Career clinic: Should I become a limited company?

Q: I am about to leave my local authority social work post to become an independent social worker and plan to find work via agencies. I have been told my best bet is to become a limited company. Is that right, and how do I go about doing that? What else do I need to do?

A: The idea of working as an independent social worker (ISW) is gaining popularity in the profession. Job satisfaction, greater flexibility, freedom from bureaucracy and bigger earning potential are among the most often quoted.

There are essentially two types of social work agency that might appeal to an independent social worker. The first tends to focus on providing locum posts, usually to local authorities, but they may also offer discreet independent social work opportunities as part of their remit. The second type focuses much more on providing ISW services when specific pieces of work are required, such as an assessment of parents in care proceedings or a specialist risk assessment for a local authority. These agencies tend to provide a wider range of work for an ISW than the more recruitment-focused firms.

Typically an independent social worker will need to register with Revenue and Customs (HMRC) as a self-employed individual or alternatively they may choose to establish themselves as a limited company. A limited company is a separate legal entity, distinct from its shareholders and directors and easy to set up. The cheapest way to do this is to apply directly to Companies House. You will need to provide a “memorandum of association” which sets out the company name and what it will do. You will also need to provide “articles of association” which establish the rules for the running of the company’s internal affairs.

One note of caution. If you intend to take all your work through an agency you may fall foul of IR35 legislation, which will apply if the individual is working for a client under circumstances that, if it were not for the imposition of a limited company, would be deemed as an employee or, as HMRC sometimes term it, “a hidden employee”. Most reputable social work agencies or providers will be in a position to guide you on this issue and most recruit both self-employed and limited company ISWs.

Individuals’ tax affairs can be quite diverse and there may not be significant advantages to trading as a limited company. Although you may pay less tax (dependent upon profit) you are likely to have higher accountancy bills and face more regulation.

Mark Willis is director of WillisPalmer, a national network of independent social workers, psychologists and therapists for children and families. For more information visit www.willispalmer.com

Next question:

“I am a manager of a children and families referral unit in a local authority which has seen a sharp rise in referrals in the last six months. Staff have been struggling to cope with an increase in caseloads and we have experienced high levels of sickness absence. We have been provided with some agency cover but it is not enough, and the remaining staff are left working round the clock to meet deadlines. What can I do to stabilise the situation?”

We want to publish your advice, and any career dilemmas you might have. Please send to daniel.lombard@rbi.co.uk

This article is published in the 15 October 2009 edition of Community Care magazine under the headline As an independent social worker, should I become a limited company?