Sole Trader Freelancer - Client now says I must be a limited company

joharm wrote: »

I've been self employed for 13 years, registered as a Sole Trader, working as a freelance graphic designer.

No client has ever had any issue with my self employed status, as long as I was officially registered with HMRC with a UTR number.

However a long-term client has been in touch, saying that very soon (possibly due to the recent Uber ruling) they will probably only be able to use freelancers who are limited companies, so that they are not seen as employees.

This client gives me a lot of freelance work per year, but I can never imagine I would be seen as being an employee by the law - it probably averages out only about 3-4 hours a week.

Has anyone else heard anything similar like this recently?

I want to avoid going limited if possible because the admin will be a huge pain, and my tenancy agreement forbids me from registering at my home address anyway so I would have to pay for a virtual office address.

We have been in business for 20 years now, and over that period have come across many customers who will only source from other limited companies (not individuals). It does not affect us as we trade through a limited company anyway, but I have known some individuals complain that they cannot supply to some of our customers because they do not benefit from limited liability.

Ultimately, the customer is king and always dictate who they will source from. On the other hand, us suppliers whether trading with the benefit of limited liability or not, also have the last say on who we will or will not supply to.

If one of your customers, for whom you only provide services for a maximumn of 4 hours per week, no longer wished to source from you unless you provide those services as a limited company, then unless you set up a limited compaay to provide those very limited services (almost certainly not worth it), simply advise them you will no longer be able to supply them.

Plenty of customerers out there who won't give two hoots as to your trading style.

Could you ask them if they will put you on the payroll?

Until very recently I was working as a freelance designer (in publishing) and pretty much every publishing house had to pay you via PAYE as you were classed as an employee albeit on a fixed term contract. I recently had to take a two week break in a booking as I'd been there too long and they needed to safeguard themselves against me having claims to becoming permanent.

Lots of people were up in arms about being taxed at source when it first started and some did set up as limited companies as that was the only way to be paid gross but it's a lot of trouble just for one client. If you are taxed too much you can either offset it against other income or it will be repaid as a rebate.

Ask an accountant to crunch the numbers for you, so you can work out the difference between
a) being on the payroll
b) being a sole trader
c) being a limited company.

And read up on IR35 to see whether you think you are in breach.

As to running a business from a rented address - surely as a sole trader you are already doing this?

We've lived in 6 different rented properties while we ran our limited company, and we never had any trouble with landlords. The clause is there to stop you opening a shop in your front room... It would be worth speaking to the landlord and explaining that you would be doing exactly the same work as you're doing now, just under a different heading. Also reassure them that there will be no-one visiting the premises for business purposes, and you won't be keeping any stock (this would be the same if you owned your own home).