Trading formats

When you decide to go into business on your own account, you have a choice of three trading formats:

In light of recent legislation brought into force by HM Revenue & Customs (HMRC) (see Agency Workers Regulations), the major interim providers and many clients now insist that interim managers work through a limited company.

Why do you need a limited company?

In order to protect themselves and their clients from legislation such as the Agency Workers Regulations, interim providers (agencies) insist that all candidates put forward for interim management assignments work through a limited company. Part of appearing professional when presenting yourself for interim assignments, therefore, is to have set up your own limited company. It implies a commitment to transacting business in accordance with standard practice, which will reassure both providers and clients.

Working through your own limited company also clearly establishes your employment status under HMRC regulations. As well as being the owner you are also the director and an employee of the company, leaving no grounds for HMRC to say that you are employed by either the interim provider or the client.

From the point of view of the interim providers and the clients you deal with, it will be clear that they are not expected to bear the cost or the legal burden of employing you. As your own employer, you are responsible for funding holiday pay, sick pay, pension contributions, medical insurance, etc. The clients and agencies also know that they can benefit from your services for a short period of time, and then let you go, without incurring termination or redundancy costs.

When you work through a limited company you are not working as a self-employed individual. You are an employee of your own company and you pay tax and National Insurance (NI)under PAYE (Pay as you Earn). As both the employer and the employee, you will have to fund both Employer’s NI and Employee’s NI out of your fee income, and this must be factored into your costs when setting your daily rate.

Working through a limited company also offers you the chance to control the image you project to the business world through your company name, business cards, headed paper, email, and possibly a website if you feel that’s appropriate.

Working as a sole trader, through an umbrella company or via a Limited Liability Partnership (LLP) is therefore no longer a viable option for interim managers.