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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 16244
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I am unsure wheather to open an ltd position or a sole

Customer Question

Hello
JA: Hello. How can I help?
Customer: Hello Pearl, I am unsure wheather to open an ltd position or a sole trader one for my new consultancy services to an abroad company
JA: Have you talked to a tax professional about this?
Customer: yes
JA: Is there anything else the Accountant should know before I connect you? Rest assured that they'll be able to help you.
Customer: no
Submitted: 15 days ago.
Category: Tax
Expert:  Sam replied 15 days ago.

Hi, Sam here , one of the UK tax Experts here on Just Answer, thank you for your question and I shall reply shortly

Expert:  Sam replied 15 days ago.

Hi

What are your short and long terms goals for the income as with a limited company you pay tax twice on the same income plus have high accountancy fees due to all the admin requirements, but they are useful if you plan to leave your profits (after corporation tax) in for a future date

Sole trader is more tax effective and you can probably manage your own accounts and tax filing requirements

Do let me know if you ned more information

Thanks

Sam

Customer: replied 15 days ago.
hello Sam, thanks for your message, why do you say that I pay tax twice with a limited company?
and what are the sole trader tax filing requirements you are referring to?
Customer: replied 15 days ago.
hello?
Expert:  Sam replied 15 days ago.

Hi

Well says £10000 is paid into the limited company you pay corporation tax on it at 19% so £1900

Then as salary you pay 20% ( as a basic rate taxpayer) plus 12% national Insurance and employer National Insurance 13.8% so a further £4580 or if you draw as a dividend (though you do have to draw some as salary then first £3000 dividend is tax free so £7000 at 7.5% £525 so total of £6480 OR £2425 plus accountancy fees at several thousands

As a sole trader £2000 as tax £900 as class 4 national Insurance £2900

You need to give me time to type back as this is with calculations please !

Thanks

Sam

Expert:  Sam replied 15 days ago.

Requirments to follow

Expert:  Sam replied 15 days ago.

Return to companies House annually

return for corporation tax annually

payroll monthly

Self assessment tax returns annually

Then board meting decisions of payroll and dividends with articles of association each time

Thanks

Sam

Customer: replied 15 days ago.
Very clear thanks, ***** ***** for earlier I thought this system worked differently. Since I would be working directly with this company as a consultant and this will be my only source of money, I would also fall into the new rules for the IR35 isn't it? does it apply to ltd only or would I be required to pay it in case I operate as sole trader as well? Thanks
Expert:  Sam replied 15 days ago.

Hi

I agree if that's the case they should in fact employing you directly through their payroll!

Thanks

Sam

Customer: replied 15 days ago.
this is a company based in Italy and does not have any subsidiaries in the UK, would this still be possible? do they or me need to worry to pay double taxes (in Italy as well) in this case? I ask for them but especially me as well because I am an UK resident but my family is in Italy and I will be going back and forth from the UK to Italy for work and family reason (for less then 6 months anyway)
Expert:  Sam replied 15 days ago.

HI

Then you are your own UK company by proxy and can operate PAYE on your own salary on whats known as a direct payment scheme  if they are paying you tax free- link here

https://www.gov.uk/guidance/when-and-how-an-employee-operates-paye-on-their-employment-income

However if they are taxing you then you njust register for self assessment and declare the foreign income and foreifn tax paid year end and due to our double taxation agreements any Uk tax due will be covered by the Itialian tax already suffered

Thanks

Sam

Customer: replied 15 days ago.
I am not sure If I will need to pay taxes in Italy honestly and I don't think so, I will trade as a sole trader and the source of income is a foreign company, but I will still be paid in £ in UK bank account, is this still considered to be foreign income? I have my house here and I qualify as an UK resident, what's the opinion of the UK taxman on this? shall I simply register for self assessment at the end of the year declaring 0 tax paid abroad hence 100% taxes to be paid in the UK?
Expert:  Sam replied 15 days ago.

Hi

You cant choose to be a sole trader there are strict guidelines to that decision as per IR35 and employment status legislation

Yes its still foreign income as arising from Italy

But you will either declare it as employment and Italian tax or Nil tax or

Self employment as income and expenses and Nil tax

Either way you would need to register for self assessment

Thanks

Sam

Customer: replied 15 days ago.
Ok I understand, but if the work I will be doing will not be configurable as "employment", infact I will not be an employee, I will not have sick pay, will not have holiday, will not have to show up at work, I will not be supervised, I will not have a fixed amount of hours to work, and I am not guaranteed I will have work all the time. It will be my sole source of income as I choose to, I can indeed choose to trade as a sole trader and declare my foreign income in the UK registering for self assessment being an UK resident, isn't it?
Expert:  Sam replied 14 days ago.

Hi

Its nothing to do with the fact you will not be paid holiday or sick pay (that's a legal matter as to whether you should be or not) nor doesn't matter where the work is carried out - its what work you do and how its carried out that affects whether this is self employment or employment

So you cannot simply choose as already advised

Go through this employment status indicator for a decision and answer it honestly

https://www.gov.uk/guidance/check-employment-status-for-tax

Thanks

Sam

Customer: replied 14 days ago.
That is a very usefull tool, thanks for your help and advice!
Expert:  Sam replied 14 days ago.

Hi

you are very welcome

Thanks

Sam