Self employed or Sole trader

Paddymcc_2

The time has come that my business is finally generating enough cash to support myself full time so ive given up my job.

Basically i refurbish laptops and resell them.

So...its about time i get it all setup correctly before things snowball any further.

Do i need to go self employed or do i go for a sole trader.

Another question is that i dont wish to register for VAT so am i able to setup another company basically doing the same thing to avoid the vat registration as it will really effect profit margins.

Danni19

I assume you mean should you set up as a limited company or as a sole trader.

This is a complex issue, and the tax benefits of setting up as a company are now much smaller (especially for a one man band).

My personal opinion (and that is all it is) is that it is less hastle is you trade as a sole trader, until you start paying tax at 40%.

Regards the VAT, I wouldn't recommend the approach you have suggested. I think this is basically evaision and could land you in very serious trouble.

Paddymcc_2

Danni19 wrote:

I assume you mean should you set up as a limited company or as a sole trader.

This is a complex issue, and the tax benefits of setting up as a company are now much smaller (especially for a one man band).

My personal opinion (and that is all it is) is that it is less hastle is you trade as a sole trader, until you start paying tax at 40%.

Regards the VAT, I wouldn't recommend the approach you have suggested. I think this is basically evaision and could land you in very serious trouble.

So basically what is the best way around this VAT thing?

Im in Ireland so i can setup as a sole trader either side of the border so perhaps this is the way around it?

A limited company is of no benefit to me as everything is paid on cash terms and i have no real outstanding debts.

I was also going to run the business from my new home so is this deductable from the tax i pay etc or what other benefits are there for me?

Pennywise

Paddymcc wrote:

So basically what is the best way around this VAT thing?

If you're turnover is over the VAT threshold, you have to register. If you could legitimately split your business into two, one being yourself as a sole trader and the other being your own limited company, you may well avoid the VAT issue, but your businesses would have to be completely separate - i.e. different products or services, different suppliers and customers, different bank accounts, etc etc, so it is quite difficult to achieve.

Paddymcc wrote:

A limited company is of no benefit to me as everything is paid on cash terms and i have no real outstanding debts.

I don't think you understand about limited companies - using a limited company can reduce your tax bill and gives you greater protection from being sued by your customers if things go wrong. It's more than just protecting yourself from supplier debts.

Paddymcc wrote:

I was also going to run the business from my new home so is this deductable from the tax i pay etc or what other benefits are there for me?

Only the additional costs of your home will be allowed as an expense - i.e. your power bills will increase if you spend time working from home, so you can claim the extra. Unfortunately, you cannot claim any of your mortgage nor other fixed costs as HMRC would argue that you'd have to pay those anyway so there is no extra cost of trading from home.

As for "other benefits" - that's a strange request. What other benefits were you thinking of? The main benefit of self employment is being your own boss, being in control of your own destiny and having the opportunity to use your abilities to earn more money and possibly create a valuable business capable of being sold on for a profit later.

Paddymcc_2

Pennywise wrote:

If you're turnover is over the VAT threshold, you have to register. If you could legitimately split your business into two, one being yourself as a sole trader and the other being your own limited company, you may well avoid the VAT issue, but your businesses would have to be completely separate - i.e. different products or services, different suppliers and customers, different bank accounts, etc etc, so it is quite difficult to achieve.

I could split the business in 2 with no problem at all basing one part in southern Ireland and the other part in Northern Ireland. I was actually considering this as i have started branching into laptop accessories which is also going pretty well.

Ultimately though which will result in me paying the least amount of tax?

I have addresses in both parts of the country which are just 5 miles apart so perhaps thats is just one option.

lemontart

would have thought better to keep in ni with tax levels being higher in south.

Beth
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