Sole Trader - Can I sub-contract work to a people abroad and put it as business expenses??

Sam3007

Hi there, 
I am a sole trader working from home with several companies inside the UK.
Because of the work load, I sometimes use people outside the UK (outside europe) to help me prepre some MS word documents and I pay them for their work using international bank transfers. They are not emplyed by me but help me if and when needed.

My question is that: 
1- Can I include the money I have paid to them as business expenses in my self assessment calculations?
2- Do the payments need to go from my business account? I sometimes use apps such as Wise to minimize fees but I can provide receipts if needed. 

Any help would be apprecaited. 

Grumpy_chap

1 - yes.  The external contract resource should invoice your business and the business pays against the invoice 
2 - payment from the business account is the preferred option.  Can the service provider you use work with business accounts?

One consideration, though not a tax question, is whether the terms of business with the Clients allow data processing in the geographical areas you propose.

pramsay13

Of course, any legitimate expense can be included in your accounts.

It doesn't necessarily need to be paid from a business account although some people prefer it from a record keeping point of view.
As long as you keep good records and can evidence the payments if required it will be fine. 

Dakta

Grumpy_chap said:

One consideration, though not a tax question, is whether the terms of business with the Clients allow data processing in the geographical areas you propose.

That did occur to me tbh, OP needs to be sure on this and depending on the situation may be quite an issue.

Marcon

Sam3007 said:

Hi there, 
I am a sole trader working from home with several companies inside the UK.

If you're a sole trader, why have 'several companies' as well? Normally you'd trade through (and be employed by) one of your companies - with the major advantage of limited liability. Also useful if you want to make employer contributions to your pension scheme in excess of your earnings.

If you've not done so, a chat with a good accountant might enable you to rationalise your trading structure.

Grumpy_chap said:

One consideration, though not a tax question, is whether the terms of business with the Clients allow data processing in the geographical areas you propose.

It certainly is. OP, have you checked the terms of your PI cover to see if you'd be insured for this? Do your contracts with clients permit you to do so?

Grumpy_chap

Sam3007 said:

I am a sole trader working from home with several companies inside the UK.

Marcon said:

If you're a sole trader, why have 'several companies' as well? 

I read that differently.
I read that sentence as having the following components:

1. The OP is a sole trader
2. The OP works from home
3. The work is for several "companies" with "companies" being interchangeable for "Clients" in this case
4. The companies / Clients are based in the UK and the OP is base in the UK

Obviously, if the OP has "several companies", being their own Ltd Cos, that would make a big difference to the meaning of the sentence.

I do agree with your suggestion that the OP is worth engaging the services of an Accountant to assess the optimum way to structure their growing business.
If the OP has increasing workload and is needing to engage external support to deliver the workload, that is great but the OP needs to keep an eye on whether they will reach the threshold whereby they need to become VAT-registered if they are not already VAT-registered.

Marcon

Grumpy_chap said:

Sam3007 said:

I am a sole trader working from home with several companies inside the UK.

Marcon said:

If you're a sole trader, why have 'several companies' as well? 

I read that differently.
I read that sentence as having the following components:

1. The OP is a sole trader
2. The OP works from home
3. The work is for several "companies" with "companies" being interchangeable for "Clients" in this case
4. The companies / Clients are based in the UK and the OP is base in the UK

I think you're right. OP seems to have gone through a sole trader/limited company loop a year ago: https://forums.moneysavingexpert.com/discussion/6389581/help-sole-trader-switching-to-a-limited-company-is-it-really-tax-efficient#latest

Might be worth their while revising that topic now.

Sam3007

Marcon said:

Sam3007 said:

Hi there, 
I am a sole trader working from home with several companies inside the UK.

If you're a sole trader, why have 'several companies' as well? Normally you'd trade through (and be employed by) one of your companies - with the major advantage of limited liability. Also useful if you want to make employer contributions to your pension scheme in excess of your earnings.

If you've not done so, a chat with a good accountant might enable you to rationalise your trading structure.

Thanks. Because my business was growing, I spoke last year to two accountants whom said that that there was no big advantuage to switch to a limited compnay taking into account the income and net profit. My busines is still growing, so I think you are right and it is better to speak to them again

Sam3007

Marcon said:

Sam3007 said:

Hi there, 
I am a sole trader working from home with several companies inside the UK.

 with the major advantage of limited liability. Also useful if you want to make employer contributions to your pension scheme in excess of your earnings.

Could you please elaborate on this? 
If my gross income is below the VAT limit.. what difference does it make if I pay 4K into my private pension a year through my limited company .. or directly as self employed? 

Marcon

Sam3007 said:

Marcon said:

Sam3007 said:

Hi there, 
I am a sole trader working from home with several companies inside the UK.

 with the major advantage of limited liability. Also useful if you want to make employer contributions to your pension scheme in excess of your earnings.

Could you please elaborate on this? 
If my gross income is below the VAT limit.. what difference does it make if I pay 4K into my private pension a year through my limited company .. or directly as self employed? 

The VAT limit isn't the issue here. What is important is whether you want to make pension contributions which exceed your earnings. You can't do that if you are self employed, whereas if you are an employee of your own limited company, you can make employer pension contributions which exceed your earnings and still get the tax break, assuming your company can 'afford' these.