The Green Lantern Group provides all contractors with qualified advisors to ensure that when running their own business, all of the expert advice is on hand to make the job as easy as possible.
Being a self-employed sole trader is an option enjoyed by many Green Lantern Group contractors. We will be happy to discuss the legislation in more detail, however, to give an indication, we’ve summarised some pertinent points below.
Unlike a limited company, a sole trader is an unincorporated business, i.e. one not registered with Companies House. The business will have one owner, who runs and works in the business on a day to day basis, and generates its profit.
A sole trader business is not a company, and therefore, the person that runs the business is not seen as separate from the business, as is the case with those businesses operating via a limited company. The assets and liabilities of the business are therefore seen as the assets and liabilities of the individual sole trader who is running the business. This affects the way that the business is taxed, and also the levels of exposure to the business of the individual sole trader running it.
Sole traders do enjoy fewer formalities and regulations compared to those imposed on a company. There is no annual return to complete, no statutory records that need to be maintained, no statutory accounts to prepare and no separate corporation tax return to submit. Each of these can produce cost savings to the business and therefore its owner – and also mean that the administrative burdens are far less than those who run their businesses via a limited company.
Starting business as a sole trader has very few requirements. There is certainly no requirement to inform Companies House (who only form and regulate companies). It is a requirement to notify HMRC for the purpose of informing them that the person will now receive income from self employment (on which they will pay income tax) – usually within the first three months of trading as a self-employed sole trader.
As with all business, VAT also applies to those run by a self-employed sole trader. VAT usually becomes a requirement as soon as the turnover hits the VAT threshold – often, as a sole trader, it makes financial sense to register under the Flat Rate VAT scheme.
Being self-employed is of course a decision that is to be made with consideration given to the circumstances of the individual. The tests for self-employed status are very similar to those covered by IR35 legislation, and our experts will discuss this with all contractors regularly, especially when their contract circumstances change.