Sole trader with unpaid assistants

[seven_segment]

Hi. As I've mentioned a couple of times on the Accounts & Finance forum, over the past year or so I've helped by providing sound and lighting for a number of charity/non-profit events, along with a couple of friends who've assisted me.

Everything I've done so far has been unpaid, but as I have all the equipment, I've recently decided to set up as a sole trader and start trying to take on some paid events. I've registered for SA as a Sole Trader and have set up a business bank account.

Currently, I own all of the equipment and have been solely responsible for arranging the unpaid work thus far. Going forward, I want my friends to become more closely involved with finding paid work for the business and physically setting up and running equipment during events. The intention is that the business will invest all profits in the first couple of years to buy more/better equipment to enable us to take on bigger events. Therefore, the two friends will receive absolutely no payment beyond legitimate expenses.

If the business is successful, the intention is to turn it into a Limited Co. with myself and my friends as directors. In the meantime, I'm concerned that registering as a sole trader and not a partnership may have been a mistake. I'm worried that HMRC may consider my friends to be workers or employees rather than volunteers, which would mean paying them the minimum wage and me needing to have an Employer's Liability Insurance policy. These two points from the definition of a worker from Gov UK seem relevant:

- They have a contract or other arrangement to do work or services personally for a reward (your contract doesn’t have to be written).
- Their reward is for money or a benefit in kind, for example the promise of a contract or future work

I'd argue that there's no contract (they aren't obliged to do anything that I ask of them), but if a verbal agreement is still considered a contract then I wouldn't be able to prove that such a thing didn't exist. I'm more concerned about the second point, could the promise of forming a Ltd Co. together in the future be considered a benefit in kind?

Setting up a partnership would remove any ambiguity as we'd all be self employed, therefore definitely not employees and also no concerns over Employer's Liability. However, this would mean an additional tax return for the partnership plus SA returns and class 2 NICs for my two friends, which they would prefer to avoid.

What are people's thoughts on this one? Could my two friends be considered workers or would they be quite safe being considered unpaid volunteers?

 

[Gecko001]

As a sole trader you can certainly employ people. However you will be an employer and must, by law, pay the minimum wage. You must also have employer's insurance by law.

 

[Newchodge]

are you a registered charity? If not, then you cannot usually take on volunteers without payimg them.

 

[estwig]

Let's look for red tape to comply with and make a meal of things.

You draw a wage, you take money from the company, give half, or some of it to your friends for helping out. In time if the business works out, then put things on a more formal footing.

 

[The Byre]

Let's look for red tape to comply with and make a meal of things.

My thoughts exactly!

If you really want to do the fair thing by your 'helpers' make them partners or just pay them.

I used to run a PA and lighting company (1980-1992). We had six vans/trucks going out and each operator was paid by the gig. We went through an agency and each rig did between three and five gigs a week.

In today's world, I would definitely get a virtual desk, such as the Soundcraft Ui24R or the A&H equivalent Qu-Pac series and keep everything as lightweight and portable as possible. DMX and LED technology and line-arrays has made it possible to do away with centralised 'flight-control' and cumbersome giant builds and you can today keep everything really portable. You can complete, recall and adjust huge mixes and lighting set-ups on a tablet, as you walk through the audience.

 

[seven_segment]

Thanks for all your helpful replies. I think maybe I didn't make the situation entirely clear. The two friends that are involved would prefer the situation to remain as-is, they don't want the hassle of doing a SA tax return nor paying class 2 NICs, and any profit the business makes in the first year or two will be re-invested in assets. We all have full time jobs as well. Please don't be under the impression that I'm taking them for granted, because that isn't the case.

are you a registered charity? If not, then you cannot usually take on volunteers without payimg them.

I'm definitely not a registered charity, although we have been doing charity/non-profit work to gain some experience and make contacts. You've hit the nail on the head though, this is an unusual situation, and the government's guidance isn't clear as to whether meeting only one or two of the criteria is enough to make them a worker/employee, or if they should meet most/all of them. I suspect this is intentional though.

Let's look for red tape to comply with and make a meal of things.

Yes, you're probably right. I'm a dot the I's and cross the T's kind of guy. I should probably check that my PLI policy covers work done by volunteers and then move on.

In today's world, I would definitely get a virtual desk, such as the Soundcraft Ui24R or the A&H equivalent Qu-Pac series and keep everything as lightweight and portable as possible. DMX and LED technology and line-arrays has made it possible to do away with centralised 'flight-control' and cumbersome giant builds and you can today keep everything really portable. You can complete, recall and adjust huge mixes and lighting set-ups on a tablet, as you walk through the audience.

I have a Ui16 but honestly I'm just not a fan of virtual desks. I've only used it a couple of times for small events and I can see the attraction - in 4RU you've got what would have taken a full size analogue console and a whole rack of outboard maybe ten years ago. For me though, I prefer the tactile feel of a real fader and when I'm on a touchscreen I'm constantly worried at how easy it would be to accidentally nudge the master fader right to the top. It's especially troublesome outdoors when you're struggling to see the screen in direct sunlight. I also have an X32 and much prefer that, but only when there's time to set up a proper mix position.

Can't speak much for LEDs as we haven't made that leap yet - there's just too much cheap discharge lighting on the second hand market at the moment. It looks more or less the same to Joe Public and until I hit an issue with transport or power, there are other things that money could buy.

 

[The Byre]

The one thing I had to learn the hard way in my days 'on the road' was that time and space are money. That and BS beats brains!

In other words, you must be a slick, fast and modern operation. To that end, I must state the following -

1. The magic of getting that perfect mix in rehearsal and then being able to punch up that setting for the gig and the time you save, as well as the far, far superior sound and overall service you provide will sell your service.

2. You can't charge money for putting in equipment with the word 'Behringer' on it. In fact, I've seen some bands and artists put a list of stuff they do not want to see in their rider - and Behringer comes pretty much top of that list. I know the X32 is quite a good piece of kit, but the name tag is bad for business. BS beats brains - remember!

3. The early Ui16 was a bit of a basket case and had noisy pre-amps, as a result of digital interference in the analogue wiring.

4. I have an acquaintance who runs 100% virtual, but without a separate box. He just runs the whole thing through Reaper and gets about 10ms latency, which is the time delay he needs anyway, as the front line is 10 feet from the front of house. Considering Reaper costs peanuts, that's a pretty good idea! I also have a good friend who is now musical director for an A-list act and they run everything through Reaper and also use it for studio work.

5. People hear with their eyes - lighting is important. And modern LED lighting lives in a different world to the old red-hot PAR cans. Companies like ADJ and others provide cheap and effective DMX control and you do not need the massive fans and all the noise they create in things like scanners. Because the lighting using LEDs is far, far lighter and uses ONE-TENTH of the power, everything works out cheaper and can be set up far faster. Old ten volt controlled lighting rigs and dimmer packs are still used for film work for artistic, as well as technical reasons, but on the road, only a fool lumps old heavy, manky halogen lights and has to run a separate power line to each and every bulb! Remember that an old PAR can had to be one colour: an LED can can change colour - so you need far fewer lights for the same effect and DMX allows you to recall any complex set up with one button-push! One LED can replaces four PAR cans!

6. Most work does not come from bands and musical acts, but from things like hip-hop and house DJs, fashion shows, military parades, sporting events - in other words, anything and everything that requires sound and lighting!

7. A standard small lighting rig in the Stone Age required a three-phase 90 amp supply. I today's world, the customer will expect you to get the same results with a standard single-phase 20 amp supply! If you rock-up with truck load of old halogen lights, you may discover that you will not be able to do the job.

8. All the above applies to sound as well - so no more bulky old speakers piled high. Small, light-weight line arrays and of course they have to be flown. Speaker technology in the past 20 years has transformed the PA business completely!