Can you be self-employed and a Director of a Limited Company

Self Employed Consultant and Director

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Can you be a self-employed consultant whilst also being a registered Director of a Limited Company? In this case, the consultant is providing part-time consultancy on behalf of the Company but also has a variety of other clients. The company would like to appoint him as an Officer/ Director to support the running of the business but is not offering a shareholding in the Company.

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Scalloway Castle
By scalloway
15th May 2016 14:31

If he becomes a director he can't be self employed for the work he does on the company's behalf - he will need to go on PAYE. For anything else he does he can still be self employed.

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RLI
By lionofludesch
16th May 2016 07:22

You've an uphill struggle here. In theory, it's possible to do self-employed work for the company - if the director has some real specialist skill unrelated to the company's normal business, for example.

In practice, it's nigh on impossible.

Play safe.

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Mike Cooper HJS
By mike_uk_1983
16th May 2016 09:32

Cant be self employed as directors are deemed employees.

I have seen companies where the directors are paid through their personal service companies instead of being on the payroll but I am aware this can create IR35 and other anti avoidance issues.

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paddle steamer
By DJKL
16th May 2016 11:17

You do not say what sort of consultant?

I have seen an architect in practice as a sole trader invoicing a company of which he was a director ,for his services as an architect. The fact he was carrying PI cover re his activities, was bound by RIBA rules and was culpable as certifying architect re the property in question possibly removed the reward for the activity from that of a director to that of a third party consultant; certainly his billings were not for activities as a director.

It possibly made the relationship more arms length as there were two unconnected (except as shareholders/directors) parties as directors ,but only he was paid. Whilst both managed the company, as directors, his reward was for being an architect.

I think I would wish to examine the facts before determining the status of the payments to the individual.

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Replying to DJKL:
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By Peter84
16th May 2016 12:35

In this case, the consultant is performing marketing services on behalf of the company for its clients. For example, media planning. However, the consultant does have other clients and only consults for the company 3 days per week. The company invoices clients for the services [in-part] performed by the consultant. It is my understanding that the fact the consultant is part-time - and has a variety of other clients to whom he has accounts for - avoids IR35 implications?

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Replying to Peter84:
Scalloway Castle
By scalloway
16th May 2016 12:49

It is who he supplies services through the company that matters for IR35, not what he does as a sole trader.

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Replying to Peter84:
RLI
By lionofludesch
17th May 2016 11:30

Peter84 wrote:

In this case, the consultant is performing marketing services on behalf of the company for its clients. For example, media planning. However, the consultant does have other clients and only consults for the company 3 days per week. The company invoices clients for the services [in-part] performed by the consultant. It is my understanding that the fact the consultant is part-time - and has a variety of other clients to whom he has accounts for - avoids IR35 implications?

Imho, not good enough. But if the company thinks it has an arguable case, they're free to take the option. It's the payer's risk.

One point though - the director could be better off taking a fee as salary. There could be an NI saving. Depends on his circumstances.

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By Sherman Holter
14th Sep 2017 08:58

Can anyone point me to the statutory basis for these responses. I've always understood that directors can not invoice their own companies. I would like to see the legal basis for this but I can't find it.
Thank you.

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Replying to Sherman Holter:
By mrme89
14th Sep 2017 09:21

Have you considered starting your own thread?!

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Replying to Sherman Holter:
Stepurhan
By stepurhan
14th Sep 2017 10:15

Accepting for the moment that you have a valid reason for tagging this on to a query that is over a year old.

Directors and companies are separate legal entities. That being the case, the default position is that one legal entity can legitimately bill another. So it is really you that needs to provide a statutory basis for why directors cannot invoice their own companies.

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RLI
By lionofludesch
15th Sep 2017 09:59

Depends, depends, depends.

There is an obvious difference between a sole director invoicing from his single client self employment and one of many directors invoicing from his business which has hundreds of clients.

It's up to you to make your case in the particular circumstances.

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By [email protected]
25th May 2023 06:15

I am a self employed taxi driver , I have been doing this for over 20 years, recently I began to win school contracts directly from the council, my accountant recommended I set up a limited company to receive these payments and initially , he said to keep my normal taxi earnings separate as a sole trader. However , recently he has advised to group both of these earnings as one and to deposit any money I receive from my normal taxi work into my limited company. I get paid a salary plus dividends as a director but there is some advice out there which suggests I can still keep my sole trader status as a taxi driver separate to my limited company. The only advantage of keeping it separate for me would be that I could continue to operate as a normal taxi driver because I do not hit the VAT threshold , once I hit the VAT threshold, my private hire company will refuse to let me continue to work as a taxi driver for them as I would have to charge VAT on all fares.

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Replying to [email protected]:
Scalloway Castle
By scalloway
25th May 2023 08:05

As both trades are the same doing he same work as a a sole trader and limited compnay to avoid VAT would be tax evasion. Ask your accountant about disaggregation for VAT.

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Replying to [email protected]:
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By DKB-Sheffield
25th May 2023 08:43

salfarazkhan-AT-hotmail.com wrote:

once I hit the VAT threshold, my private hire company will refuse to let me continue to work as a taxi driver for them as I would have to charge VAT on all fares.

Has the private hire company actually said that? I mean verbatim? Is that an assumption? Or, have they said they won't allow an increase in rates?

Part of falling over the cliff edge of VAT is managing it. Don't forget, VAT isn't a one-way street. You reclaim inputs as well as paying outputs. It's a decision you need to make as to whether it's worth having an £85K turnover.

Not sure why it was set up in this way in the first place. But, as has already been said... disaggregation is likely an issue you will face, maybe you have already exceeded the threshold... it's not clear. Trying to separate your business to avoid VAT registration... not a sensible option I'm afraid.

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Replying to [email protected]:
RLI
By lionofludesch
26th May 2023 15:38

I don't know where to start, fella.

Will you be using the same vehicle for work the company does and for work that you do as a sole trader ?

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