Sole traders in the construction industry
A sole trader is an individual who establishes their own business in which responsibility for the running and operation of the business is theirs alone. The individual may employ others but they remain the sole owner of the business.
This is generally considered to be the simplest way of running a business, with relatively simple accounting processes. However, the individual is personally liable for any debts which may accrue and, for businesses that require a lot of investment, it can prove a risky venture.
Sole traders may have to register for the Construction Industry Scheme (CIS) if they are working in the construction industry as a subcontractor or contractor. The CIS sets out a series of rules for how contractors should make payments to sub-contractors.
Sole traders will need to keep records of the business’s sales and expenses; send an annual Self Assessment tax return; pay income tax on any profits; and acquire Class 2 and Class 4 National Insurance. They may also need to register to pay any VAT.
There are two forms of sole trader:
- Sole proprietor.
- Sole practitioner.
A sole proprietor is usually a trader selling physical products to customers. A sole practitioner is usually a professionally-qualified person selling services to clients.
For example, architects can practice as sole traders, either with employed staff or entirely alone. Many architects choose this form of practice, attracted by the freedom of conducting their own business, on their own account. This is considered by some to be one of the hardest forms of practice, as they can feel isolated from fellow professionals.
Advantages:
- Autonomy at work.
- There are few formalities to setting up and operating as a sole trader. This can keep costs down and increase profits.
- The sole trader can make immediate decisions, as there is no need to consult with other parties.
- The business belongs to one individual thus all profits belong to that person.
Disadvantages:
- High risk.
- Difficult to keep up with changes in practice.
- If the business fails, all debts would have to be met by the trader's personal assets.
- As a small business, sources of finance may be difficult to obtain compared with larger businesses.
[edit] Find out more
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
Apprenticeship announcement by the Prime Minister
Welcomed but with call for more actionable detail.
Heat pump announcements, what homeowners need to know
An 'ultimate guide to heat pumps' from a heating company.
Construction contract awards reach £7.1bn in February
Their highest level in seven months.
The journey to sustainability in heritage
Research is the key to better understanding.
Heritage approaches to adaptation, mitigation and loss.
Bridging the gap between policy, finance and installation.
Development on brownfield land
Definition, background, policy and the latest consultation.
With the Design Framework for Building Services.
Retrofit of Buildings, a CIOB Technical Publication
Pertinent technical issues, measures and the roles involved.
ECA joins HSE campaign to support mental health
Working Minds’ five simple steps based on risk assessment.
Mental health in the construction industry
Mental health issues in brief with related articles.
Transitional arrangements, Building Control and the BSR.
For pre-October buildings with substantial progress by April.
Why quality counts in domestic ventilation systems
From products, to systems to the installation.
Empowering the Future with CIOB Academy
Lifelong learning, upscaling, and reskilling for the built environment.