Home Budget 2007 Company Profile Services Accountancy Zone Business Zone Tax Zone IR35 Update News Articles Feedback Search Legal Notice How To Find Us There is no precise definition of self-employment though guidance is given in Inland Revenue leaflet IR56. In order to determine whether an individual is truly self-employed the whole circumstances of his or her work need to be considered. Typically, a self-employed person will: Have a large measure of, if not complete, control over the way in which work is done; Have no guarantee of regular work; Receive no pay for periods of holiday or sickness; Will bear the risks of his or her enterprise; Will probably use his or her own equipment or materials; Have the right to send someone else to do the work. The precise rules are complicated and you should seek professional advice in order to clarify your own situation. A self-employed person is taxed under Schedule D. The relevant sub-division (known as a case) can be determined by reference to the complete list of schedules. The most relevant of the cases are Case 1 (profits or gains from trade) and Case 2 (profits or gains from a profession or vocation). There are very few formalities for a sole trader who trades under his or her own name. You should keep proper records and may require professional advice when dealing with the Inland Revenue and declaring income. A self-employed person does not need an external audit, and financial information need not be filed at Companies House. Also, unless registered for VAT, there are no rules on record keeping. If you have employees, you will have to register them with the local tax office and be responsible for paying over Pay As You Earn (PAYE) tax and National Insurance Contributions (NICs), as well as complying with Inland Revenue and Department of Social Security (DSS) form filling. In short, the self-employed may begin trading immediately, with the minimum of formality. Setup costs are low and there are no audit fees (although it is advisable to seek advice from an accountant). For tax purposes, the sole trader is classed as Schedule D, and profits or losses in one trade can be set off against profits or losses in other areas. In fact, PAYE previously paid may possibly be offset against trading losses. If you would like to know more, please contact us. [ Tax Zone Home]