaimito

thanks for the input fengirl and Debt_Free_Chick,

if i am not allowed to operate as a sole trader with 2 businesses then i guess this comes back to my original question which is am i allowed to open more than one sole trader business?

if so, how does the mechanism work which enables me to offset the losses of one business against another? is this possible with 2 sole trader accounts?

thanks again!

jaimito

BoGoF

You can have as many sole trader business' as you want but they need to be accounted for seperately.

When completing your Tax Return you complete a Self Employed supplementary page for each business. For losses there is a section you complete to say how you want these losses treated, e.g. set against other income of the year, carried back or carry forward.

Debt_Free_Chick

Just to add, you only need to register as self employed with HMRC once - not for each business. As BoGoF says, you need to complete a separate self employment section for each business on your tax return.

Before then, make sure you keep books/accounts for each business, separately.