Sole Trader rules - need help!

pollyanna132

Hi everyone.

I need help!!

My husband has recently started working for himself as an event manager. This is mainly for one company who doesn't have employees but uses all freelance people. We invoice them after each job and it gets paid monthly. I understand that we will need to declare this as income etc and pay TAX and NI as a sole trader.

The issue I have (and I will be the one doing the paperwork!) is in regards to the extras.. such as expenses. I have tried to look online but it is a hard to pin point one answer.

Sometimes the events are overseas and so my husband has to spend a week or so away. The company pay for the flight and hotels up front. Occasionally he needs to take equipment with him so there is excess baggage...he pays this charge and the company reimburse straight away.
So first question is....as this is just a simple like for like transaction that is actually a company expense do we declare this transaction even took place?

The company also pay £20 per day per diems whilst on a job abroad... this is paid in advance and no receipts are required upon return. Sometimes this is good as he may not spend £20 per day but sometimes he spends more depending on which country he is in (the company pay a flat rate whether he is working in Barcelona or Abu Dhabi!).
So my second question is this....do we need to declare this anywhere? I understand expenses for food etc cannot be claimed back via HRMC but I am concerned that should they ever wish to check bank records there are also going to be these payments going into the account which we are not declaring anywhere?! Even if in fact he ends up spending more than he gets!

I hope this makes sense and I hope someone can help me find clarity!! ahhh!!

Thank you
Polly

droopsnoot

For stuff like excess baggage charges I can't see a need to declare them - that's no different to an employee buying something while out on a job, and claiming it back from their employer - you haven't "made" anything on it, so it's not income, so not to declare. I can't answer about the "per diems" though - this may be treated in a similar manner to mileage claims, if there is a general acceptance that being away incurs costs over and above those that the company pays anyway.

You should also keep in mind that there may be issues with working as a freelance contractor but only doing work for one client - HMRC take a dim view of this kind of thing, seeing it as a means for employers to wriggle out of their obligations with regard to NI, pensions, sick pay and so on, even when it is not. If the company only work this way, it might be worth asking them (or other contractors, if he knows them well enough) how they stop this being an issue. Simply doing work for more than one client would probably do it, and please ignore this doom-mongering paragraph if that's already happening - I noticed you said "mainly" for one company.

I should add that (obviously) I'm not an accountant, don't take any of the above as actual advice. If you're in any doubt, it might be worth seeing if you can get an appointment with a tax advisor - it might cost you money up front, but save a lot in the long term.

pollyanna132

Thank you for your reply..much appreciated.

Yes I guess I was thinking that if the company just paid for his food whilst he was away instead of giving him the money then I would see it the same as them paying for his hotel and flight etc. My concern was the fact the money goes into the bank and he doesn't get receipts so would they ask (if anyone was to check his account) what that money was for? I wouldn't want it to look like undisclosed income.

I also totally agree with your point regarding working for one company, I was concerned about this set up (husband got the job through a friend who has been working there for a while) and it seems that every single event person/manager is paid as freelance so I can see it means they get to run the business without having hardly any 'employees'.

Thanks for the advice