Your live trace should be fine if you expand it and delete the white filled areas, then fill the rest with a spot color that you name Varnish or something useful. It needs to be set to overprint, and should be on a separate layer above the rest of the file in ID.
Thank you.. I know how to do the live trace but how to do I get rid of the white background in illustrator properly? I can't figure that part out?
It depends a little on your version of Illy what Live trace tereminology is used, but once the tracing is complete select it and go back to the menu where you have the tracing options and you should see an "Expand" item at the bottom of the list (or you may be able to trace and expand in one operation).
The expanded tracing is a group, so grab the deirect select tool (white arrow) and click on a white space. Select > Same Fill Color and delete.
Related to second issue:
1- Create a path in photosho
2- Place image into indesign, copy and paste into place then with image stile selected to Object menu>Clipping Path>Options, on the Type select Photoshop Path
3- With the image still select mouse right click select Convert Clipping Path to Frame
then select the content of the frame and deleted
4- Fill the frame with the spot Color and check Overprint Fill on Attributes panel
here when separtation UV plate
Last export your file to PDF/X-4