Paying a sole trader & ltd companies

CocoPopsLover

A friend of mine and myself would like to set up a ltd company. It will be an events company but at times, we may need to hire models (who are self employed), now if we have to pay them, do we have to pay any additional taxes or NI for them?

I also wanted to ask, is corporation tax due on profits that we make after all expenses have been taken into consideration or before? The information I have been reading on the net, is not so clear for me.

theesel1994

I think the best advice is get an accountant. You're going to need one at some point so best getting one at the start. Corporation Tax is on profits after expenses have been deducted.

Flyboy152

The models, or their agency, will invoice you and you pay them on invoice. There is no NI or tax to pay, on their behalf. However, if the agency bill you, there will be more than likely VAT to pay. If the models invoice you, unless hey turnover more than the minimum threshold they may also have to charge VAT. If you become registered for VAT, it can be reclaimed.

paddyrg

If they are self-employed, and registered as such, you have no further obligations. You can make your life easier by making sure their invoices are all pukka invoices with addresses, dates, invoice numbers, etc., but that they also contain a statement that they are registered self-employed and responsible for all their own NI and taxes, with their NI number.

Or make your life easier still, only employ models through a limited company agency and it becomes entirely their problem, you just pay an invoice.

Premier_2

Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement. A statement by the employed saying they are self employed will not usually suffice.

There is guidence from HMRC here:
http://www.hmrc.gov.uk/employment-status/index.htm

Employing models through a limited compnay (which may be their own) also does not guarantee they are not actually employed by you either.

Flyboy152

Premier wrote: »

Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement. A statement by the employed saying they are self employed will not usually suffice.

I have not had many difficulties when contracting self-employed people. If I engage them to provide me with specific services and they supply me with an invoice, it is pretty much read that they are self-employed, or working for a different limited company.

There is guidence from HMRC here:
http://www.hmrc.gov.uk/employment-status/index.htm

Employing models through a limited compnay (which may be their own) also does not guarantee they are not actually employed by you either.

If they are supplied by a limited company, who else would they be working for?

CocoPopsLover

thanks guys!!!

Just making sure!

paddyrg

Flyboy152 wrote: »

If they are supplied by a limited company, who else would they be working for?

I suspect that's a reference to IR35, but unless they're full-time models for 2+ years, it's unlikely to trigger IR35!

FWIW I occasionally work as a management accountant for a largeish musical artist, the band are mostly paid as limited companies although some are self-employed. Crew are all one or the other (about 50/50). Despite being on the road all last year, we never triggered IR35, so I think it's unlikely for a few models here and there.

Premier_2

Flyboy152 wrote: »

I have not had many difficulties when contracting self-employed people. If I engage them to provide me with specific services and they supply me with an invoice, it is pretty much read that they are self-employed, or working for a different limited company.



If they are supplied by a limited company, who else would they be working for?

From the HMRC link

A worker's employment status, that is whether they are employed or self-employed, is not a matter of choice....

What the parties call their relationship, or what they consider it to be, is not conclusive. It is the reality of the relationship that matters. ...

As part of our compliance activity we may wish to check that a person's employment status has been correctly classified. We seek voluntary compliance, but, where we find that the incorrect classification has been applied, we have a duty to ensure things are put right, both for the past and for the future. If someone does not agree with our decision, he or she has the right to appeal - How to appeal against an HMRC decision - direct tax.

Help and advice on employment status issues for tax and NICs is available by phoning 0845 3000 627....

The fact that a person is found to be an employee for tax and, or NICs purposes does not necessarily lead to the conclusion that he or she is an employee for other purposes. ...

I suggest reading the whole article

Flyboy152

Premier wrote: »

From the HMRC link

I suggest reading the whole article

It would help if you explained where you think I was incorrect.

Premier_2

Flyboy152 wrote: »

It would help if you explained where you think I was incorrect.

Flyboy152 wrote: »

... If I engage them to provide me with specific services and they supply me with an invoice, it is pretty much read that they are self-employed, or working for a different limited company....

...What the parties call their relationship, or what they consider it to be, is not conclusive. It is the reality of the relationship that matters. ...

See the HMRC article for more details