Sole trader with just one client?
Thread poster: Jen Lawson

Jen Lawson
United Kingdom
Local time: 13:38
German to English
Dec 6, 2011

Hi there,

I've just recently qualified and begun my career as a freelance translator. I have one client who keeps me really busy and I'm really happy with that. But I have seen that there may be a problem with just having one client as a sole trader, which I believe I'm classed as. I have registered as self-employed but have not yet had to fill out any self-assessment forms. It's proving rather difficult to get any definitive answers on this topic by googling, and so I was wondering if anyone had any advice? If I do have to have more than one client, is there any way round it?

Many thanks!

Jen


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Hazel Underwood  Identity Verified
United Kingdom
Local time: 13:38
Member (2005)
German to English
+ ...
Number of clients does not matter Dec 6, 2011

Hi Jen!

I can't see that it matters how many clients you have. I'm pretty sure that's the case anyway.

Once you have registered self-employed you will have to complete a self-assessment once a year. The tax year runs from April to April. The deadline for submissions is end of September if you want the tax office to check the form, end of January otherwise and the payment deadline is end of January.

So if you haven't done any work prior to 1 April 2011 then you won't have to complete one until next September/January.

Hope that helps!

You can always ring your local tax office if you're not sure, they're usually helpful.

By the way, I'm a Proz Mentor for your language combination, so feel free to get in touch if you need any more advice on anything.

Best wishes,

Hazel


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David Wright  Identity Verified
Austria
Local time: 14:38
German to English
+ ...
It might matter, but Dec 6, 2011

I think in most countries of Europe there are provisions about the pseudo-selfemployed, i.e. people who on paper are self employed but in fact aren't. If you only have one client, this is a warning light for the powers that be (inland rev?). However, if you can show, as you will certainly be able to, that you are not in an employment-like situation, then you have no problems. This means: you can work whenever and wherever you want, you can refuse jobs, you get paid on a job by job basis (retainer fees are dodgy), you are at liberty to work for other clients, you provide the equipment you work with, etc. I can't imagine this is really going to be a problem, but it is useful to be able to provide the evidence if "thay" need it. Good luck in your career!

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Jocelyne S  Identity Verified
France
Local time: 14:38
Member
French to English
+ ...
OT: Be careful Dec 6, 2011

Hi Jen,

I agree with what the others have said regarding the legality of having just one client, which shouldn't be a problem if they really are a client, but I just wanted to point out that it's not the wisest choice from a business perspective to have all of your proverbial eggs in one basket.

You should try to pick up at least a few other clients so that you are not completely dependent on a single source of revenue. It's best to have money coming in from several different clients so that if one starts to run dry, you have the others to fall back on and do not find yourself in a financial bind.

Good luck,
Jocelyne


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Aisha Maniar  Identity Verified
Local time: 13:38
Member (2003)
Arabic to English
+ ...
Income tax Dec 6, 2011

As far as I am aware, you are taxed on the basis of the income you make and not the number of clients you have. I don't think the number of clients has any effect whatsoever on the type of employment status - running your business as a sole trader or a company - you choose either. As Hazel said, the tax office is usually very helpful with any queries. As a self-employed person, income/number of clients/activity, etc. can vary broadly from one year to the next. I'm sure the Inland Revenue has seen all sorts of things. The important thing is that you are not classed as an employee of that sole client and can provide (and keep) evidence of that.
Best wishes, Aisha


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Charlie Bavington  Identity Verified
Local time: 13:38
French to English
The rule you may be thinking of... Dec 6, 2011

...is IR35 - have a google around that that.

Chances are you'll be OK if you work from home, are able to pick and choose what you do, etc. (I'm sure you can read up on it yourself!), BUT HMRC are the ones who ultimately decide and they *could* take the view that the agency itself is treating you as a de facto employee regardless of how you or the agency feel about the situation, or even what your genuine intentions are. And note that being a small limited company is no protection (although joining an umbrella company is). The rules were mainly aimed at on-site service providers and unscrupulous employers of any kind, but rules being rules, other people can get caught up in them.

Some of the advice in this thread is actually dangerously misleading; however one piece that is not is that about having all your eggs in one basket - get yourself some more customers and the chances of being accidentally caught out (and in my view, it is more a question of being accidentally trapped by rules not intended for our circumstances than the type of deliberate avoidance the rules are intended to target) are reduced enormously.

That said, the information you have to provide on the S/A form in no way gives HMRC any indication of the likelihood or possibility you'd fall under IR35, so it would probably only arise under a random inspection.


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Decipherit  Identity Verified
United Kingdom
Local time: 13:38
Portuguese to English
+ ...
Best to check with the professionals Dec 6, 2011

If I were you I would check with an accountant, a solicitor or with HMRC itself. As I understand they brought in a rule about sole traders working for one client 10+ years ago because of the number of I.T. consultants that suddenly appeared on the scene. Presumably the concern was that companies were avoiding N.I. contributions and the consultants were benefitting from lower N.I. contributions too. I haven't heard anything about this recently and I don't know if it all just fizzled out but Googling the issue does throw up a mention of it on a couple of solicitors' websites. It may be safer to seek professional advice on this.

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joanduplessis  Identity Verified
Local time: 14:38
Afrikaans to English
Claiming of expenses as well as taxation Dec 6, 2011

I think you should be aware that if the tax people regard you as an employee of this client, that you may not be permitted to claim various expenses such as office supplies, travel costs, rent (or portion of your bond if you work from home).

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Daniel Bird  Identity Verified
United Kingdom
Local time: 13:38
German to English
What Charlie said Dec 6, 2011

IR35 can seem like a bear trap in wait for people in your situation, however it was/is most often used and with varying success to target one-man limited companies set up as an avoidance ploy.
Good luck finding your next client - and if I may add, a switched-on accountant.
DB


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Charlie Bavington  Identity Verified
Local time: 13:38
French to English
Bit of both Dec 6, 2011

Lisa Simpson wrote:

As I understand they brought in a rule about sole traders working for one client 10+ years ago because of the number of I.T. consultants that suddenly appeared on the scene. Presumably the concern was that companies were avoiding N.I. contributions and the consultants were benefitting from lower N.I. contributions too. I haven't heard anything about this recently and I don't know if it all just fizzled out but Googling the issue does throw up a mention of it on a couple of solicitors' websites. It may be safer to seek professional advice on this.


It did seem to be mainly IT contractors moaning at the time. Well, from the "professional" side. That was the "pseudo-employee" angle, really. Yes, the employer did save on NI/pension/holiday pay/sick pay, but I can assure you it was in no way a money-saving exercise in general for the employer with contractor rates (in IT anyway) being what they were compared to the rates paid to permanent staff (even allowing for the estimate that it costs approx 2x salary to employ someone). However, the govt lost a small fortune from the contractors themselves. So hence one part of the rules focussed on what the contractor/pseudo-employee was doing in terms of varying their income sources. Note too that these people were rarely self-employed, and would usually go down the ltd co route to wealth and happiness (as Daniel said), and are still included under IR35 rules.

Meanwhile on the unscrupulous side, low-end employers twigged that they could save the NI/holiday/sick pay etc by making their "employees" be self employed. So some of the rules look at how the "employer" is behaving in terms of supervision, giving the "employee" work choices, etc.

Hence it is in theory possible for one individual to be caught under IR35 for one income source and not for another (as if they were both a part-time employee and freelancer). So even having more than one income source is no guarantee. And the rules don't talk in terms of professions, merely characteristics of the situation, none of which is individually a decisive criterion (e.g. you can't claim exception solely because you work from home, although it helps). I don't want to go overboard, I've never heard of a freelance translator getting done under IR35 but the theoretical possibility exists and it is as well to be up to speed with all relevent legislation, IMHO.



[Edited at 2011-12-06 12:45 GMT]


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Marijke Singer  Identity Verified
United Kingdom
Local time: 13:38
Dutch to English
+ ...
You can have your tax year run in line with the rest of Europe Dec 6, 2011

Hazel Underwood wrote:

Once you have registered self-employed you will have to complete a self-assessment once a year. The tax year runs from April to April. The deadline for submissions is end of September if you want the tax office to check the form, end of January otherwise and the payment deadline is end of January.

Hazel


That is from 1 January to 31 December (I do this because it makes it easier for me since most of my customers are in mainland Europe).

Good luck,
Marijke


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Jen Lawson
United Kingdom
Local time: 13:38
German to English
TOPIC STARTER
Wow - thanks for all the replies! Dec 7, 2011

Taking everything into account, would I be right in thinking that if I acquired another client or two by April 2012 I wouldn't have any more problems? That implies that I have to file my S/A for the 2011/2012 tax year (April to April) by September 2012, right?

I started working in October 2011 after finishing my MA, so have only really been on the market for 2 months. I wanted to see what the workload was like and what I myself am capable of delivering before branching out to other clients. I'm still massively busy, but the point about multiple clients is well noted!

Do translators generally employ accountants then? I have a few in the family, not sure I'd want them scrutinising my income though

Thanks again for your help.


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