Does anybody know if HMRC will allow you to be a Sole Trader and a Company Director in the same year.
The reason for asking is that I'm a Sole Trader, as is my mate, but on bigger jobs we work together, invoicing clients seperately.
I was wondering if we could retain our sole trader "roles" when working independently, but operate via a "LTD" company on the bigger jobs.
I'd appreciate any views and/or opinions.
HMRC will let you do almost anything, providing you pay the relevant taxes
Okay, in essence, you can both continue to be sole traders, working in your own rights and doing your own thing. You can, at the same time, be directors in a limited company.
If you were to put your larger jobs under the "limited company", then essentially the best way of employing yourselves to do the work would be for both of you to invoice your limited company, thus allowing the company to invoice the customer only one time.
However, you'd need to be very careful regarding earnings, and drawings, or you may end up paying much more tax than you need to, or being taxed twice on the same money.
You need an accountant's advice for this, and he'll need detailed information from both of you, to be able to advise accordingly.
You'd also need to prove that you weren't making this arrangement purely to avoid tax - i.e. registering for VAT, or payment on earnings. Against that, if your limited company is doing too many large jobs, then you may end up liable for corporation tax too.
There's no hard and fast answer, but it seems to me that you may be better off looking at either a Limited liability partnership, or simply folding your individual businesses into one limited company, each with equal voting rights, and each to sign on any decisions.
It really does depend on your current tax liabilities, and those likely to be encountered in forming any type of partnership, whatever the format. It may even be that you remain better off both remaining self-employed and coming to an arrangement over who invoices the work, and who invoices the other party in the job....
On the face of it, though, if you're doing a number of jobs and tax or VAT is becoming an issue for one or both of you, then considering the legal basis on which you are both trading is the best option.
Consider the time and cash in seeing an accountant well spent though - it will potentially save you a fortune down the road.