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Sole trader vat registration with no company reg

Sole trader vat registration with no company reg

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A sole trader who is being paid as one would pay a limited company is now VAT registered. Without a company registration number we are in difficulty QA'ing the sole trader as he is required to have a company registration number to comply with our own in house software (which does not include a payment option for sole traders - hence why he is in as limited company payment).
Alan Edwards

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By Anonymous
26th Jun 2006 13:29

IR35 protects the engager
The whole point of how IR35 was brought about and implemented is that it protected the engager (disguised employer plc who avoids employment responsibilities and NIC costs) and passed the buck to the worker (disguised employee who gains more admin).

So, from the engager (customer) viewpoint to have workers as Ltd Co's puts the engager (disguised employer plc) well and truly in the clear. Any risks re: status pass well and truly to the worker, ie. potential IR35 liability unless a watertight IR35-proof contract has been put in place.

Thus, an engager (disguised employer plc)would be well-advised to have their "self-employed" workers provide their services through a Ltd Co. Having a software inhibitor of payments to non-Ltd Co workers protects the engager (disguised employer plc) from a branch / lower management not understanding the risks of engaging individuals on a self-employed basis.

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By Anonymous
22nd Jun 2006 13:27

Yes, IR35
IR35 came about as a means of passing the burden from the top 250 or so companies (and their advisors) most benefitting from the use of consultants suggesting to IR that any matter to deal with consultants be "passed down the line" - so PSC's and IR35 came about, leaving the 250 or so major plcs to continue to avoid the costs of employing (as opposed to using the s/e services of) consultants, etc.

Prior to the IR35 detail, there had been suggestions of some certification scheme, maybe akin to the construction industry being brought about, but the top 250 or so plcs didn't like the extra admin burden, so IR caved in and hit a less-politically-sensitive target, the small business and PSCs in particular.

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By Anonymous
21st Jun 2006 22:59

Labour only Ltd Co?
Mark has remembered IR35 I suppose?

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By Anonymous
23rd Jun 2006 13:35

IR 35
Yes I know about the background to IR 35 but the point I was making was based on your comments in which you suggest that it wise for the customer to insist on the limited company status to avoid the risk of the supplier subsequently being adjudged as an employee etc.

As the trader is VAT registered and apparently accepted by HMCE as an independent business surely the risk of being deemed to be an employee is limited (full circumstances of course not known)

Whilst there might be protection for the customer, the risk of an IR35 status does not protect the trader. Would not forcing him to be a ltd co increase his current risk significantly?

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By Anonymous
21st Jun 2006 13:21

Possible reason for Ltd Co requirement
If the supplier is providing labour only services it is wise for the customer to try and insist that the supplier be a limited company - as opposed to being a sole trader.

The reason for this is to avoid the risk of the supplier being subsequently adjudged to be an employee and the consequent PAYE/NIC assessment on the customer.

The software might, quite wisely in such a scenario, have been set up to inhibit payments other than to limited companies.

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By Anonymous
21st Jun 2006 17:15

And so a grey world becomes even greyer
What a pitiful idea!

The day I let my computer tell me what to do is the day I give up, and go surfing for ever.

Once upon a time traders sorted things (and their accountants helped them), instead of creeping around frightened of anything that might go boo!


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By alan.falcondale
20th Jun 2006 16:54

Thank you
Thanks Andrew and Nicola.
Yep, the software is by IR approved supplier so I guessed it should have been correct in the first place and able to accommodate the normal run of the mill entries - but not so.

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By Anonymous
20th Jun 2006 21:00

Don't be coy!
We need to know who produced this inadequate software and had the nerve to sell it as fit for purpose!

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By alan.falcondale
20th Jun 2006 13:41

forgot to ask
Sorry, forgot to include in essence what I am asking:
Can I continue to pay the sole trader as a limited company? this of course would mean the sole trader details come through on the TIDO report
Should I really be asking for a company registtration - and would the sole trader be able to attain one. Or does this require convert to Limited company via IR rules?

Thanks

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By andymeeson
20th Jun 2006 14:17

You already know the answer....
You need to fix your in-house software.

The problem is not with the sole trader, who is trading fully in accordance with the law. And so the answer does not lie in asking him for a company registration - he doesn't need one. The problem is that whoever wrote your software was ignorant of the simple fact that a sole trader can be a VAT registered entity.

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