Operating as a Sole Trader

If you are registered as a sole trader and you find work through a recruitment agency, they won’t be able to deal with you in your capacity as a self-employed person under Section 134 of the Income & Corporation Taxes Act 1988.

Typically as a sole trader, you are expected to have multiple clients and a number of different sources of income. This would meet HMRC’s definition of self-employed.

Working through a recruitment agency, you are placed with one client and receive a single income which, if investigated, would be a very strong pointer towards being ‘employed’.

If an individual is investigated by HMRC and they haven’t paid the correct taxes, the agency could be forced into an employment arrangement and become liable for the deficit.

To protect themselves from this possibility, the agencies will insist that you are contracted through the services of an Umbrella Company or trading through your own Limited Company. The contracts are drawn up between the agency and company, rather than the individual, which removes the risk of being held accountable as the employer.

You may be given the option to be paid directly by the agency and they deduct the necessary tax and NI contributions from your income. However this will inevitably reduce the rate you are offered because the company takes on the obligations and responsibilities of the employer.

You may still be able to deal with some clients direct as a sole trader, but the majority are signed up with recruitment agencies to save the hassle of filling the position(s) themselves. You therefore may limit yourself to the number of contracts available to you unless you make alternative arrangements.

ContractorUmbrella takes on the employment responsibilities and allows you to take advantage of the higher contractor rates on offer, saving you the hassle of setting up and running your own limited company.

Our Commitment Charter guarantees the very highest levels of service for employees and clients and ensure that you will never be kept waiting for an answer.

If you have any questions or would like to make a general enquiry, please do not hesitate to contact a member of our team on 01206 713680 or email us at info@contractorumbrella.com.

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Our Choosing an Umbrella Company page covers the misleading claims and promises advertised by some companies.