Responsibilities of a Sole Trader

A survey by the British Chamber of Commerce as of 2013 revealed that more than 3.6 million business owners are sole traders in the U.K. These sole traders are single individuals who own and control their businesses, analogous to sole proprietors in the U.S. This in turn means that the business owner is personally liable to pay any debts incurred by the business. In legal terms, the sole trader and the business are one entity.

Personal Responsibility

Sole traders take a financial risk during startup just like other businesses. They come up with individual capital contributions for the business. Sole traders have to find the extra funds required in cases where the business needs extra income. The owner is legally bound to pay the creditors at the end of a fiscal year even if the business has not generated sufficient income to cover its debts. Similarly, the sole trader is answerable to the court in case the business faces criminal charges. The trader will serve whatever sentence the court passes.

Tax Returns

The sole trader is required by law to register the business and make income tax contributions as a key responsibility. The sole trader has to submit self-assessment tax returns annually. The law expects the sole trader to fill in and submit the personal tax returns honestly and in a timely fashion. Failure to comply with these regulations may result in hefty punitive penalties or even imprisonment. The sole trader has the obligation of paying the National Insurance Contributions after three months of operation. These are regular monthly payments to the tax authorities that warrant certain benefits such as the maternity payment.

Value-Added Tax

Sole traders should register their businesses for VAT once they begin taking in more than £79,000 in one fiscal year. The tax authorities encourage small-scale sole traders to register for tax voluntarily by coming up with VAT systems that benefit small-scale businesses. Sole traders should register for VAT to prevent heavy penalties that result from undeclared income and late registrations.

Business Operations

Another responsibility of the sole trader is to adhere to the stipulated rules and regulations of business practice. Sole traders have a duty to inform and register the business premise with the local authority to get proper documentation and licenses. Sole traders with employees are responsible for taxing and remitting the employees’ income. They also have to ensure suitable working conditions and that the employees receive proper treatment and wages.