Sole Trader and Company "Director" at the same time?

[Octopus]

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.

 

[telectrix]

you would have to form a limited company . file accounts with companies house annually and loads of other legal stuff needs serious consideration before forming ltd.

 

[Octopus]

If not "Ltd" how about a "Partnership"?

 

[Dan]

You can have a Limited company and act as a Sole Trader at the same time but the businesses need to be totally separate. The benefit in doing this could perhaps be to avoid needing to be VAT registered for one of the businesses. So you'd make the VAT registered one Limited and use the one turning over less cash or invoicing private customers (who can't claim vat back) as a Sole Trader.

An example is we have an accountant on tilersforums who is also a tiler (accountancy being fairly seasonal), he's VAT registered for his accountancy business but as his customers for his tiling business can't claim vat back and would have to pay 20% more (from jan, currently 17.5) than his competitors charge.

You can't have the same type of business for both though.

I'm not a legal or an accountant so do check with HMRC and or an accountant. I don't think you'd need legal advice, the accountant will know his business.

 

[telectrix]

you could form a partnership, but you can't be a director of a partnership, only a partner. to be a director, you can only be director of a limited company, incorporated at Companies House

 

[accordfire]

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.

 

[Octopus]

Some most useful contributions - thanks all.

 

[andekoch]

If your sole trader business and ltd company business is the same you need to be very careful of the use of the van tools etc for the ltd company since they are the property of the sole trader business and all business conducted between you (sole trader) and the ltd company should be on a normal commercial business eg as suggested the best way is for you (and your mate) to both bill the ltd company for the work you do and the ltd company to bill the client but make sure the rate you charge the lts company is a reasonable commercial rate ie dont charge £1/hr for your time so you can save tax via the ltd co etc since £1/hr is not a normal rate that an electrician would charge although the company would be allowed to make some profit off you.
I have a sole traded business that does the work for domestic customers and a ltd company that works for commercial customers. This works for me and as said before you need to be very careful to separate the businesses from each other and have good paperwork to back it all up.
Best is to speak to an accountant in person to discuss your exact situation.