Paying Contractor as a Freelance Sole Trader

[JJR]

Ok, so I've been freelance for a bit over a year and all set up as a sole trader with HMRC without any problems. Recent changes have arisen some questions that we're not sure of the answer of and I hope you can help.

My partner and I recently set up the freelance work under a brand name, so that we can look more professional when we pitch and can grow it into something more than just the two of us. First question, do we need to legally set this up as a company or anything?

Secondly, about 6 months ago my partner started helping me with the freelance work and I've been paying him out of what I get paid I was given advise that I could then mark this as an expense on my tax return classifying it as paying a contractor and then he can pay tax as a freelancer as I do, but is this the right/best way to go about this? It's not big money so don't think we constitute being set up for PAYE and as an employer just yet, any tips would be great.

Thank you.

[nemesis45]

Re: Paying Contractor as a Freelance Sole Trader

Hi,

You could set up a Limited Liability Partnership, there is advice on this available online.
Which would be protection for both of you.
As to paying " cash in hand" you must certainly
carefully account for these payments and put in
writing that the obligation for paying tax and
National Insurance is entirely your partners.

nem

[JJR]

Re: Paying Contractor as a Freelance Sole Trader

Thank you, that makes a lot of sense.

So, am I ok to just mark the payment as expenses in my tax return for now?

[nemesis45]

Re: Paying Contractor as a Freelance Sole Trader

I suggest that it is listed as payment to a self employed subcontractor to avoid problems for
yourself.
nem

[ostell]

Re: Paying Contractor as a Freelance Sole Trader

Any reason why you can't turn the Brand Name into a limited company? You can then be paid as employees of the company or as contractors to the company.

[Garlok]

Re: Paying Contractor as a Freelance Sole Trader

There are a number of implications for any of this and the OP would be advised to look into all the possibilities carefully. Any "employment as such will require an examination of what is required in the specific circumstances with regard to RTI (real time information) for HMRC regardless of how the business is set up. Any form of contracting via freelance/ltd company will need an examination of the requirements and implications of IR35 (the infamous IR35 and ALL relevant contracts as it is now). This cuts in the moment any form of "intermediary" is in the loop and the use of ANY of their or their clients equipment and resources. HMRC will certainly question in current days the write down of expenses on the OPs forms without back up data from the payee. All information is available on HMRC's websites all explained in relatively simple terms for us mortals. Get an understanding then ask. We have always found them to be helpful. If there's a problem just ask for supervisor.

This simple request has resolved untold problems for us in the past 25 years or so.

regards