Employed or Self Employed?

If you are working as a sole trader and spend a lot of time working for one client, be careful! The HMRC could deem you to be an employee (they would prefer you to be as they get a lot more tax in this way). Check out the following guidance to ensure you don't get caught out by this (can also be found at http://www.hmrc.gov.uk/employment-status/index.htm):

As a general guide as to whether a worker is an employee or self-employed; if the answer is 'Yes' to all of the following questions, then the worker is probably an employee:

•Do they have to do the work themselves?
•Can someone tell them at any time what to do, where to carry out the work or when and how to do it?
•Can they work a set amount of hours?
•Can someone move them from task to task?
•Are they paid by the hour, week, or month?
•Can they get overtime pay or bonus payment?

If the answer is 'Yes' to all of the following questions, it will usually mean that the worker is self-employed:

•Can they hire someone to do the work or engage helpers at their own expense?
•Do they risk their own money?
•Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
•Do they agree to do a job for a fixed price regardless of how long the job may take?
•Can they decide what work to do, how and when to do the work and where to provide the services?
•Do they regularly work for a number of different people?
•Do they have to correct unsatisfactory work in their own time and at their own expense?

Sole Trader Accounting Records

In order to prepare your year end accounts in the most efficient way, I need you to provide me with the following records:

1/ Completed Excel accounts template (please ask me to email this if you don't already have it), listing sales and purchases information.

2/ Bank statements downloaded from online banking in excel format (or paper bank statements if downloading really isn't an option)

3/ The total business mileage travelled during the year. Your records should be itemised in detail but I just need the total amount. Business mileage is any journey completed wholly, exclusively and necessarily for business purposes (eg purchasing stock, visiting a client), excluding commuting to your permanent place of work.

4/ Stock value as at period end. The stock should be valued at the lower of cost and net realisable value. Therefore if you have some old stock that you think you'll struggle to sell, revalue it at the price you think you'll be able to get for it, if this is below the original cost you paid for it.

5/ Average number of days per week and weeks in the year that you work from your home office.

6/ Details of contributions to pension schemes during the tax year.

7/ Details of gift aided donations to charities during the tax year.

8/ Details of all other taxable income
- if you are employed as well as self employed, don't forget to provide the form P11d as well as the P60
- details of net interest received and the tax deducted from your bank statements
- any rental income from property

If you need accountancy or taxation advice, please contact me on kate@scottaccounts.co.uk, 0161 355 5911, www.scottaccounts.co.uk.

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