• Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
  • Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

Super dumb question re. employment status/IR35

Collapse
X
  •  
  • Filter
  • Time
  • Show
Clear All
new posts

    Super dumb question re. employment status/IR35

    So I'm currently consulting full time for a company, as a sole trader- I have NOT incorporated. I am unsure as to my correct/best employment status. Maybe I can save taxes by incorporating. Or maybe I shouldn't even be a sole trader as I am effectively an employee.

    Obviously, I wish to minimise my tax payments. My understanding is that the lowest taxes (generally) are paid if I incorporate. Failing this, the next best option is to remain as a sole trader. Failing this, I need to become formerly employed. My understanding is that my taxes are very similar (small NI differences) whether or not I am a sole trader or formerly employed, but the taxes of my employer are considerably higher if I am formally employed (which my employer would like to avoid if not legally necessary).

    I propose to use the brilliant form the government provides for this exact query (Check employment status for tax - GOV.UK).

    When asked "What do you want to find out?" I will choose: "If the off-payroll working rules (IR35) apply to a contract". I will then find out if I am eligible to incorporate. If the answer is 'no' then I will repeat the form, but this time, when asked "What do you want to find out?" I will choose: "If some work is classed as employment or self-employment for tax purposes".

    Is this the correct approach?

    Also, my employer is outside the EU. Is this relevant?

    TLDR:

    I'm self employed. Can I save taxes by incorporating? Or maybe I shouldn't even be self employed as I'm effectively an employee?

    #2
    Most of us are incorporate or use an umbrella.
    You are an outlier. Very few people in IT are sole traders.
    I don't believe there is any problem with being a sole trader, other than most agencies won't use them. But as you are already doing it, and with the upcoming chnages, if I were you I'd stay exactly as you are for the next 6 months or so.

    Have you an accountant? If not get one.
    See You Next Tuesday

    Comment


      #3
      So as a self-employed person (the official version of that term) you submit an annual tax return and declare all your income?

      Then really the IR35 changes shouldn't affect you as you'd already be paying the taxes due.

      Comment


        #4
        I am also self-employed (ie. a sole trader). You might save taxes by incorporating but then you would open yourself up to the potential hit of IR35 and, depending how you work w.r.t. expenses, etc., end up paying more tax. You would also incur the expense of running the Ltd. Co. With the recent hikes in dividend tax you're not going to save a whole heap anyway, I would expect.

        As a sole trader the only benefit that incorporation would bring is the limited liability. I would not let the tax tail wag the business dog.

        Regarding whether you should be SE or an employee, that's a matter for you (and your client). Me, I like being my own boss, choosing my clients, saying "no" to them, working from my own premises, taking time off whenever I feel like it, being able to supply services to 2 clients who might be in competition, being able to supply goods as well as services to my clients, etc., etc. Why are you self-employed? Why would you want to go perm?

        Originally posted by proudfeet View Post
        Also, my employer is outside the EU. Is this relevant?
        They aren't your employer - they are your client.

        Comment


          #5
          Thanks for your replies, and apologies for my late response.

          Originally posted by ladymuck View Post
          So as a self-employed person (the official version of that term) you submit an annual tax return and declare all your income?. Then really the IR35 changes shouldn't affect you as you'd already be paying the taxes due.
          That is correct. Sure, IR35 does not affect me right now. I'm trying to figure out whether a) it is in my interests to incorporate or b) whether I'm even allowed to be self employed at all at the moment.

          Originally posted by openstrike View Post
          Regarding whether you should be SE or an employee, that's a matter for you (and your client). Me, I like being my own boss, choosing my clients, saying "no" to them, working from my own premises, taking time off whenever I feel like it, being able to supply services to 2 clients who might be in competition, being able to supply goods as well as services to my clients, etc., etc. Why are you self-employed? Why would you want to go perm?
          You are implying that I can simply choose whether to be SE or employee- is this really the case? Are there not strict rules about this? Indeed, is this not the whole point for this form: Check employment status for tax - GOV.UK ?

          Originally posted by Lance View Post
          Most of us are incorporate or use an umbrella.
          Isn't incorporate and umbrella the same thing?

          Originally posted by openstrike View Post
          They aren't your employer - they are your client.
          Haha great point, thank you for this

          Comment


            #6
            Originally posted by proudfeet View Post
            Thanks for your replies, and apologies for my late response.



            That is correct. Sure, IR35 does not affect me right now. I'm trying to figure out whether a) it is in my interests to incorporate or b) whether I'm even allowed to be self employed at all at the moment.



            You are implying that I can simply choose whether to be SE or employee- is this really the case? Are there not strict rules about this? Indeed, is this not the whole point for this form: Check employment status for tax - GOV.UK ?



            Isn't incorporate and umbrella the same thing?



            Haha great point, thank you for this
            You are implying that I can simply choose whether to be SE or employee- is this really the case? Are there not strict rules about this?
            your employment status is a matter of fact and depends on a number of issues. However, only a court, either the FTT or the ET, can determine your employment status. Even then, sometimes they get it wrong and the judgement can be, and has been appealed in the next level of court.

            Comment


              #7
              Originally posted by proudfeet View Post

              Isn't incorporate and umbrella the same thing?
              No. If you're incorporated you own and run your own limited liability company.
              If you work for an umbrella you are an employee of a limited laibility company that someone else owns.

              Originally posted by JohntheBike View Post
              your employment status is a matter of fact and depends on a number of issues. However, only a court, either the FTT or the ET, can determine your employment status. Even then, sometimes they get it wrong and the judgement can be, and has been appealed in the next level of court.
              Ignore JtB. He spouts a lot of garbage about employment tribunals which is mostly irrelevant, and in your case completely irrelevant beyond belief.
              See You Next Tuesday

              Comment


                #8
                Originally posted by Lance View Post
                No. If you're incorporated you own and run your own limited liability company.
                If you work for an umbrella you are an employee of a limited laibility company that someone else owns.

                Ignore JtB. He spouts a lot of garbage about employment tribunals which is mostly irrelevant, and in your case completely irrelevant beyond belief.
                He spouts a lot of garbage
                so pray tell me which part of what I posted in this reply is garbage?

                Comment


                  #9
                  Employed or Self Employed?

                  See links for background on employed / Self Employed

                  Employment status - GOV.UK

                  Am I employed, self-employed, both, or neither? | Low Incomes Tax Reform Group

                  Comment


                    #10
                    Originally posted by JohntheBike View Post
                    so pray tell me which part of what I posted in this reply is garbage?
                    everything about his employment status.

                    He's a sole trader. Your point is utterly immaterial.


                    Most of what you post is illogical, confusing and very misleading. Some people will read what you write and take it seriously. You need to be called out on it.

                    There may be a grain of truth in some of what you say, but in most cases it's not relevant.

                    See You Next Tuesday

                    Comment

                    Working...
                    X