Advice needed regarding setting up side job as a sole trader + paying a friend for consultancy work

joecmorgan21

Right ok, that's understandable. If hypothetically his employment contract wasn't an issue, would the best way forward to set up a company together? That way we'd split the liability and the hassle of my employing him?

Jeremy535897

That might be the simplest thing, although you need to check that the company you do work for will be happy to pay the company's invoices rather than apply IR35. Assuming it is possible, you can then decide how to allocate pay between the two of you, and how to split it between salary and dividends to minimise tax and NIC.

joecmorgan21

Having done some more research I think we're going to set up a partnership. That seems as though it's the best/easiest option when it comes to tax, payments, liability etc. Thanks everyone for their help - it's been extremely useful. 

Jeremy535897

I debated mentioning that option. The main issue is with joint and several liability for partnership debts, and there is also the need to register the partnership as well as two self employments as partners with HMRC.

joecmorgan21

As mentioned before, we've decided to go down the partnership route. I'm now attempting to till in all of the relevant forms in online. I believe I need to fill in an S400 for the partnership, and myself and my friend need to individually file an S401. Is that correct? If so, do I need to send these forms off now, or can I wait until the end of the tax year?

On a side note, I've tried registering using the online government portal, but I get greeted with a page saying the following - 

You need to enrol in an online tax service

This page gives me the option of enrolling/registering for self assessment. When I click that link I get taken to another page, but on that page it says - 'Do not use this service if you are not a business.'. It's all very confusing... Am I right in believing I can't do it online, and that I'll have to send the forms off via post? If so can I invoice for work before they're sent off?

Jeremy535897

See https://www.gov.uk/set-up-business-partnership/register-partnership-with-hmrc and the links.

joecmorgan21

Hi Jeremy - they're the links I've followed. I think I may need to do it by post as doing it online gives me the options I wrote about in my previous message. Could you confirm whether I'm able to invoice for work without having completed for S400 "Registering a partnership for Self Assessment" (as it'll be in the post). Cheers

Jeremy535897

When it says  'Do not use this service if you are not a business.', what happens if you continue? It may just be trying to separate those who are in business (as a sole trader or as a partner in a trading partnership) from those who need to register for self assessment for other reasons. The difference is to do with registering for class 2 NIC, and you need to do that as a partner.

Technically you don't have to register until 5 October in the second tax year of trade as explained in the link I provided. In practice, do it sooner rather than later once you have started the business.

joecmorgan21

Clicking continue actually allowed me to fill the form is as a nominated partner. So it looks as though it's worked - thankfully meaning I don't have to print and post anything off. Glad to know I begin to invoice regardless, but I'll make sure to keep on top of the paperwork from the get go. Thanks for all of your help with this Jeremy!