Freelancing: Sole Trader vs Ltd.

Chubacheroo

I'm about to leave a publishing company where I've worked for 5 years. My intention was to go freelance, initially as a sole trader, to provide publishing and business services with a view to publishing some magazines later on (once I've established cash flow).

Today, I was advised that I wouldn't be able to freelance for the company I currently work for :eek: for some reasons to do with employment law...unless I did one or more of the following:

1) signed an agreement
2) wait 2 weeks (something to do with overlapping employment?)
3) work as an employee of my limited company (which I have already set up)

As I'm hoping to start working on this on Monday, and can't afford to not work for two weeks, I'm hoping someone will be able to shed some light on this. I was under the impression that financially, using my Ltd would not be good due to tax reasons (unless I was bringing in a certain amount of money). However, if it means I can work immediately, then it's starting to look very good indeed.

Any advice? Please?!

buglawton

Not worth starting a Ltd co just as a workaround. I would happily ignore the advice given and put your 1st bill in after say 1 month. You will be billing for services done not time I assume, and who will be measuring when you do the work?

Chubacheroo

Hmm, yes, I was wondering if I could just delay sending the first invoice. The trouble is it is editing and would be billed at an hourly rate, so that might be tricky..although there's nothing to say WHEN I did it is there?

I don't want to be dodgy about this, I just don't understand what this regulation is trying to do.

I wouldn't have to start up a Ltd. company - I already have one set up and sitting around being dormant.

earner

If you know somebody else in business, they could invoice for the job and employ you to do the work for them.

Or investigate umbrella companies - used in the IT industry a lot. Although not sure if they'd be keen on it just being 2 weeks.

buglawton

Chubacheroo, someone advised you there is a regulation. Can you ask them to point out where they got this? I would check it personally.

rjm2k1

I think this probably refers to something like IR35, where it can look like tax avoidance if someone works for a company one day as an employee and then goes freelance, but working for the same company.

martindow

I would contact the Inland Revenue and ask their advice. I have found them very helpful in the past.

Chubacheroo

Thanks everyone, for your help. I've called every IR helpline known to man and seem to have found the following:

1. It's to do with IR56 - determining if you're self-employed
2. It's very hard to find someone, even on the status team, who will tell you for certain what you are (if you're registered as self-employed, they seem happy with that).
3. The important thing is that you're doing different work and the guidelines given in the IR56 handbook apply
4. The IR concern here is that they're not missing out on Employer's NI contributions.
5. Time does not matter (I was told by my employers that I'd have to wait 2 weeks, 1 month, etc).

I've asked them to give written confirmation that they're happy that I'm self-employed and can work for my current employers (in a different capacity). There's a big variation in what each line has told me, but they've all been really helpful and friendly (which shouldn't, but did surprise me).

Just thought I'd post my findings to help anyone in the future who might have a similar problem.

buglawton

A couple of years ago my wife ceased employment with a co. on a Friday and commenced as a Sole Trader on following Monday, the main paperwork was to ensure minimum NI contributions were maintained. 2 Tax returns later and absolutely no comback. I say, PROCEED!

Chubacheroo

Well, I went and told them this, and now they're trotting out something about it being "company policy". I'm thinking of asking for a copy of this policy in writing, seeing as it's not listed on the company internal website or anywhere I know about. They've known that I would be doing this for 6 weeks now, so I think it's appalling that they've only just mentioned it 3 days before I was due to leave.

buglawton

Looks like there's some hidden agenda, perhaps they are nervous that others will follow your path at short notice!