[NobleMatt]

As some of you may remember I was forced to leave my job as a graphic designer last December and I have recently reentered the world of employment with a paid internship with a very well respected, small, branding and strategy agency in London.

The way the company is set up like a lot these days is that all members of staff are self employed and are contracted by the company as and when needed. I have no experience of being self employed or of running a company. I heave read/heard that I could effectively be better off setting up as a Private LTD Company and invoicing them like that as opposed to a Sole Trader.

Has anyone got any experience of this that can offer some advice?

Few more details that could be relevant:

• I'm hoping to once my internship has expired to stay on with them as a graphic designer (so were talking long term solution hopefully).

• My wage at the moment as an intern in something in the region of 22-23K gross pay

• I could be tempted to buy a new mac for work in the next 12 months (avoid VAT?)

• I plan to possibly do some freelance work outside of this company (say if i lose a day a week from the 5 im on now)

Thank you advance for any help.

Matt

[Doc HM]

Well a Private Ltd company is a halfway house between a full Ltd company and a sole trader. Designed to give individuals some of the protection from creditors and tax advantages of a limited company without the full regulatory framework. It's probably more suitable to a sole trader running their own business than a small business with several employees.

As a sole trader you remain personally liable for any tax debts and/or business debts, bank loans etc but don't have to pay to have company accounts filed. You can become VAT registered as either.

I would probably say go the sole trader route for now as it's easier, less paperwork and you won't have complex tax issues.

However, be aware that this new fad for hiring staff as contractors is great for companies as they can hire and fire people on the spot even after several years. The Revenue position on this is currently unclear as well since they general view anyone who gains all (or nearly all) of there income from one source to be employed by that company whatever the company says. You may need to gain some income from other clients so your plan to do additional work is a good one.

In order to claim the VAT back on the Mac you will need to VAT register. This is compulsory if you turn over more than around £66,00 but voluntary below. It's a good move if you plan to buy stuff, which you can also right off against tax. However you will have to add VAT to your invoices (including your employers), account for this and remember not to spend the VAT before sending it off to the revenue.

[Big Mac]

"Sole trader" in the UK = sole proprietor in US?

[Phileas]

If you get all, or even just the majority, of your income from one source for a period of time longer than six months, the both you and the company you work for will be taxed the same way as if you had been employed by that company.