These days few individuals have the option to trade in a self-employed capacity. There is a larger burden inherent in contracting self-employed workers as a result of S.44 Income Tax (Earnings and Pensions) Act 2003 (formerly s.134 ‘Income and Corporation Taxes Act 1988 (ICTA)). This legislation puts responsibility on the Recruitment Agency to decide whether the nature of the engagement is that of employment or self-employment, and therefore whether PAYE should be deducted from payments to the individual worker.
The Self Employed trading option reflects that;
- It shares many of the advantages of running your own Limited Company, albeit with reduced taxation and expense benefits
- Personal assets are not protected against liability (not limited liability) – a contractor could lose their house
- It is unlikely that agencies or end clients would be willing to allow you to trade this way because of the potential tax risks to them.