Sole trader going through an agency

[andrewl]

Hi - first time poster here.

I'm seeking a bit of advice. I've been contracting for a few years as a VAT registered Sole Trader with a number of clients, always invoicing them directly. Having a couple of quiet months with only a couple of service contracts running until the start of a new project in November I decided to find a short term contract to fill up the time. So, I got a contract for about 8 weeks through an agency which was confirmed Thursday night.

However, the agency say I must go through a Ltd Company (they mentioned this after the offer was made of course). I don't want to start a Ltd Co just for 8 weeks work, neither do I relish paying Employers NI, Employees NI (I already do my own contributions), Tax at emergency rate (I have no P45) and having to chase it up through the revenue months after the contract has finished, and Umbrella Fees. Especially as I'm unlikely to fall within IR35 as I 'll be servicing two other contracts directly in my status as a Sole Trader during this time as well.

The agency say I have to go through a Ltd Company (either my own or an umbrella) by law in order to get paid. Has anyone found themselves in a similar situation, or know of the legislation that they're talking about, as I've not been able to find anything about it.

Many Thanks,

A

[minstrel]

I think most agencies will only deal with Limited companies, not Sole Traders. I doubt it's the law, but it's definitely standard practice in my experience.

What is the benefit of being a Sole Trader? Perhaps you could set up a Limited company and run your other contracts through the Limited company too? You may even find that it is more tax efficient working through a Limited.

If not, and it is only going to be 8 weeks work, you are probably best using an umbrella rather than setting up a company just for 8 weeks work.

[fzbucks]

you can go through my limited company for a small fee

[NotAllThere]

Should Hector on investigation, decide that your 8 week contract is in fact one of employment, then the agency will be liable to pay the income tax and ni contributions. Naturally, they don't want to expose themselves to this risk.

I'd use this as an opportunity to move to a ltd co. basis permanently. Although you'll have to pay ernic, you'll also be able to take profits out of the company as dividends without paying any NI on it. You'll benefit from limited liability, and, as you've seen, you've greater flexibility. As you've 2 other direct clients already as sole-trader, then IR35 isn't an issue for those contracts.

So more money, more flexibility and a degree of protection. Can't see a downside. ( OK, a bit more complicated paper work ).

Novate the contracts, and you're business will simply change from being SoleTraderCom to SoleTraderCom now trading as MyLtdCo.

NotAllThere

[andrewl]

Thanks for all of the useful replies. Looks like I'll have to go through an umbrella just this once. I guess that I won't be able to claim travel expenses to go into the office as this would be deemed my permananent place of employment (ie I would be expected to work there for the term of my employment), whereas (I think) if I was dealing direct with client (or agency) I would be able to claim them as it counts as a temporary workplace. Might need to clarify that with Mr Accountant.

[minstrel]

Thanks for all of the useful replies. Looks like I'll have to go through an umbrella just this once. I guess that I won't be able to claim travel expenses to go into the office as this would be deemed my permananent place of employment (ie I would be expected to work there for the term of my employment), whereas (I think) if I was dealing direct with client (or agency) I would be able to claim them as it counts as a temporary workplace. Might need to clarify that with Mr Accountant.

You can still claim travel. Whether you go direct or through an agency, umbrella, limited company or sole trader doesn't matter. Just make sure your permanent place of work in the contract between you and your limited or umbrella is your home address.

Think it is also definitely worth considering ditching your sole trader status and setting up as limited. I think you would be financially better off with a limited.

[NotAllThere]

For a one-off with an umbrella, you can't claim home-office expenses.

NotAllThere