Overview
This guide explains the pros and cons of operating as a limited company versus a sole trader, specifically in the context of IR35.
Step-by-Step Instructions
Understand your client's size and sector.
Large and medium businesses (in the private sector) and all public sector bodies must apply the Off-Payroll Working rules to determine your IR35 status.
Small private sector businesses are exempt from this rule, and you remain responsible for your own IR35 determination.
Determine your most favourable option.
If your client is a small business, a limited company is often the better financial and liability option. You are responsible for your own IR35 status.
If your client is a large or medium-sized company, you may be deemed "inside IR35." If so, operating as a limited company can be the least financially favourable option. If you disagree with the determination, a sole trader may be a better option.
Consider using different structures for different contracts.
You can choose to work through your limited company for some contracts and as a sole trader for others, depending on how the IR35 rules apply to each one.
Additional Information
Before setting up any business, it is highly recommended to seek professional advice to assess which structure is best for your unique circumstances.
What is IR35? IR35 is UK tax legislation that aims to identify "disguised employment." This applies when a contractor works through an intermediary (like a limited company) but, in reality, works like an employee.