This limited liability means that the business owner can protect his/her personal assets against certain claims or losses relating to the business. However, running a business through a company structure results in additional administration and paperwork for the owner (for example, the owner has to meet the filing requirements of Companies House and prepare accounts).
The Office of Tax Simplification (OTS) published a discussion paper in July 2016 on the introduction of a new trading vehicle for sole traders referred to as the "sole enterprise with protected assets model" (SEPA).
Broadly, the SEPA model enables a sole trader to register under the SEPA rules and nominate his/her principal residence as an asset to be protected from trade creditors. There will be no change to the taxation of the business owner as he/she will remain a sole trader. The SEPA is not a new business entity.
This SEPA model would be a welcome alternative to company incorporation for sole traders as it would help to protect their assets from claims and losses relating to their business, but require less administration and paperwork than using a company structure.
The OTS was positive on SEPAs in its recently published final report on this matter, so we expect some movement towards introducing legislation on this in the next year or so.