Some business advice needed please

Hi all, I've been informed that, from September, my local authority will no longer be paying for work undertaken by people who are self employed, they'll only pay limited companies. Legally, I'm not sure whether that's allowed, but that's another story. The amount of money I earn from the local authority is relatively small, it amounts to about a grand a year, but it's a grand that, being a mature student in uni that I could do without losing.

Basically, it looks like I'll need to set up my own limited company to be able to continue working for them. For such a low amount, is it worth doing? Thanks

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Originally Posted by Eric the Half a Bee

Hi all, I've been informed that, from September, my local authority will no longer be paying for work undertaken by people who are self employed, they'll only pay limited companies. Legally, I'm not sure whether that's allowed, but that's another story. The amount of money I earn from the local authority is relatively small, it amounts to about a grand a year, but it's a grand that, being a mature student in uni that I could do without losing.

Basically, it looks like I'll need to set up my own limited company to be able to continue working for them. For such a low amount, is it worth doing? Thanks

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It's a pain - you'll probably need an accountant, and if you have one now they'll charge extra -say £200-£300 - for submitting annual returns. For £1k ? I now it's £1k you need, but I'd try and find something to replace it. Is it illegal ? Doesn't seem right I must admit. you're a legally-operating business so should be able to tender for work.

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Originally Posted by A Quiet Monkfish

It's a pain - you'll probably need an accountant, and if you have one now they'll charge extra -say £200-£300 - for submitting annual returns. For £1k ? I now it's £1k you need, but I'd try and find something to replace it. Is it illegal ? Doesn't seem right I must admit. you're a legally-operating business so should be able to tender for work.

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Thanks for this. I don't currently have an accountant - as self employed I'm fine with submitting my own returns and book keeping. The headache seems to be registering myself as an employee and knowing all the intricacies that go with that. I could probably get away without an accountant for now, but from what I read it's generally not recommended.

In some ways, it's good to keep in with people that I know and work for within the council, so that has its benefits. Long term, setting up my own company is probably going to be of benefit, just whether I want the hassle now or when I finish in uni!

It is legal, and is due to new legislation affecting almost everybody. Essentially, if you pay an individual you need to employ them directly is the basic premise. Obviously that wouldn't affect a company, even if a one person consultancy type company. Up until 2016 these guidelines were applied differently. However, the introduction of new off-payroll worker legislation means that payments to Limited Companies, Partnerships or Agencies are now also affected.

Almost any procuring body is now required to follow a procedure as below:

If you are engaging someone to provide services personally either directly or through a company, partnership or agency then please fill in the online status form giving as much information as possible. https://www.tax.service.gov.uk/check...-for-tax/setup

Some of the questions that may assist are:
• Is the service provider registered for VAT?
• Do they operate a business bank account?
• Do they have the expense of running an office?
• Do they advertise for work eg. do they have an internet site and do they in practice provide (substantial) services to other clients?

Whilst a ‘yes’ to any of the above questions alone could not determine a service provider’s status, the answers would help to form an overall picture that we can share with HMRC that may assist in obtaining a ruling.

Could this to be with the new IR35 regulations? https://www.gov.uk/guidance/ir35-find-out-if-it-applies

In essence this means that if you are a sole trader, the onus is on the authority to establish your status and potentially deduct tax and NI at source, as if you were an employee (and potentially big penalties for them if they get it wrong). This only applies to the public sector btw.

I'm sure there are one or two accountants on here who will be able to give you better advice than me, but I suspect that the authority is being a bit overly cautious.

Might be worth mentioning to them the Welsh Procurement Policy, of which one of the key principles is ensuring access for local business to public tenders.

Edited to add - Looks like Dobbby has done just that while I was typing :thumbup:

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Originally Posted by Eric the Half a Bee

Hi all, I've been informed that, from September, my local authority will no longer be paying for work undertaken by people who are self employed, they'll only pay limited companies. Legally, I'm not sure whether that's allowed, but that's another story. The amount of money I earn from the local authority is relatively small, it amounts to about a grand a year, but it's a grand that, being a mature student in uni that I could do without losing.

Basically, it looks like I'll need to set up my own limited company to be able to continue working for them. For such a low amount, is it worth doing? Thanks

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no

you should also ask your LA why they will only trade with limited companies

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Originally Posted by Eric the Half a Bee

Thanks for this. I don't currently have an accountant - as self employed I'm fine with submitting my own returns and book keeping. The headache seems to be registering myself as an employee and knowing all the intricacies that go with that. I could probably get away without an accountant for now, but from what I read it's generally not recommended.

In some ways, it's good to keep in with people that I know and work for within the council, so that has its benefits. Long term, setting up my own company is probably going to be of benefit, just whether I want the hassle now or when I finish in uni!

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you don't need to register as an employee if you have your own company.

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Originally Posted by Dobby

It is legal, and is due to new legislation affecting almost everybody. Essentially, if you pay an individual you need to employ them directly is the basic premise. Obviously that wouldn't affect a company, even if a one person consultancy type company. Up until 2016 these guidelines were applied differently. However, the introduction of new off-payroll worker legislation means that payments to Limited Companies, Partnerships or Agencies are now also affected.

Almost any procuring body is now required to follow a procedure as below:

If you are engaging someone to provide services personally either directly or through a company, partnership or agency then please fill in the online status form giving as much information as possible. https://www.tax.service.gov.uk/check...-for-tax/setup

Some of the questions that may assist are:
• Is the service provider registered for VAT?
• Do they operate a business bank account?
• Do they have the expense of running an office?
• Do they advertise for work eg. do they have an internet site and do they in practice provide (substantial) services to other clients?

Whilst a ‘yes’ to any of the above questions alone could not determine a service provider’s status, the answers would help to form an overall picture that we can share with HMRC that may assist in obtaining a ruling.

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are you looking to describe the new rules regarding the extension of IR35 to consultants within the public sector? If so this situation certainly does not apply

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Originally Posted by TH63

Could this to be with the new IR35 regulations? https://www.gov.uk/guidance/ir35-find-out-if-it-applies

In essence this means that if you are a sole trader, the onus is on the authority to establish your status and potentially deduct tax and NI at source, as if you were an employee (and potentially big penalties for them if they get it wrong). This only applies to the public sector btw.

I'm sure there are one or two accountants on here who will be able to give you better advice than me, but I suspect that the authority is being a bit overly cautious.

Might be worth mentioning to them the Welsh Procurement Policy, of which one of the key principles is ensuring access for local business to public tenders.

Edited to add - Looks like Dobbby has done just that while I was typing :thumbup:

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IR35 legislation only applies if the trade is operating via a limited company. no such provisions apply via sole trader trading

@Eric

If your total earnings are less than £11,000 per annum you are not going to be paying tax, irrespective of your legal status. If you earn less than £8,164 you won't pay NI either.

It may be worth you speaking to the LA and asking if you can go on the payroll so tax and NI is deducted at source. As this will be your only employment,the LA will be your only employer, and all other things being equal, your PAYE code will ensure there are no deductions when payments are made to you.

You will then complete your SA100 as you do now but you will also need to include employment pages.

This was always going to smoke Feedy out.

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Originally Posted by lardy

This was always going to smoke Feedy out.

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but NinianClarke is feedy, haven't you read the memo

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Originally Posted by TISS

you don't need to register as an employee if you have your own company.

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Ok. Perhaps I've confused myself, but how would I pay me? Thanks for your other input on the thread, too btw. :thumbup:

Do you know another limited company that you could contract with & bill the LA through?

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Originally Posted by Eric the Half a Bee

Ok. Perhaps I've confused myself, but how would I pay me? Thanks for your other input on the thread, too btw. :thumbup:

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you only need to register for PAYE if any one employee earns above the LEL (lower earning limit) of £113 pw or £5,876 per annum. typically, owner managed limited companies will draw via a mix of salary and dividends, thus negating the need to operate a PAYE scheme