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expat
22nd September 2004, 14:01
I have heard that the reason for not working as a sole trader is that clients (or agencies) won't take you on as one.

Can't you form a Ltd Co, have it bill the client, and have it engage you as a sole trader? (rather than having it employ you, or pay you dividends).

Vetran
22nd September 2004, 14:23
Why do you want to be a Sole trader?

Agencies can't use sole traders (law), companies won't because they are liable to pay your tax if you default. Some companies may but they are unlikely to be big ones.

The tax advantages of being a LTD are good. If its the bother then go via an umbrella or full service accountant.

expat
22nd September 2004, 14:55
Agencies can't use sole traders (law), companies won't because they are liable to pay your tax if you default.But they won't be using a sole trader, they'll be using your Ltd Co.

But why would you do it, indeed? A special case: I am registered in France as a sole trader. If I do some work in the UK on the same basis, I should pay only one set of NI/Social Contributions. If I do salaried work then I will have salaried NIC/SSC to pay as well as sole trader SSC. It's a big deal, these are about 30% of ny income.

ASB
22nd September 2004, 19:47
Expat,

Talk to a specialist. Your french vehicle may be able to invoice the UK clients, obviously all taxable in France under French law. Key thing is to avoid become UK resident for tax purposes since you can then quite happily be resident in both France and UK for tax purposes, then the DTA kicks in.

In reverse for example I simply bill French clients from my UK ltd. However I spend very little time in France - although I used to.

For NI contibutions you can make an election as to whose you pay, but I think you would do well to get specialist advice. It may be worth your while talking to an accountant in the CI, they are quite well versed in both sets of rules.

expat
23rd September 2004, 07:54
Quite right ASB, it would be penny-pinching folly to go into it without getting good advice. I'm looking for orientation now.

Again, right, I could invoice from France for a limited time: problem is persuading a UK agency to do it without a Ltd Co in the way - hence my suggestion, what I really had in mind was my Ltd Co invoicing the UK client, and me (as a French "sole trader") invoicing my Ltd Co.

Central to this is that I believe I would be legit, I just have trouble persuading agencies that the├Że all right.

Would I be legit? Well, what would the IR do? Deem the Ltd Co turnover to be salary? I'll be declaring as much before they ask! I'm not after tax evasion, I'm just after avoiding a silly situation (being taken as salaried in one place and sole-trader in the other).

In short, I would be in the opposite position to most people who try unusual things with their company: I would be happy to be an employee from the tax point of view, I just don't want to be an employee from the employment status point of view.

Vetran
23rd September 2004, 10:37
sounds like you need to research EU trading rules. Agents cannot pay UK based sole traders, they have to make them PAYE Employment agencies act 1988 (ish). However a french sole trader may be different.

ASB
23rd September 2004, 11:53
Vetran,

Whatt you say is correct in practtice, but not in law. The reason agents do not like sole traders is the risk they represent. In the event of an enquiry and the sole trader being found to be an employee they would be found to be an actual employee. The consequence of this would be expensive for the agency (and very handy for the sole trader).

Expat,

A UK company can use whatever legal labour it chooses. There is no reason in principle why you shouldn't incorporate a UK company (which is contracting to Agent) and then act in a self employed manner to that company. Don't forget to register as self employed though. Also ensure that the contract yourco signs is consistant with this (e.g. if it says "yourcos" employee be cautious. You may like to argue that if you were a director of yourco then that is OK, but whether that office would also make you an employee when you were also providing services on a SE basic could give rise to some interesting arguments).

As to whether you can trade as a French self employed person that is a different matter. There are all sorts of rules about UK entities using overseas labour for more than 30 days.

Whatever happens, and however you do it, you will need to be cautious as to the impact of this on your French tax, i.e. how the income will be treated and what relief for the UK taxation you will get.

expat
23rd September 2004, 12:46
Thanks ASB. And no, creating interesting arguments is far from my mind!

The French tax liability is exactly the point: I want my status in the temporary UK contract to be as close as possible to the status that I have already in France, in order to benefit from double taxation relief.

IR35 Avoider
23rd September 2004, 18:18
In 1989 I knew a contractor who was a sole-trader to "his" company of which his wife was the director. I'm not sure what extra advantages he got out of this compared to just using a company.

I'm not sure if being a director of the company would complicate things - I suspect it would, but if you're not deriving any/much UK tax advantage then it's difficult to see what the harm would be. (Come to think of it, aren't there special rules that any payments to directors have to be taxed as PAYE even if they are sole traders? I'm not sure.)

Vetran
24th September 2004, 22:32
Quoting Mr Antell in a submission to Tolley's.


However in 1975 what is now Section 134 of the ICTA 1988 was introduced the effect of which is to tax agency workers under Schedule E (so that PAYE applies) if the client company controls how they carry out their work (and not just what pieces of work they do).


www.john.antell.name/article007.htm (http://http://www.john.antell.name/article007.htm)

I suppose you can go Sole Trader but you are taxed at source as per John's summary.