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starting own business in the UK
Thread poster: MariusV

MariusV  Identity Verified
Lithuania
Local time: 11:55
English to Lithuanian
+ ...
Apr 7, 2007

I am working at present as a free-lancer (in my own country), but considered an idea of moving to the UK to start my own business. This idea is just "on the level of an idea" (one of the many options for growing up), and dtarting to move for it should be taking quite a challenge (not only from the financial side). So, started collecting some pre-info about all the formalities, etc., but would like to share some experience with some people who moved to the UK and started their own business in the area of translation (esp. if there are free-lancers from the Eastrn Europe who grew up into a small company or, at least, into individually working freelancers in the UK).

So, I would like to know the following from people who already did it:

1) what is the best legal status for a small (one-person) company at the very beginning (1-2 years)?

2) do you find the UK taxes reasonable (or at least sufferable)? + are there some possibilities for smaller taxes for a beginner?

3) what about the bookeeping issues - is it complicated in the UK, does it involve a lot of formalities and all these papers?

4) what do you think about the clients and the local mentality - is it difficult to work with the UK clients, are they fair, reliable, etc.?

5) office space rental - what would be your best suggestions for a small office for the start (e.g. is it necessary to move to London to expect a bigger turnover, or just enough to have a small office at some provincial town)? also usual prices for the office, etc.

6) other pros and cons of doing a business in the UK?

Regards,
Marius

[Edited at 2007-04-07 00:14]


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Charlie Bavington  Identity Verified
Local time: 09:55
French to English
A few hints Apr 7, 2007

For question 1, see this thread:
http://www.proz.com/topic/54180

For Q.2, see http://www.hmrc.gov.uk/home.htm
As a very, very rough guide, in terms of personal income tax, the first 5000 GBP you earn is tax free, and the next 30,000 GBP will, the year after next, be taxed at 20%. Income above that, 40%. But that is only a rough indication for the purposes of immediate comparison with Lithuania before you click on the link

For Q.3, I can only speak from a self-employed, non-VAT registered, viewpoint. I have no idea about companies. But I do not view the financial reporting requirements for self employed people in the UK to be particular complicated. Certainly less so than in France, which is the only point of comparison I have.

Q.4 - no comment

Q.5 - London, and the south-east, is very expensive compared to elsewhere and I would think that, prima facie, you could run a translation business equally well, but at lower cost, elsewhere in the UK. You should also consider the costs of where you will live - both buying and renting are, generally (although there are exceptions) cheaper away from London and the south east. Is there any reason why you really want an office, rather than work from home?

Q.6 - I really have no idea why anyone would actually want to live here rather than any of the far more attractive places the planet has to offer


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Gillian Searl  Identity Verified
United Kingdom
Local time: 09:55
Member (2004)
German to English
My perspective Apr 7, 2007

1) Sole trader - you don't need to set up a company. You simply register with the Inland Revenue as self-employed.

2) They are graduated on how much you earn (so if you don'tearn you don't pay) but I actually found it cheaper in Germany!!

3) No, it is relatively simple, just keep a spreadsheet on what you earn and keep your receipts for what you spend.

4) Although I live in the UK, 90% of my income comes from the eurozone. You don't need to live in the UK to get UK clients - that is the beauty of the web. Clients are similar around the world - some are reasonable, others are outrageous.

5) Why do you want to rent an office? It would increase your costs drastically and if it's in London the prices can be astronomical. Do you really need an office to work as a freelancer? Or maybe you are planning to set up an agency? Personally I don't like London any more - those days are over for me! Try a smaller town somewhere.

6) I have recently visited Brazil where I could live like royalty on what I am earning so why come and live in a country with a high cost of living if you could stay in your own country and earn euros/pounds and live like royalty?


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Evonymus (Ewa Kazmierczak)  Identity Verified
Poland
Local time: 10:55
English to Polish
+ ...
one more question Apr 7, 2007

Hello Everybody,
Marius I’m very glad to see your post as I’m thinking about moving to UK as well. This means the subject is very interesting for me, and I do hope you won’t mind that I’m asking one more question (additional to your list of questions).
Gillian wrote: „1) Sole trader - you don't need to set up a company. You simply register with the Inland Revenue as self-employed.”
And my question is – in such case, is there any obligatory social/health insurance that I would have to pay. If so, how much is it? And is it related to your income? I mean, in Poland I’m registered as a sole trader/ sole proprietorship and I have to pay very high obligatory social/ health insurance, regardless my income. How does it look like in UK?
Thank you very much in advance for your time. Greetings Ewa


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Gillian Searl  Identity Verified
United Kingdom
Local time: 09:55
Member (2004)
German to English
Class 2 NI Apr 7, 2007

We often forget to mention Class 2 NI but there's a reason for it - it is sooooooo small!

Class 2 rate per week
£2.20

Class 2 small earnings exception
£4,635 per year

http://www.hmrc.gov.uk/nic/class2.htm

The other Class - 4 - is collected with your tax so we just include it as part of the income tax.


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Williamson  Identity Verified
United Kingdom
Local time: 09:55
Flemish to English
+ ...
Off-shore. Apr 7, 2007

Google "Offshore". Some sunny places are tax-friendly too.
As a "sole trader", you are "sole". As a company, you are a legal entity, independent of yourself.

[Edited at 2007-04-07 09:10]


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Russell Jones  Identity Verified
United Kingdom
Local time: 09:55
Member (2004)
Italian to English
Client base Apr 7, 2007

Hi Marius

I'm a freelancer but also a co-director of a very small agency, which is a Limited Company.
I totally agree with the advice Charlie and Gillian have given you, including their questioning your reasons for moving to the UK. If it is because you are passionate about the culture as well as the language I can understand you; I feel the same about Italy.
It seems of dubious merit from a business point of view though, unless you already have an established client base here (or elsewhere if they will continue to employ you).
If your intention is settle here and then start looking for new UK clients, I don't think tax will be the problem, it will be earning enough to survive.
In my experience, the marketing exercise for new companies takes an enormous amount of work for very little return; it needs great patience, skill and another means of support for quite a long period.
Best of luck.


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Wilmer Brouwer
Netherlands
Local time: 10:55
Member (2006)
English to Dutch
+ ...
just moved to the UK Apr 7, 2007

I just moved to the UK, officially going to start my business here on Tuesday with the new tax year. What I thought is/was the most difficult thing is that the British need forms for everything and getting a national insurance number takes long and is difficult. Without a national insurance number you can;t get a VAT number so if you need a VAT number that can take up to three months. But it is a great country to live in I think.

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Williamson  Identity Verified
United Kingdom
Local time: 09:55
Flemish to English
+ ...
VAT-number : Opt-in or opt-out Apr 7, 2007

Are you in a hurry to get a VAT-number? The British VAT- treshold is an annual turnover of £61,000, the highest in Europe).
Ok, without a VAT-number, you can not deduce VAT on purchases, but you will not get fined either if you make mistakes on your VAT-declaration.



[Edited at 2007-04-07 15:28]


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MariusV  Identity Verified
Lithuania
Local time: 11:55
English to Lithuanian
+ ...
TOPIC STARTER
yes :) Apr 7, 2007

Williamson wrote:

Are you in a hurry to get a VAT-number? The British VAT- treshold is an annual turnover of £61,000, the highest in Europe).
Ok, without a VAT-number, you can not deduce VAT on purchases, but you will not get fined either if you make mistakes on your VAT-declaration.



[Edited at 2007-04-07 15:28]


Well, I think you are right - I think that free-lancer's activity is somewhat specific - actually 100 "moneys" of income from translation jobs and 2 "moneys" of expenses...What does a free-lancer buy? A new computer once per 2-3 years, some paper, a printer cartridge once per 3 months, well, maybe some other small expenses (if there is no office rent)...I do think that being VAT-registred makes more sense for those who do some trade (have to buy goods from the producer/supplier and then sell these having some difference for the profit...), say you spend 30 000 GBP per year on purchase of items and sell them for 50 000 GBP to your clients, then VAT "return" makes some sense...

Btw, does that limit of 61 000 GBP of turnover goes for all, I mean both companies, and persons registered as sole traders? Or is there some kind of differentiation?


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Evonymus (Ewa Kazmierczak)  Identity Verified
Poland
Local time: 10:55
English to Polish
+ ...
reasons Apr 7, 2007

Russell Jones wrote:

Hi Marius
(...) including their questioning your reasons for moving to the UK. If it is because you are passionate about the culture as well as the language I can understand you; I feel the same about Italy.
It seems of dubious merit from a business point of view though, unless you already have an established client base here (or elsewhere if they will continue to employ you).
Best of luck.


Hello Russel,
well, to keep up with the language seems an obvious reason to me. And nowadays with the internet facilities I can „take” my clients with me. What a difference it makes (to my clients) whether I e-mail a translated file from Poland or from UK.
Greetings Ewa


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Gillian Searl  Identity Verified
United Kingdom
Local time: 09:55
Member (2004)
German to English
VAT threshold Apr 7, 2007

The VAT threshold of around GBP 61,000 applies to sole traders and companies. Below that level you can register but don't have to. If you register you have to fill out a lot of forms so many people don't register.
Setting up as a sole trader is really easy in the UK - one quick call to the Revenue helpline and your done.
This site provides more information:
http://www.hmrc.gov.uk/selfemployed/iwtregister-as-self-employed.shtml

Gillian


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Charlie Bavington  Identity Verified
Local time: 09:55
French to English
It is easy, but... Apr 7, 2007

Gillian Noameshie wrote:
Setting up as a sole trader is really easy in the UK - one quick call to the Revenue helpline and your done.
This site provides more information:
http://www.hmrc.gov.uk/selfemployed/iwtregister-as-self-employed.shtml

Gillian


... it was undoubtedly easy for us since I guess we both had NI numbers already, as the government kindly provides you with one on your 16th birthday
I'm not sure how complicated it is for foreign nationals to get an NI number; Wilmer seemed to imply it took some time. Might be worth investigating. But yes, when you've got an NI number, one phone call is all it takes - that aspect is great.


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MariusV  Identity Verified
Lithuania
Local time: 11:55
English to Lithuanian
+ ...
TOPIC STARTER
to be there or not to be? Apr 7, 2007

Evonymus wrote:

Russell Jones wrote:

Hi Marius
(...) including their questioning your reasons for moving to the UK. If it is because you are passionate about the culture as well as the language I can understand you; I feel the same about Italy.
It seems of dubious merit from a business point of view though, unless you already have an established client base here (or elsewhere if they will continue to employ you).
Best of luck.


Hello Russel,
well, to keep up with the language seems an obvious reason to me. And nowadays with the internet facilities I can „take” my clients with me. What a difference it makes (to my clients) whether I e-mail a translated file from Poland or from UK.
Greetings Ewa


Well, it is almost a new topic I do not think it makes any difference where the translator works from the geographical side (for the translator as long as one has a notebook and internet connection), BUT, maybe it can make a difference to the client, esp. when the translator want to approach some high-level companies?

One thing is "someone from the Eastern Europe", esp. from a post-Soviet country. Have to admit that at least the "local" Lithuanians do not have a good reputation for quality and deadline reliability - a crazy paradox, but serious translation projects into my language undergo several stages of mediation, e.g. some big end client will order a job from a UK agency, the UK agency orders it at a CZ agency or a PL agency, then that orders it in Lithuania (at least that goes UK end client – UK agency – Lithuanian freelancer). The paradox here is that all the work is actually done by the same Lithuanians (whatever is the actual „reliability“ - strange, but true), and the cash from end client will the job doer is STILL sufficient to make all happy - the client, one several mediators, and the translator too.

So, maybe moving to the UK and being there physically (being registered in the UK as a business person, with a small office. UK bank account, a number of linguistic certificates and memberships received in the UK, and other "frills", etc.) would make more profit and some added value psychologically by “hooking“ end clients, kicking out the mediators, providing a direct service (doing work yourself and not ordering via several stages) one can give a rate that a local UK agency hiring freelancers could never beat? Like agency takes 1000 from the client, pays 500 to the translator, and here you can offer some 800 to the end client instead of that 1000. And the taxes in LT and UK are actually the same, but it can make a difference of income even paying taxes from 800 instead of the same 500 ?

So, do you think that the psychology "native Lithuanian speaker translator working in the UK" might work in the head of the end client like "Ah, he is working in the UK, has a small company, does the work himself - maybe worth ordering jobs at him, let alone that I save some 20 per cent on the rates" ?


Another advantage - market size (compare the market of the UK - a high level of economy, big clients with a lot of cash and the LT market with the population of slightly over 3 million (a bigger UK city) and a post-Soviet economical system and worst of all - post-Soviet mentality?

Finally – what is the risk? In the worst case, you move to the UK, have some expenses for company registration, office space, on self-marketing locally...OK, if that does not go as you expected, what you lose? I think several thousand euros max (your average income of a couple of months). If business does not go, you register out as a businessman in the UK or close your company, buy air-ticket back home, take your notebook and say "Good-Bye UK, was nice trying"...and when you return home, you work just like you worked before coming to the UK??? Why not give a try if the situation in the worst case can be like that?

Well, maybe I am too optimistic





[Edited at 2007-04-07 19:39]

[Edited at 2007-04-07 19:42]


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Uldis Liepkalns  Identity Verified
Latvia
Local time: 11:55
Member (2003)
English to Latvian
+ ...
Hi Marius Apr 7, 2007

I did read this your thread. What can I say- if I will think of relocation (and the idea haunts me, will not deny it), my first choice will be the Kingdom of Tonga or like (weather-wise, and probably also tax wise), the second one would be Spain or Portugal (for the same reasons). As to Williamson's suggestion about off shores- that doesn't work here in Latvia any more- you can have a company there, but no local clients can transfer any money to offshores, nor can you receive any money into your local account from any offshore zones (OK, from most of them, starting with Delaware and the list is followed by some 50 more).

Slight explanation on "tax paradise Eastern Europe” for others reading this thread – for simplicity sake, say, I will not take any single cent from the transfer I get from my client (but I have to pay 18% VAT and 15% Company income tax), so the supposed initial sum in my example on what I’m receiving from my client is not 100 moneys, but 133.

So, after receiving from the client 133 moneys and paying my taxes, I’m left with 100 moneys. From witch, if I will pay them all to the locally based translator, he will receive in cash 41,91 (33,09% social tax + 25% income tax).

I’m not here taking into account un-taxable monthly minimum, because at least here, in Latvia, it doesn’t make the weather- it constitutes LVL 50 (EUR 71).

So it happens, as Kurt Vonnegut used to write.

Uldis

Added- ach, yes, if I don't earn anything, I don't have to pay this Company income tax. However, it doesn't change the end result much.
U.

[Rediģēts plkst. 2007-04-07 23:40]

[Rediģēts plkst. 2007-04-08 18:12]


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