Register with HMRC. 
Within three months of starting trading, you must register with HMRC. You will be responsible for paying any tax liabilities and you will be liable for paying National Insurance Contributions (Class 2 and Class 4). We advise you seek professional advice from an accountant who can take note of your particular liabilities that are likely to be affected by other factors. For example, your work history, business structure, planned or actual turn over, any other income source etc. 

When you register you will need to provide the following information: address, NI number, date of birth, telephone number, email address, the nature of your business, start date of self-employment, business address, business telephone number, your Unique Tax Reference (UTR) (only if you have done self-assessment previously), the business UTR (unless it’s a new business) and also the same information for any business partners you may have. 

It is unlikely that your turnover will be sufficiently large for you to need to register for VAT if in doubt your accountant can advise. 

Keep financial records
You must keep up to date and accurate records of all your transactions- who pays you what, what you pay and for what. Some people prefer to do this in a physical book, others use spreadsheets, or your accountant may offer an online system so you can each keep track of the accounts on a day-by-day basis. An online system will allow you to see your balance sheet, cash flow and profit and loss you’re making. The important thing is to keep accurate information that will keep HMRC happy and will make things easier for you to run your business. 
 

There are advantages and disadvantages to any business structure and for this reason we suggest you speak to an accountant before deciding so you can make a fully informed decision. Within the EFL field you may consider being a Community Interest Company (CIC) or have aspirations to set up as a charity. A CIC is also a limited company that existed to benefit its community rather than private shareholders. 

Most of us start out as a sole trader or limited company when we first start out, if we consider the difference of the two structures in terms of liability, flexibility, registration paperwork and expense of business operation. 

• Liability
  • As a sole trader, you are liable for any claims against the company and for any debts of the company. You are the company. So, if your company owes £15,000 and only have £5,000 in the company bank account, you would be liable to pay the remaining £10,000 out of your own money. It is easy to see how some sole traders have become personally bankrupt if business debts grew too large. 
  • If you trade as a limited company, the company itself exists as a legal entity in its own right and any claims against it are limited to the resources of the company. You are not the company, but an officer of the company. If you company owes £15,000 but only has £5,000 in the company bank account, it could pay a third of the debt (although resources could be sold to contribute to paying the rest). However, you personally would not be liable to make up any difference from your personal financial resources. Trading as a Limited Company is a protection against personal bankruptcy, but it does carry additional costs.
• Flexibility
  • If you are a sole trader, you pay yourself a wage by taking drawing out of the company. If you trade as a limited company, the company can employ you and pay you a wage. However, if you set up a company, you will own shares in the company and you could elect to pay yourself a dividend for the shares that you own. Or you could pay yourself a combination of the two. Limited company directors have the potential to pay less tax, as they can pay themselves small salaries and high dividends which are free form National Insurance. However, sole traders pay themselves a salary that is liable to NIC as well as income tax. 
• Registration 
  • If you’re a sole trader, you simply have to register with HMRC and keep a good set of accounts. 
  • If you are a limited company, there is a lot of paperwork involved. You have to complete the company registration forms and submit them to Companies House. You have to name the director (s) of the company, and you must have a company secretary (someone who is officially responsible for the paperwork). In small companies, directors can also be company secretaries. Once registered your company name is protected; no other business can use it. 
  • There are more obligations on limited company directors than on sole traders. This is something to discuss with an accountant so you are clear as to making the best choice to suit your EFL business.
    • Limited companies have to hold one formal meeting a year (even if there is only one director) and submit minutes and their accounts to Companies House. These accounts are public and for a small fee anyone can access them. Most accountants would be willing to complete and submit the annual accounts and minute from the directors meeting. 
• Expense 
  • When you’re considering business set up, there is initially more expense involved in trading as a limited company than as a sole trader. You have to pay limited company set up fees and ongoing registration costs. An accountant will charge you more for preparing accounts for a limited company than for a sole trader, your professional liability insurance maybe higher as a limited company and if you have no other income, you may end up paying more in company corporation tax than if you had done income tax as a sole trader (this will depend on your personal financial circumstances).
  • Some practitioners feel that the higher costs are worth it for the limitation of liabilities and the greater flexibility on renumeration. It is also worth remembering that the National Insurance obligations on limited companies can be lower than on sole traders, and when turnover reaches a certain point (approx. £15-20k) if could be less expensive to trade as a limited company. 
• Seek advise
  • Clearly how you set up your EFL practise is not simple. There are plenty of websites explaining the difference between the two. Talking to an accountant will take on board your personal financial circumstance and help you work out what is best for you. Don’t worry about the decision being set in concrete as you can change between the two as your practise develops, if necessary. It is not uncommon for Practitioners to start as sole traders and then move to forming a limited company or CIC. 

We are often asked about insurance requirements of running an EFL Practise. There is not clear answer we can give as everyone is working in a slightly different way. We of course can recognise several risks involved in running an EFL Practice but the variant of how practitioners work; some work from home, other from a livery yard/riding school, some are employed or working out of a field, make it impossible for LEAP to provide a definitive answer. We have outlined below the different types of insurance available and advise you speak to an insurance specialist about your individual situation and business set up to get a bespoke quote for you. 

• Professional Liability Insurance

While there is no legal requirement for you to have professional liability insurance, there are two compelling reasons. Firstly, LEAP and other professional organisations, for example ACCPH require you to demonstrate that you have such insurance if you are to become or remain one of their members. Most credible supervisors would require you to have such insurance before agreeing to supervise your work. Most referring organisations would require you demonstrate that you have such insurance before offering you work. 

Secondly, the cost of not having might lead into bankruptcy or severe financial hardship. The cost of mounting a legal defence if sued, then paying financial compensation if you lost the case, could easily run into hundreds of thousands of pounds. While this rarely happens, there is a risk it might. Even if allegations of inadequate or harmful service are proved to be unfounded, defence costs are still likely to be significant. 

• Public Liability Insurance

Or third-party cover, this covers you against bodily injury to a third party or damage to a third parties property as a direct result of your negligence. The cover is normally offered with choices on the limit of indemnity usually £1/2 or 5 million. 

• Employers Liability Insurance

This provides cover for any bodily injury, sickness or disease sustained by your employees because of the business’s negligence. Employers’ liability is a requirement under the Employers Liability Act 1969 and should be in place for anyone working on your behalf whether full time, part time, voluntarily or in training. It is often a requirement to also take out public liability cover. 

• Custodial Liability Insurance

This provides cover against the death and/accidental injury to horses/ponies that are in your care, custody or control in respect to a claim that is made against you by the owner. This is typically liveries, but you may use other people’s horses as part of your EFL Practise. A benefit will be paid for veterinary fees and/or the current market value, up to the limit of indemnity in the event of an accident, disease or mortality of the horse. 

• Horse Insurance 

This provides cover for death, theft and straying, legal liability, vet fee cover, personal accident, saddlery and tack depending on your individual policy. Policies often cover your horse being used for leisure activities so you may need to advise your provider of a change of use and speak to an insurance specialist to understand the best cover for you.

All insurers require that you comply with current Health & Safety Guidelines as well as ensuring that you have appropriate risk assessments in place. While LEAP cannot provide any risk management advise, it may be useful to look as the following sites which can act as reference points and contain information on risk assessments along with good practice advice for general equestrian businesses:

https://www.hse.gov.uk

https://www.cieh.org/news/

For some Practitioners the idea of working from home is the last thing that want to do for others it may initially seem like a good idea and an easy option and certainly it seems less risk financially if you already have your horses at home. In some ways it is more convenient; you don’t have to travel and if a client fails to turn up you can simply carry on with your normal day, maybe even sneak some quality horse time in for yourself! 
 

Despite the initial attraction there are some important things to consider before making that choice.