Hiring a lone trader

**northernladuk** · 29 September 2019, 21:15

How much are you making out of this? It would have to be a good chunk to make it worth my while.

Can't you just put him straight on to the client and get some good will or a finders fee and then wash your hands of it?

**WordIsBond** · 30 September 2019, 10:10

If you engage a sole trader, it means he is personally liable if something goes wrong, rather than his company. That means in the event of a liability issue your company has a little more protection -- he couldn't just have his company go bankrupt and solve his problem and stick your company. In many cases, liability isn't really likely to be an issue.

The bigger possible issue with engaging a sole trader is that he decides to take you to an employment tribunal and claim he was really your employee. For a two-month project, that risk is probably very small, especially if he's not under your direct supervision. There's also, I suppose, a risk he could try it on with the client. Again, I'd say for two months, the risk is small.

The only likely drawback isn't related to his sole trader status. It's that if something goes wrong, you are stuck in the middle. You can damage your relationship with one or both of them, and perhaps even end up with it costing your company something.

The advantages are two-fold, as I see it.
1) Revenue. Presumably you are taking a cut. Unlike NLUK, I'm of the view it doesn't have to be a lot of money, because I'm looking to build relationships like this. Even a 5-10% cut, if it works, is easy money, and most of the time it will work, and if you can get a client looking to you to provide solutions, this can happen again and again.
2) It's a great argument for IR35. Sure, IR35 is on a contract by contract basis, but this was almost a silver-bullet under the old Business Entity Tests. BETs aren't in effect any more but they still tell you a lot about the way HMRC thinks. Employees don't hire subcontractors, businesses do. Case law puts a lot of weight on 'in business for himself' and HMRC knows it. If you've got a contract that is clearly inside, this kind of thing won't change that, but if there is any doubt at all this is going to be significant.

On its own this one contract is probably not worth a lot but if it lays the groundwork for more of these it can be a great opportunity. Your cost-benefit analysis should consider whether more of these are possible and something you'd want to do, how much you would value that, IR35 concerns, etc.

**AnthonyQuinn** · 30 September 2019, 11:24

Originally posted by tr0users View Post

I'm a contract software developer that works through a Ltd company. A client that I'd worked for previously recently asked if I would be interested in some more work. I looked into it then explained that I wasn't particularly experienced with the toolset required. He thanked me for the advice and asked if I could hire someone that could do the job. I have now found developer that's a great fit and the client would like to proceed - expected duration for the work is approximately two months. My only concern is that the developer is a sole trader - he doesn't not have a Ltd Company and he's not VAT registered. Does this make any difference? Should I simply ask the developer to send me a weekly invoice? Should I issue a contract to the developer?

You can play this well if it pans out favourably. Tell the mug that he needs to set himself up as a company. Then pimp him out to your client and in the process get yourself added to the client's preferred supplier list. You then are a pimp rather than providing the services. You can get away by having payment terms like 'Paid on paid' etc. With some luck you may be able to add 2-3 contractors more at this site.

Again, a few things need to fall in your favour, but worth a try? Who knows where it mightlead. If you could setup a pimp shop of 7-8 contractors across clients over the next 2 years, you would be laughing and never need to work again.

Hiring a lone trader