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Where Taxpayers and Advisers Meet

Limited company vs sole trader status?

TaxLobster
Posts:13
Joined:Wed Jan 27, 2010 12:02 am
Limited company vs sole trader status?

Postby TaxLobster » Fri Mar 08, 2019 7:57 pm

Not sure of the best subforum to post this...

My accountant has demonstrated that I can save money overall by changing from sole trader to limited company status. I have no reason to doubt that, but I have two concerns about going down this road. First, the amount of extra admin involved and secondly, the fear of sticking my head above the parapet, thereby potentially raising a red flag to HMRC and ending up the subject of one of their fishing investigations, the thought of which makes my blood run cold.

I'm currently VAT-registered (by choice) I have no employees/colleagues, and my work is desk-based with very few business-related expenses. All my affairs are 100% legit, up to date etc; ie there's nothing untoward which could either to trigger an investigation or to get caught out with.

How well-founded are my two fears? Thanks for any advice

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Limited company vs sole trader status?

Postby pawncob » Mon Mar 11, 2019 1:34 pm

When you cease to trade, HMRC will close down the Schedule D file.
When the company starts up they'll open a CT file.
Never the twain shall meet.
With a pinch of salt take what I say, but don't exceed your RDA

wamstax
Posts:2019
Joined:Wed Aug 06, 2008 3:39 pm
Location:Operate Nationally but based in Aberdeen
Contact:

Re: Limited company vs sole trader status?

Postby wamstax » Mon Mar 11, 2019 1:45 pm

You say that you’re vat registered by choice which would suggest that your turnover (& even possibly profits) is less than the current VAT registration limit. On that basis I would question the actual financial benefits to you from such a move taking into account not only the tax benefits but the extra costs of administration and the costs of ultimately getting any accrued profits out of the company in the short or long term.
Incorporating a company can be useful for an all round appraisal of both tax and commercial benefits or costs and should not be judged solely on tax benefits etc
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites

TaxLobster
Posts:13
Joined:Wed Jan 27, 2010 12:02 am

Re: Limited company vs sole trader status?

Postby TaxLobster » Mon Mar 11, 2019 3:04 pm

Thanks for the replies.
You say that you’re vat registered by choice which would suggest that your turnover (& even possibly profits) is less than the current VAT registration limit
Yes that's correct; however because this freelance work is now not my full-time job or complete income, effectively all the money I earn from it is taxed at 40%, and it's on that basis that the company idea now seems to make financial sense (I've been a sole trader, working more or less full time, for around 15 years already). Hence my queries...
Never the twain shall meet.
Sorry but you've lost me there! ;)

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Limited company vs sole trader status?

Postby pawncob » Mon Mar 11, 2019 5:18 pm

Self employment and Corporation Tax are dealt with by different departments with little (or no) communication between them. CT won't know you used to be S/E.
With a pinch of salt take what I say, but don't exceed your RDA


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