Sole Trader vs Limited Company

[Jivemaster]

Freelance means ONLY "accepts work provided by several work providers" You can be a PAYE freelancer or a self employed freelancer or a small Limited Company.

 

You can do accounts BUT If you are as good as your accountant why do work -do books! BUT an accountant is required to maintain current knowledge of all relevant legislation and best practise, which takes time.

 

Getting your business well sorted out is important to pay the right tax at the right time.

[GaryNattrass]

I think these days with IR35 etc it may just be easier to go PAYE and dump all of the problems on any company who wants to hire you, they also have to give you paid leave and pension contributions too.

 

If HMRC and the government does not want us to be self employed and make it difficult to act as a sole trader then I think it is time to flip it all and also say to any company wishing to use our services that they also have to provide travel and accommodation for any work that is more than a reasonable travelling distance from home base.

 

I personally got sick of it all in TV broadcast and after 25 years of being a freelancer just bit the bullet and took a staff job with SKY.

 

Ok I can't claim my travel and living costs from Durham and have to stay on my boat in London but I get paid on the 27th of every month, get 6% of my salary in my pension pot as well as lots of personal and medical insurance with 6 weeks paid leave too.

[paulears]

When my accountant, who really does just year end accounts and my tax filing, completes my self assessment there is always information in strange boxes for figures I don't understand. I use a very simple accounts package that puts all my ins and outs into categories and I include everything that remotely could have an impact, and the accountant probably laughs at some, accepts others and scratches head on others. However, tiny expenses build up. A trip to plasa or abtt or BVE can easily add up to five hundred quid a year, on the transport, the food, and drink. This is five hundred quid of your profit gone, and you only pay tax on profit. I work from home but this year I repainted my edit suite and installed new video lighting and a green screen. The costs of that again are worth the faffing around with receipts. VAT, because I go over the threshold mainly because I tend to do the invoicing for two or three people on projects, is nowhere near as difficult as people tell you. Unlike tax where you are assessing what you owe, you have fixed rate VAT on your inputs and outputs, and my accounts software simply prints me out a list of what to stick in the boxes when you report. My business is very seasonal. Nov to Feb is me invoicing lots, then fed to June getting lots of spending done, then income again from July to October, so two quarters often mean nothing to pay or a refund, the other two lots to pay. I can cope with this. The important thing was that my accountant knows how I do it and understands the weirdness of the business. If you ever get inspected or selected for investigation HMRC will want to know everything. They will at random suddenly ask what you bought for £35.40 on a certain day, two years ago. You MUST be able to come up with it. You will NEED your accountant because they ask questions that I didn't understand. At a meeting they suddenly pulled out a piece of paper and said . For nine weeks you took £350 in cash out of the account. What did you do with it? My answer was "I gave it to a Romanian dwarf, because he couldn't get a bank account, so the company paid his wages into my account and I handed him the cash. Romania at that time wasn't in the EU so that was the only way to pay him. " they were happy with that, same again with the quantity of ladies underwear that was going through my accounts. Dancer supplies. Once they understood, it was fine. The result was 35 quid of underpayment as I'd claimed some travel in my wife's car, not my van, and this is assessed differently. The downside was the accountants bill to prepare all the records they wanted and be at the meetings. Worse is that expenses to satisfy HMRC questions are NOT allowable expenses in your accounts. You cannot claim from HMRC money they cost you!,

 

Pretty much I'm saying that it is not hard to be self employed as a sole trader, and accountants are genuinely useful people. Using a ltd company to fudge self employment where clients will only deal with ltd companies, the famous 3rd party enterprises is risky, because HMRC don't like it. Many of our linked industries have real grief. Broadcast self-employed cameramen who used to be staffers at bbc and itv are suffering as HMRC want special paperwork to allow them to act as self-employed because they fail the tests. No cameraman on an outside broadcast has half a million pounds worth of kit that they supply, they just use what is supplied, which of course suggests they are employees. Loads set up ltd companies to solve the problem, but many friends report its getting more difficult to justify to HMRC.

 

30 mins chat from an accountant is free. My current small firm is so much easier to deal with than the old bigger firm who had no clue what I do really. I was commended my current one and he came here to see me one evening, looked at the figures and said he could save me money. He did!

[GaryNattrass]

Totally agree with everything you say there Paul but as for my industry TV and Film the list that the HMRC have was set up in the 1980's when few people were freelance, they also tended to get paid travel and accommodation costs as part of their freelance contract. HMRC no longer issue Lorrimer letters and pretty much haven't a clue what most of the jobs are on their list and I challenged it during my 2014 commonwealth games contract and won as they had to agree that a commentary manager was akin to a production manager.

 

As a former soundie and cameraman for several companies in the past I agree that I didn't provide kit most of the time but it did cost me to travel hundreds of miles and pay for my own accommodation but as a PAYE freelancer I can not claim this as a legitimate expense.

 

Indeed I still spend around £10k of my staff salary each year travelling and for secondary accommodation to work here in London but I can not offset this as a working expense against my income tax bill and still have to pay all my other taxes and bills on my home 300 miles away.

 

Now don't those nice MP's get all their travel and subsistence paid for them and I bet Mr and Mrs inland revenue tax inspectors get their travel and expenses paid when they have to travel around snooping into small fry businesses whilst totally Ignoring the tax dodges that are done by multi million turnover companies.

 

As I said I personally gave up two years ago and at 57 and 38 years in the TV industry this is only my second staff job but I still have over £50k worth of kit that sits there at home doing nothing in the media wilderness that now exists outside of the M25.

[Stuart91]

The downside was the accountants bill to prepare all the records they wanted and be at the meetings. Worse is that expenses to satisfy HMRC questions are NOT allowable expenses in your accounts. You cannot claim from HMRC money they cost you!

 

The Federation of Small Business offer some protection against the costs of dealing with an investigation. However even if you do have something like this in place there's still the enormous amount of time that gets eaten up.

[paulears]

I took out insurance for a few years after, but in the end just went back to taking the chance! The problem is that if you don't keep proper records, finding even where to look is a mystery. My accountant hates my accounts software, and probably charges me for the extra time it takes to get figures out of it, but quick books and other stuff is too much for me, and does tend to be buried in accountant speak - I use instant admin, and it does exactly what I do, and if I burn it onto a DVD, he can run it on any PC to interrogate it - but it doesn't export files he can load into something else.

[timsabre]

I use Quickbooks (not the online version) and my accountant hates that too - mostly because it is very non-accountanty.

[GaryNattrass]

I used Quickbooks for my pub business and found it very easy to use, the accountants seemed to be able to use the exported data too.