Frequently Asked Questions

• There are no formation costs
• Sole traders are not required by law to have annual accounts nor to file accounts for inspection, but you will need annual accounts to complete your tax returns.
• Losses generated by a sole trader can be set against other income of the year or carried back to prior years.

However, the main disadvantages are that you will be personally liable for the debt of your business. If you have assets or savings, they are vulnerable to a claim made against you.

To become self-employed you will need to register with HM Revenue & Customs. Once you have registered, you will receive a Unique Taxpayer Reference (UTR) and HMRC will set up the correct tax and National Insurance contributions records for you. You should keep your UTR safe because you will need it when completing your Self-Assessment tax return. If all of this seems a little daunting, then we are here to help and will assist in all stages of your registration.

There are a number of advantages in becoming a limited company, such as:-

• You can give a share of the business to others eg family.
• It may be easier to attract people to invest money in your business.
• Obtaining bank loans may be easier.
• Corporation tax rates at present are lower than most of the income tax bands.
• In the event of a partner leaving or somebody dying, it is easier to continue the business.
• It is easier to sell the business.
• You have better standing in the public eye.
• It can assist in the protection of a name.
• People have more confidence in your business as they can check up on your company on the public records at Companies House.

The main disadvantages of becoming a limited company, are the extra costs of preparing annual accounts and some loss of financial privacy. We are able to help you with the formation of your new company and can advise over the best share structure and your other responsibilities.

• A self-employed person:
  • Runs his own business and decides about the type and time of its work.
  • Can have more than one customer at the same time.
  • Can hire people.
  • Takes care of the main equipment needed to perform business activities.
  • Bears responsibility for the success or failure of the business
• An employed person:
  • is paid a regular wage or salary.
  • Is told how, where and when to do your work.
  • Works within fixed hours.
  • Work for just one person at a time.
  • Has to perform the tasks imposed.
  • is not in charge of the business nor takes responsibility for it, that is the employer’s task

HMRC has a useful tool which is helpful in assisting when the distinction is less clear and can be accessed here. However, we encourage you to contact us at Hill Lillis & Company for specialist advice if this is an issue of concern to you

• If you qualify for one of the flat rate schemes then it might be beneficial if your customers are also VAT registered businesses.
• If there is a zero VAT rate for the items you sell however you buy standard-rated items, it may be beneficial as HMRC will regularly give you a VAT refund.

Please note, by registering for VAT, you do become responsible and potentially liable for HMRC penalties

Sometimes, businesses which do not consider their core activities are in construction, fall into the scheme where HMRC determine you are a deemed contractor (usually relating to the level of expenditure on construction services). We, at Hill Lillis and Company can help if this is a potential issue.

• £3k per annum
• Lump sum gifts on marriage
• Small gifts of £250
• Regular amounts of surplus income

We recommend you meet with us at Hill Lillis & Company, so that we can discuss some of the options available to you.

Using a Tax Advisor, such as Hill Lillis and Company, will ensure you can have reassurance regarding your financial position and you will be able to call us for advice, when needed, freeing up your time to do more of the things that matter to you!