niggling worry
Discussion
One of my self employed out-workers came in to collect some work today. He has 4 jobs, 2 or 3 of which are PAYE. Last year one of his jobs, for which he had been 'self-employed' was forced to take all their people onto the PAYE books by the tax man who considered they were 'employees' (which they were as most didn't work elsewhere, he provided them with pool cars, paid their fuel and meals, dicated who did what work etc). The tax man wrote to him saying he no longer needed to submit a self assessment, so he rang up to check that was correct, made a note of the reference number for the call then stopped doing so.
Thing is, he earns about £8k a year from me and it seems that he now considers that since the tax man knows he has been earning it but has said not to submit a SA, and that he has managed to pay no tax on that £8K in the past of off-setting his expenses against it, that he is somehow in the clear. He is blase about it, saying that since the tax liability is very small or low he will worry about it when asked again to do a SA.
I am a bit concerned that they think he is also PAYE with me but he has never asked for any tax details from me and himslef is not exactly financially savvy in tax matters (ostrich and sand come to mind)!!!!!!
Why else would the tax man tell him not to submit a SA?
Thing is, he earns about £8k a year from me and it seems that he now considers that since the tax man knows he has been earning it but has said not to submit a SA, and that he has managed to pay no tax on that £8K in the past of off-setting his expenses against it, that he is somehow in the clear. He is blase about it, saying that since the tax liability is very small or low he will worry about it when asked again to do a SA.
I am a bit concerned that they think he is also PAYE with me but he has never asked for any tax details from me and himslef is not exactly financially savvy in tax matters (ostrich and sand come to mind)!!!!!!
Why else would the tax man tell him not to submit a SA?
Edited by Brown and Boris on Thursday 22 January 21:22
Those letters are deadly. Whenever any of my clients receive them (which is quite frequently) I always tell them to ignore them. I would say at least 50% if these letters are sent out to taxpayers who STILL need to complete SA returns.
They have no legal standing and if a taxpayer acts on the Revenue's instructions when the Revenue is wrong - it is the taxpayer's fault.
They have no legal standing and if a taxpayer acts on the Revenue's instructions when the Revenue is wrong - it is the taxpayer's fault.
We have had a number of PAYE 'status' enquiries on our clients in the last year or two. Clearly it is better for HMRC to be taxing workers under PAYE as the tax and NI take is always that much higher.
Unfortunately for you it is down to the "employer" (note the inverted commas) to decide on a case by case basis whether a worker is performing his job for you under a contract of service (i.e. employment) or a contract for services (i.e. genuine self-employment).
Whilst the worker (if genuinely self-employed) is liable for completion of his own SA Tax Return and payment of tax, you need to step back and re-assess if you think there is any risk that he should be classed an employee. There are a great number of factors to decide this and in our experience it is never clear cut and we are usually able to reason to an inspector why the treatment as self-employed is correct. This is despite the fact that HMRC seem to think that it SHOULD be clear cut (see their 'employment status indicator' tool on www.hmrc.gov.uk). However, in reality there are always factors pointing each way, making it a very grey area.
If your chap has four other "jobs" (note inverted commas again) and he uses own tools, takes financial risk if his work is defective, dictates his own prices and hours, is not wholly under your day to day control, does not have any other benefits characterised by an employee relationship (i.e. holiday pay, sickness pay, benefits in kind, staff partys, etc, etc) then I would say that the treatment as self-employed looks to be valid.
Unfortunately for you it is down to the "employer" (note the inverted commas) to decide on a case by case basis whether a worker is performing his job for you under a contract of service (i.e. employment) or a contract for services (i.e. genuine self-employment).
Whilst the worker (if genuinely self-employed) is liable for completion of his own SA Tax Return and payment of tax, you need to step back and re-assess if you think there is any risk that he should be classed an employee. There are a great number of factors to decide this and in our experience it is never clear cut and we are usually able to reason to an inspector why the treatment as self-employed is correct. This is despite the fact that HMRC seem to think that it SHOULD be clear cut (see their 'employment status indicator' tool on www.hmrc.gov.uk). However, in reality there are always factors pointing each way, making it a very grey area.
If your chap has four other "jobs" (note inverted commas again) and he uses own tools, takes financial risk if his work is defective, dictates his own prices and hours, is not wholly under your day to day control, does not have any other benefits characterised by an employee relationship (i.e. holiday pay, sickness pay, benefits in kind, staff partys, etc, etc) then I would say that the treatment as self-employed looks to be valid.
I spoke with him again today. He called HMRC for the third time and was told he didn't need to submit a SA. She even went to check with her manager. He noted her name, call reference etc. He feels fire proof.
He works from home, supplies his own lap top, comes to collect work at his own cost, can set his price (but I have a set price I will pay), attended refresher training at his his own time/cost, can swap work/out source the work with other people as long as they are qualified to do it, gets paid on a simple piece work basis and sometimes goes months with no work from me. But he has no financial risk beyond his equipmnet and home office costs I guess.
Even so, I may ring HMRC just in case they are already seeing him as my 'employee' and waiting to pounce at a future date.
He works from home, supplies his own lap top, comes to collect work at his own cost, can set his price (but I have a set price I will pay), attended refresher training at his his own time/cost, can swap work/out source the work with other people as long as they are qualified to do it, gets paid on a simple piece work basis and sometimes goes months with no work from me. But he has no financial risk beyond his equipmnet and home office costs I guess.
Even so, I may ring HMRC just in case they are already seeing him as my 'employee' and waiting to pounce at a future date.
Edited by Brown and Boris on Tuesday 27th January 19:10
Brown and Boris said:
I spoke with him again today. He called HMRC for the third time and was told he didn't need to submit a SA. She even went to check with her manager. He noted her name, call reference etc. He feels fire proof.
He works from home, supplies his own lap top, comes to collect work at his own cost, can set his price (but I have a set price I will pay), attended refresher training at his his own time/cost, can swap work/out source the work with other people as long as they are qualified to do it, gets paid on a simple piece work basis and sometimes goes months with no work from me. But he has no financial risk beyond his equipmnet and home office costs I guess.
Even so, I may ring HMRC just in case they are already seeing him as my 'employee' and waiting to pounce at a future date.
These are two seperate issues. Whether or not he has to file a Self Assessment has no bearing on whether he'll fall foul of IR35. The info you give suggests he'll be OK regarding IR35, but then that would also suggest that he needs to file a SA. As stated earlier, it is his responsibility to do this if required - regardless of what HMRC say (and they are often worng).He works from home, supplies his own lap top, comes to collect work at his own cost, can set his price (but I have a set price I will pay), attended refresher training at his his own time/cost, can swap work/out source the work with other people as long as they are qualified to do it, gets paid on a simple piece work basis and sometimes goes months with no work from me. But he has no financial risk beyond his equipmnet and home office costs I guess.
Even so, I may ring HMRC just in case they are already seeing him as my 'employee' and waiting to pounce at a future date.
Edited by Brown and Boris on Tuesday 27th January 19:10
groomi said:
Brown and Boris said:
I spoke with him again today. He called HMRC for the third time and was told he didn't need to submit a SA. She even went to check with her manager. He noted her name, call reference etc. He feels fire proof.
He works from home, supplies his own lap top, comes to collect work at his own cost, can set his price (but I have a set price I will pay), attended refresher training at his his own time/cost, can swap work/out source the work with other people as long as they are qualified to do it, gets paid on a simple piece work basis and sometimes goes months with no work from me. But he has no financial risk beyond his equipmnet and home office costs I guess.
Even so, I may ring HMRC just in case they are already seeing him as my 'employee' and waiting to pounce at a future date.
These are two seperate issues. Whether or not he has to file a Self Assessment has no bearing on whether he'll fall foul of IR35. The info you give suggests he'll be OK regarding IR35, but then that would also suggest that he needs to file a SA. As stated earlier, it is his responsibility to do this if required - regardless of what HMRC say (and they are often worng).He works from home, supplies his own lap top, comes to collect work at his own cost, can set his price (but I have a set price I will pay), attended refresher training at his his own time/cost, can swap work/out source the work with other people as long as they are qualified to do it, gets paid on a simple piece work basis and sometimes goes months with no work from me. But he has no financial risk beyond his equipmnet and home office costs I guess.
Even so, I may ring HMRC just in case they are already seeing him as my 'employee' and waiting to pounce at a future date.
Edited by Brown and Boris on Tuesday 27th January 19:10
Brown and Boris said:
My concern is that HMRC regard him as my 'employee' and for whom I have the responsibility to deduct PAYE and NI and at some point may come a knocking.
I understand your concern. This is the issue you need to be checking.Brown and Boris said:
He used to do an SA but stopped when one of his other clients got 'persuaded' by HMRC to make all their staff proper employees or go directly to jail.
I don't see how this in any way affects the IR35 issue above. Just because another company and their 'staff' fell foul of IR35 does not mean that you will - that will depend on the arrangements you have with this subby. Whether he does or does not file an SA has no bearing to you - it is his issue, not yours.groomi said:
Brown and Boris said:
He used to do an SA but stopped when one of his other clients got 'persuaded' by HMRC to make all their staff proper employees or go directly to jail.
I don't see how this in any way affects the IR35 issue above. Just because another company and their 'staff' fell foul of IR35 does not mean that you will - that will depend on the arrangements you have with this subby. Whether he does or does not file an SA has no bearing to you - it is his issue, not yours.He was asked by his other 'employer' to give evidence to the HMRC as the employer was disputing the fact he was indeed an employer of this guy and a number of others. They struck a deal that the tax man wouldn't chase for any back tax if he took them all on the books. Obviously that employer had put a case to HMRC, part of it was that my man had other clients (me). HMRC weren't fooled by this one person as everyone else he had was looking alot more like an employee (using his pool cars, getting expenses paid etc). I was wondering if in the course of that they were told he was on my books as an employee which is what led to the SA being dropped?
I must ring!
Edited by Brown and Boris on Wednesday 28th January 19:30
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