Self-employment or Ltd company?

Robots · 5 June 2018 at 10:29AM

Hi,

I've been self-employed for just over a year and have had a few clients ask me if I would consider changing to a ltd company as they think that's what I should be doing (think they're worried about the tax man complaining I should be employed). However, I feel I'm okay being self-employed and have all the evidence I need to prove I'm not working as an employee does.

My line of work is digital marketing & content strategy and consultancy. I have lots of clients who all pay by invoice.

Can anyone offer any advice here, would it be financially better for me to go ltd? i.e. at what income is this beneficial?

Thanks in advance!

Mistral001 · 5 June 2018 at 12:00PM

Whether a sole trader or ltd, you still have to meet the following requirements before you can not be treated as an employee.

https://www.gov.uk/employment-status/selfemployed-contractor

fishybusiness · 5 June 2018 at 1:31PM

Ltd will give you more control over how you use the business income, how you are taxed, and what you do with profit.

Ltd's also have more obligations, which you are likely to need accountant input = money.

If you need those things go ltd, if not, stay as you are.

Robots · 15 June 2018 at 4:51PM

Cheers, I'm definitely SE, I have lots of different clients but I think this one is worried for no reason.

phill99 · 15 June 2018 at 5:34PM

Many companies now will only take on Contractors, Freelancers etc if they are set up as Ltd Companies. This is so you can't claim being an employee and get back dated holiday pay etc.

This has been the case with the recent Pimlico Plumbers Court case, where all of their plumbers were self employed, but one claimed he was actually employed and the courts agreed with him. Of Pimlico Plumbers had made all of their self employed plumbers set up as Ltd Cos, this would never have occurred.

As this are of employment law becomes more tortuous, don't be surprised if co0mpanies refuse to contract you if you are still trading as SE.

00ec25 · 16 June 2018 at 11:31AM

Robots wrote: »

Cheers, I'm definitely SE, I have lots of different clients but I think this one is worried for no reason.

the number of clients you have is not a definition of self employment. You could be an employee of the company concerned is what they are worried about, since that would be assessed in isolation.

The solution to that is to make sure your contract is consistent with self employed status and you can show them you won't fail any of the tests listed in the link at post 2 above

Aquamania · 16 June 2018 at 3:26PM

Robots wrote: »

Hi,

I've been self-employed for just over a year and have had a few clients ask me if I would consider changing to a ltd company as they think that's what I should be doing (think they're worried about the tax man complaining I should be employed). However, I feel I'm okay being self-employed and have all the evidence I need to prove I'm not working as an employee does.

My line of work is digital marketing & content strategy and consultancy. I have lots of clients who all pay by invoice.

Can anyone offer any advice here, would it be financially better for me to go ltd? i.e. at what income is this beneficial?

Thanks in advance!

He who pays the piper calls the tune.

We have had clients who would only use contractors who benefitted from limited liability, and some who don't care.
I have never come across a client who has refused to purchase from a contractor who elected to offer their services only via a limited company (rather than a sole trader).

However you offer your services does not afftect whether or not HMRC consider you are actually an employee ... and it is only their decision that is important in that regards.
Where HMRC does deem a worker to be an employee, it will be the employer (whoever pays the worker for the work carried out) who has to pay the necessary NICs & tax.

So if your "customer" thinks the work you will be doing for them will classify you as their employee, then my advice to them would be to employ you for that work.
Then you will both know where you stand.

You can be an employee on one business, and self employed offering services to others at the same time (subject to any restrictive, legal restrictions that may be included within your contract of employment)

Robots · 23 July 2018 at 11:08AM

Thanks everyone for your replies. I've decided to put this client on a monthly invoice, which they seem happier with

00ec25 · 23 July 2018 at 6:35PM

Robots wrote: »

Thanks everyone for your replies. I've decided to put this client on a monthly invoice, which they seem happier with

what do think that will achieve?

it makes no difference whatsoever to your potential status as either an employee or as self employed.

if you genuinely want to deal with this you need to listen to proper advice. For example, ever heard of IR35? It might affect you if you invoice "monthly"

Mistral001 · 24 July 2018 at 10:20AM

Clients sometimes will only work with Ltd companies because they can do due diligence more easily with Ltd Companies compared with sole trader businesses. Often this is more important to clients than the obvious risks associated with the limited liability aspect of Ltd companies. Companies who operate this way generally only do so when the supplier of the services/goods is not local to the them.

Robots · 24 July 2018 at 10:35AM

00ec25 wrote: »

what do think that will achieve?

it makes no difference whatsoever to your potential status as either an employee or as self employed.

if you genuinely want to deal with this you need to listen to proper advice. For example, ever heard of IR35? It might affect you if you invoice "monthly"

Thanks for your response

, it took me a while to get back to the thread as I've been in and out of hospital since I wrote it. You are correct, invoicing cycles make no difference to me or my SE status, this was done to keep the client happy so I wanted to close that part of the question.

Obviously I 'genuinely' want to deal with 'things' or I wouldn't be here asking; the original question posed was at what stage (or income) would it be beneficial for me to consider setting up a limited company rather than remaining self-employed. It wasn't apparent to me at the time of writing that I may not be 'toeing the line' in the eyes of HMRC - which I obviously want to do. Now that it is apparent, the question has changed to do I NEED to set up a limited company?

Thanks for offering up something I could look up (IR35). From what I understand, IR35 applies to limited companies (which I am not), or did you mean this may apply if my client is a limited company? In which case, this may apply (I took the quiz). I now have some points I can look at to make sure I am not falling foul of this.

To clarify, in no way do I consider myself an employee for any of my clients (believe me, if I were I'd be raking in that annual leave and getting paid to attend my hospital appts), but I do understand that HMRC may view parts of my activity as something an employee would do.

Any further advice you could offer would be super :beer:

Self-employment or Ltd company?

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