Casual Work/Self Employment/Employed, and Tax
Discussion
My wife works part time in a Nursery. Until recently she was well below income tax levels, so no tax was deducted. She now has some income from another source, which takes her above the income tax threashold (including last tax year)
We've informed HMRC so that she can do a self assessment, but they asked her if she is employed or self employed. If employed they've asked her for her P60 from last year, and her payrole number etc.
The nursery is legitimate (Ofstead checked etc) but my wife has no contract, or fixed hours etc. Hours are offered, and she is able to accept the hours or not. She certainly hasn't recieved a P60. We've just kept records of everything she's recieved so that we know what her likely tax position is.
Does an employer have to give you a P60, or is that just a simple statement of income and tax paid? Is she even an employee?
We're completely happy to sort the tax situation ourselves through self assessment, but we don't want to drop the nursery (or any of the other employee's) in it, if they should have been doing something as an employer.
Where do we stand, and what are our options?
PS the wife is asking her boss today how they view her employment?
We've informed HMRC so that she can do a self assessment, but they asked her if she is employed or self employed. If employed they've asked her for her P60 from last year, and her payrole number etc.
The nursery is legitimate (Ofstead checked etc) but my wife has no contract, or fixed hours etc. Hours are offered, and she is able to accept the hours or not. She certainly hasn't recieved a P60. We've just kept records of everything she's recieved so that we know what her likely tax position is.
Does an employer have to give you a P60, or is that just a simple statement of income and tax paid? Is she even an employee?
We're completely happy to sort the tax situation ourselves through self assessment, but we don't want to drop the nursery (or any of the other employee's) in it, if they should have been doing something as an employer.
Where do we stand, and what are our options?
PS the wife is asking her boss today how they view her employment?
Edited by 98elise on Thursday 18th October 12:36
She definitely needs to stablish her employment/self-employment status with the nursery.
The default assumption with a nursery would be that she was an employee and she therefore should be under the PAYE system. I am sure she is treated as an employee in the normal day to day way in which she is used in the nursery.
Even if she is being paid under the tax threshold by the nursery, the nursery should still include her in the normal salary calculations they carry out for their staff. She should get a payslip every week or month and a P60 at the end of the tax year. She should also get a P45 if and when she leaves.
The nursery are more or less assuming that they can use her personal tax allowances to offset against what they pay her and therefore they do not need to deduct any tax from what they pay her.
Irrespective of what the nursery is doing, I would suggest that she completes her self assessment tax return and includes her income from the nursery as "Employment Income".
Her self employment income from her trading activity she shows in the "Self Employment" pages of the return.
By doing that, she is declaring her income properly to HMRC. I would not be too concerned about landing the nursery in trouble with HMRC. They are legally obliged to handle tax on their staff correctly - and if they are not doing so, that is their problem.
The default assumption with a nursery would be that she was an employee and she therefore should be under the PAYE system. I am sure she is treated as an employee in the normal day to day way in which she is used in the nursery.
Even if she is being paid under the tax threshold by the nursery, the nursery should still include her in the normal salary calculations they carry out for their staff. She should get a payslip every week or month and a P60 at the end of the tax year. She should also get a P45 if and when she leaves.
The nursery are more or less assuming that they can use her personal tax allowances to offset against what they pay her and therefore they do not need to deduct any tax from what they pay her.
Irrespective of what the nursery is doing, I would suggest that she completes her self assessment tax return and includes her income from the nursery as "Employment Income".
Her self employment income from her trading activity she shows in the "Self Employment" pages of the return.
By doing that, she is declaring her income properly to HMRC. I would not be too concerned about landing the nursery in trouble with HMRC. They are legally obliged to handle tax on their staff correctly - and if they are not doing so, that is their problem.
Eric Mc said:
She definitely needs to stablish her employment/self-employment status with the nursery.
The default assumption with a nursery would be that she was an employee and she therefore should be under the PAYE system. I am sure she is treated as an employee in the normal day to day way in which she is used in the nursery.
Even if she is being paid under the tax threshold by the nursery, the nursery should still include her in the normal salary calculations they carry out for their staff. She should get a payslip every week or month and a P60 at the end of the tax year. She should also get a P45 if and when she leaves.
The nursery are more or less assuming that they can use her personal tax allowances to offset against what they pay her and therefore they do not need to deduct any tax from what they pay her.
Irrespective of what the nursery is doing, I would suggest that she completes her self assessment tax return and includes her income from the nursery as "Employment Income".
Her self employment income from her trading activity she shows in the "Self Employment" pages of the return.
By doing that, she is declaring her income properly to HMRC. I would not be too concerned about landing the nursery in trouble with HMRC. They are legally obliged to handle tax on their staff correctly - and if they are not doing so, that is their problem.
Thats what I thought, the problem being that we don't want to be the ones dropping them in it if they are not doing things correctly. I suspect my wife would be out of a job fairly rapidly, none of them work fixed hours so her sessions could easily "dry up".The default assumption with a nursery would be that she was an employee and she therefore should be under the PAYE system. I am sure she is treated as an employee in the normal day to day way in which she is used in the nursery.
Even if she is being paid under the tax threshold by the nursery, the nursery should still include her in the normal salary calculations they carry out for their staff. She should get a payslip every week or month and a P60 at the end of the tax year. She should also get a P45 if and when she leaves.
The nursery are more or less assuming that they can use her personal tax allowances to offset against what they pay her and therefore they do not need to deduct any tax from what they pay her.
Irrespective of what the nursery is doing, I would suggest that she completes her self assessment tax return and includes her income from the nursery as "Employment Income".
Her self employment income from her trading activity she shows in the "Self Employment" pages of the return.
By doing that, she is declaring her income properly to HMRC. I would not be too concerned about landing the nursery in trouble with HMRC. They are legally obliged to handle tax on their staff correctly - and if they are not doing so, that is their problem.
All we want to do is make sure she pays correctly, due to the second source of income.
Sounds like we won't have that choice though
sumo69 said:
Have to concur with this.
One thing for you to consider as an aside - does your wife get paid holiday? The employer must give this to all employees.
David
Until recently no holiday pay, just paid for the hours done. This was due to the way she got the job.One thing for you to consider as an aside - does your wife get paid holiday? The employer must give this to all employees.
David
She started there on placement (un-paid) for her NVQ, but they would occasional ask her to cover days off or sick cover (paid by the hour). After she finished her NVQ they started using her more frequently, but only when the regular team were short. After a while she was just part of the team, and was offered sessions on equal terms as everyone else (but still part time).
Around then they offered to reduce her hourly rate (to around minimum wage) but she would receive pay during the school holiday periods (based on their hours worked in the previous term).
I’m not sure at what point she would be classed as an employee, there was no job on offer, and no interview. She just gradually morphed from being an unpaid NVQ student, to being one of the team over the course of about a year. Even now she’s not on fixed sessions, it varies based on the size of the team, the individuals availability, and the number of kids attending (varies daily).
At what point would a person become an employee, and be entitled to holiday pay etc? 1 hour per week, 20 hours per week, fixed working hours etc?
Once they started paying her a wage, she was an employee - albeit a part time/casual employee.
The PAYE system deals with employees like this so an employer should include such staff as part of the normal wages and payroll processing - even if there is no need to actually deduct PAYE or NI from the wages she is being paid.
Although it is expected that employees be asked to sign an employment contract - the absence of a formal emplyment contract does NOT mean she was not an employee.
The PAYE system deals with employees like this so an employer should include such staff as part of the normal wages and payroll processing - even if there is no need to actually deduct PAYE or NI from the wages she is being paid.
Although it is expected that employees be asked to sign an employment contract - the absence of a formal emplyment contract does NOT mean she was not an employee.
db10 said:
there are a number of factors which HMRC use to determine whether someone is an employee or not eg:
1. Do they get holiday pay
2. do they work for anyone else
3. do they do the same hours every week
4. are they able to substitute someone else into the role
etc etc
They are pointers. In themselves they don't mean an awful lot.1. Do they get holiday pay
2. do they work for anyone else
3. do they do the same hours every week
4. are they able to substitute someone else into the role
etc etc
The real test is the nature of the relationship between the individual and the organisation they are working for.
98elise said:
My wife works part time in a Nursery. Until recently she was well below income tax levels, so no tax was deducted. She now has some income from another source, which takes her above the income tax threashold (including last tax year)
We've informed HMRC so that she can do a self assessment, but they asked her if she is employed or self employed. If employed they've asked her for her P60 from last year, and her payrole number etc.
The nursery is legitimate (Ofstead checked etc) but my wife has no contract, or fixed hours etc. Hours are offered, and she is able to accept the hours or not. She certainly hasn't recieved a P60. We've just kept records of everything she's recieved so that we know what her likely tax position is.
Does an employer have to give you a P60, or is that just a simple statement of income and tax paid? Is she even an employee?
We're completely happy to sort the tax situation ourselves through self assessment, but we don't want to drop the nursery (or any of the other employee's) in it, if they should have been doing something as an employer.
Where do we stand, and what are our options?
PS the wife is asking her boss today how they view her employment?
There are several tests used to establish whether someone is an employee or self employed. They're not mutually exclusive, but in short they will look at whether or not the employee is told what to do and how to do it (however this may not apply if you are a specialist in your field), is your role part and parcel of the organisation or is it a peripheral role, i.e. is your role integrated within the organisation? If so it is more likely that you are an employee.We've informed HMRC so that she can do a self assessment, but they asked her if she is employed or self employed. If employed they've asked her for her P60 from last year, and her payrole number etc.
The nursery is legitimate (Ofstead checked etc) but my wife has no contract, or fixed hours etc. Hours are offered, and she is able to accept the hours or not. She certainly hasn't recieved a P60. We've just kept records of everything she's recieved so that we know what her likely tax position is.
Does an employer have to give you a P60, or is that just a simple statement of income and tax paid? Is she even an employee?
We're completely happy to sort the tax situation ourselves through self assessment, but we don't want to drop the nursery (or any of the other employee's) in it, if they should have been doing something as an employer.
Where do we stand, and what are our options?
PS the wife is asking her boss today how they view her employment?
Edited by 98elise on Thursday 18th October 12:36
The most relevant test looks at a number of factors:
How you are paid - salary = likely you are employed, invoice for work done = likely you are self employed
Who provides equipment - work = likely you are employed, worker = likely you are self employed
What are the work routines - e.g. 9 -5, Monday - Friday in same place = likely you are employed, project that you can decide where and when to complete = likely you are self employed
Mutuality of obligation - if you are assigned a task do you have to do it = yes, normally employed, if it can be passed onto someone else = normally self employed
What happens if you are absent - if you can allocate someone else to complete the work on your behalf = normally self employed, if the organisation allocates someone else to fill in or doesn't do anything = normally employed
Also things like uniform, headed paper, insurance, who takes on the risk if something goes wrong.
In your wife's case, being able to choose her own hours would lean towards being self employed, however note that an employment contract doesn't need to be in writing - you must receive a written statement of terms, but not an actual 'contract', this can be made verbally and it is not necessary to have the contract in writing, so if she doesn't have a paper contract this isn't necessarily a problem, what she would need to have as an employee is the terms in writing.
I would be looking at how she started this job, how did it come about and how did she accept? That may give a better indication of her status and shed light on her taxation treatment.
Edited by Lauryn on Monday 22 October 22:40
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