There are various questions rising around Freelancer Limited Company’s. Would it work in practice? Who could and would actually use it? Are there any advantages over previous set-ups? Does Great Britain actually need it? And for those who haven’t yet come across this term, what exactly is an FLC?
It may have only started as an idea at the Labour Party conference, but it has picked up support from contractors nationwide, been formed as a proposal by the ‘Association of Independent Professionals and the Self Employed’ (IPSE) and now takes up large amounts of article space in the national papers. Many industry experts and large numbers of freelancers and contractors all agree that the UK is in need of some new form of limited liability company for an individual, self-employed, trader.
The Reasoning
Lets not get ahead of ourselves here, there is currently a general election looming on the horizon where no party has a secure foothold. The voting usually divided between the three main parties is now spread over many others, such as UKIP and the SNP, meaning there is no straight fight anymore for party votes. Therefore, politicians and their minions will have to reach out to beyond their fundamental supporters with a large number of people and influential voters currently working as self-employed individuals.
The issues where freelancers more than often feel ignored may now be addressed. In recent history, the focus has always been on fake employment and tax avoidance with many industry workers feeling the gap between those exploiting the system and those being exploited by the system is narrowing, with genuinely hard working freelancers and contractors being squeezed in the middle, commonly forgotten about. Furthermore, when they are noticed it results in heavy taxation and poor outcomes for all parties involved. The finest example of this is the IR35 legislation, showing that the government and HMRC have absolutely no understanding around the working of the freelancer market.
Freelancer Limited Company
An FLC is a Freelancer Limited Company. Judged as the solution to ‘untangle the Godian knot’, or sort out the issues from IR35. The FLC would work as a single shareholder structure controlled by the main income producer who doesn’t need to work with multiple or simultaneous clients, also with no need for any precise substitutes in the contracts.
If this plan were to go ahead, there would be a freelancing register that any Freelancer Limited Company would be enforced to join by law. In order to register, the freelancer would need to set themselves up as the FLC’s sole operator while agreeing a fair split dividend-wage amount (no spouses).
For doing this, a registered Freelancer Limited Company may be excluded from various aspects and the extreme costs of the IR35 legislation. Further advantages of a Freelancer Limited Company could include limited liability status, abridged accounting and the aspect of registering for benefits if between contracts.
There are some complications, such as ensuring that lower-paid freelancers and part-time or vulnerable contractors are not enforced into setting up a Freelancer Limited Company if it is against their financial benefit.
For more information on Contractor Accountants or Limited Company V Umbrella visit the Euro Accountancy & Finance Services website.
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