Trading status, finances and taxation – the legal situation

Trading status

There are three main ways in which people trade:

• sole trader
• partnership
• limited company.

Sole trader

The positive aspect of this way of trading is that it is the simplest way in which to set yourself up in business, and it allows you to start trading just as soon as you want to. However, you should be aware that as a sole trader you are personally responsible for any money your business owes.

Partnership

There two main types of partnership. The first is where two or more people jointly run a business, and just like the sole trader situation, all partners are liable for any money that the business owes. The second form of partnership is the limited liability partnership, this is a common option amongst professionals such as doctors or consultants, who run a risk of incurring negligence claims.

Limited company

This is somewhat more complicated and can be expensive to set up. The positive aspect of this form of trading is that your liabilities are limited as the business assets are kept separate from your personal assets. You can get further information about setting up a limited company, as well as details regarding your rights and responsibilities as a company director, from Companies House (see Chapter 12 for contact details). You will need the help of a solicitor or an accountant in order to form your limited company.

Naming your company

There are certain rules and regulations regarding naming a company. Companies House can advise on the legal requirements, for contact details see Chapter 12. Before you name your company you must be sure that no one else in the same line of business is using that name.

Registering as self-employed

To register as self-employed, phone the Inland Revenue with details of the date you started self-employment – and remember to have your NI number handy. You will then be sent an Inland Revenue starter pack, which will outline your obligations and responsibilities as far as taxation is concerned. You will also be sent a form to complete in respect of your future NI contributions. For further information, see Chapter 12.

Taxation and self-assessment

Even if you have never completed one before, you will now be responsible for completing a self-assessment tax form each year. The Inland Revenue will need to receive these forms by 30 September each year if you want them to do the tax calculations for you. If however you are calculating your own tax or using an accountant, you will have until 31 January to complete your return and send it to the Inland Revenue. Failure to comply with the 31 January cut-off date will result in an automatic penalty of £100 plus interest charged on any amounts which you owe the IR. So you need to make sure that you highlight this date in your diary. And remember that you can now complete your self-assessment tax return online (see Chapter 12 for the Inland Revenue contact details).

The Inland Revenue has a helpline for small businesses, and it is worth giving them a call with any enquiries you might have, for example, what the potential tax offsets are for certain aspects of your business such as professional training or particular pieces of equipment.

National Insurance contributions

Contrary to popular belief, these do not form part of your business expenses. Therefore you should arrange to have these paid from your personal bank account. If you weren’t sent an NI contributions form with your pack of information from the Inland Revenue, you can get one by contacting the Inland Revenue direct. See Chapter 12 for contact details.

Membership of professional organisations

Whilst there are usually no legal obligations to join any professional associations, if you are a member of a professional organisation related to your therapeutic work this can help you to increase your standing in the public eye and therefore is very much a professionalrequirement. There are a number of benefits to be gained from membership:

• you will be listed on their directory for referrals
• your details may be listed on their website with a link to your own website
• you may be able to get cheaper insurance cover
• you may have your details featured in the organisations’ block adverts, eg in Yellow Pages
• your clients will know the code of conduct you are operating under
• your clients will also know of any disciplinary process the organisation has effected
• you may benefit from receiving a regular newsletter on related topics
• some organisations have egroups and/or advice lines which may be of benefit
• you have a potential market for any articles, pamphlets or books you may write
• you could make approaches to the organisation regarding supervising students
• you could also offer your services as a trainer/lecturer or examiner.

Give some careful thought to which organisations you join. It is usual to be a member of more than one association – though I wouldn’t suggest joining more than three. Check out what the benefits of joining a particular organisation will be – what are you getting for your money? It may be that in order to practise your particular therapy you have to be a member of a certain organisation – especially if you require a local authority licence or permission to practisae. Your training school will be able to advise you on this.

Complying with membership requirements

Any professional organisation will have its own rules governing membership. These can include complying with:

• the need to be adequately insured
• the need to complete a set number of hours of continued professional development each year
• the need to comply with the organisation’s Code of Conduct
• the organisation’s complaints procedure

NHS provider numbers

You may get patients referred to you by their GP. If the patient’s sessions with you are to be paid for out of NHS funds, you will need to be able to supply your NHS provider number in order to get paid. Acquiring a provider number does not confer any endorsement of your practice, or your treatments, by the NHS – you cannot term your practice as ‘NHS registered’. If you would like to request an NHS provider number for your practice, see Chapter 12 for contact details.

BUPA registration

BUPA have now limited their registration scheme and it is less likely that you will be able to work as a complementary therapist within the BUPA scheme as registration is required before any referrals will be made to you. For further details and to check out whether your complementary therapy can be registered, see Chapter 12.