How to identify a sole trader 043-03110010

A customer's involvement in a sole trader business will usually be identified at the new claim stage. This will be triggered by the customer's listing of previous/current employment details. Where a customer indicates that they were or are receiving income from self-employment, the Business Details (MOD F) must be issued.

If a customer is self-employed or operating a business as a sole trader they will answer question 7 of the MOD F to indicate this.

The features of a sole trader include the following:

• The business is not a separate legal entity from the owner
• It can be run under the owner's own name or under a registered business, for example J Bloggs (trading as) 'Brite-Up Cleaning Service'
• The owner is liable for all the debts of the business
• The owner is entitled to all the profits of the business
• One person is the business owner. The term sole trader does not refer to how many people work in the business, as a sole trader business can have employees
• The business is not a separate accounting entity (that is, the business does not lodge its own tax return)
• The business is not taxed as a separate accounting entity (that is, sole traders need only lodge an individual Form I personal tax return)

Other ways to identify a sole trader include that:

• a tax return for individuals is the only tax return completed as the income and expenses of a sole trader business are included in the individual's tax return
• net income or loss from business question is completed in the customer's tax return