Compliance checks for sole traders

What sole trader status actually requires

Registering as self-employed is the administrative step, not the test. Status is decided by how the work is really done: who controls it, whether the person may send a substitute, and whether either side is obliged to offer or accept more work.

A contract that says “self-employed” while the working reality says otherwise is decided on the reality.

Tax and filing duties

• Register with HMRC by 5 October following the tax year in which trading began.
• Keep records of income and expenses, and retain them for at least five years after the filing deadline.
• File a Self Assessment return each year and pay by 31 January, with payments on account where they apply.
• Register for VAT once turnover crosses the threshold — the test is rolling, not annual.

Invoicing that stands up

An invoice should carry a unique number, the date, what was supplied, the amount and the payment terms. Where VAT is charged, it needs the registration number and the rate applied.

The point is not formality. An invoice is the primary evidence that a service was supplied on commercial terms, which is exactly what a status enquiry asks about.

Where the risk sits

The common failure is not fraud but drift: a sole trader who has worked for one client for three years, to that client’s schedule, on that client’s equipment, is not obviously in business on their own account any more.