Paying for Irregular Labour. PAYE?
Discussion
Does somebody have a view on this please?
We use sub-contract fitters for most of our sales where installation is required (let's say it's similar to fitting out a kitchen). They are VAT registered Ltd companies and send us invoices for work done. That's all straight forward I think.
But, once in a while, we ask a couple of local handymen to do some basic work for us. These jobs take a few hours plus travel at 0.45p per mile. This typically happens every 2-3 weeks at present but is definitely non-regular and two months may go by when we have no jobs for them. I pay them with a bank transfer to their personal bank account. This might typically be £100-£300 total.
The guy who looks after payroll at our accountants says they should go on our PAYE but I think he didn't understand the question and my own research suggests the current arrangement is fine. It's rather like we pay the office cleaner by bank transfer is it not?
Is it legal to pay irregular casual labour in this way?
We use sub-contract fitters for most of our sales where installation is required (let's say it's similar to fitting out a kitchen). They are VAT registered Ltd companies and send us invoices for work done. That's all straight forward I think.
But, once in a while, we ask a couple of local handymen to do some basic work for us. These jobs take a few hours plus travel at 0.45p per mile. This typically happens every 2-3 weeks at present but is definitely non-regular and two months may go by when we have no jobs for them. I pay them with a bank transfer to their personal bank account. This might typically be £100-£300 total.
The guy who looks after payroll at our accountants says they should go on our PAYE but I think he didn't understand the question and my own research suggests the current arrangement is fine. It's rather like we pay the office cleaner by bank transfer is it not?
Is it legal to pay irregular casual labour in this way?
Ham_and_Jam said:
Just ask the handymen to invoice you for their work.
The fact that they're not ALREADY invoicing suggests the handymen are quite happy with the current system 
OP - if they're not invoicing you I can't see how you can account for their costs as a business expense (i.e. if HMRC ever do an inspection how are you going to prove that the £200-£300 that went out of your bank account was for a legitimate business expense as opposed to you simply withdrawing cash from the business without paying tax on it)?
RegMolehusband said:
The guy who looks after payroll at our accountants says they should go on our PAYE but I think he didn't understand the question and my own research suggests the current arrangement is fine. It's rather like we pay the office cleaner by bank transfer is it not?
Is it legal to pay irregular casual labour in this way?
Does the office cleaner not invoice you either?Is it legal to pay irregular casual labour in this way?
There is nothing to stop you paying somebody cash in hand as long as that money has been appropriately taxed.
Countdown said:
The fact that they're not ALREADY invoicing suggests the handymen are quite happy with the current system
OP - if they're not invoicing you I can't see how you can account for their costs as a business expense (i.e. if HMRC ever do an inspection how are you going to prove that the £200-£300 that went out of your bank account was for a legitimate business expense as opposed to you simply withdrawing cash from the business without paying tax on it)?
No they're not invoicing us. It started off as a one-off half day task and then has grown from there into something more frequent.OP - if they're not invoicing you I can't see how you can account for their costs as a business expense (i.e. if HMRC ever do an inspection how are you going to prove that the £200-£300 that went out of your bank account was for a legitimate business expense as opposed to you simply withdrawing cash from the business without paying tax on it)?
2 sMoKiN bArReLs said:
But, from what I've read so far you probably won't need to 
RegMolehusband said:
I think I can see the way this is going.
Lets be realistic about this.Most of us in business have paid for the odd job ‘off the books’, a guvvie.
Usually because it’s easier or quicker, or the tradesmen works for someone else and fits you in after work. Quite often it isn’t even any cheaper and only really benefits the tradesmen involved.
However, when this arrangement stops being a ‘one-off’, and becomes regular, that’s when alarm bells should ring.
I can see why the accountant has said to put them on PAYE, because it protects you.
I would suggest you have a word with the trades you’re using a say you’re going to need an invoice from them. One with their names / contact details on. See how they react. If their faces twist you know the answer.
RegMolehusband said:
I think I can see the way this is going.
If they were doing work for you on a personal basis there's nothing to stop you paying them cash in hand without an invoice or receiptIf they were doing work for your Company there's nothing to stop you paying them cash in hand without an invoice or receipt as long as you don't try to claim their costs as a business expense. However you can't claim their costs as a business expense without a proper invoice.
2 sMoKiN bArReLs said:
Thank you Smokin - I get this answer."You need to pay the worker’s earnings in full, without deducting Income Tax and National Insurance contributions."
RegMolehusband said:
2 sMoKiN bArReLs said:
Thank you Smokin - I get this answer."You need to pay the worker’s earnings in full, without deducting Income Tax and National Insurance contributions."
2 sMoKiN bArReLs said:
RegMolehusband said:
2 sMoKiN bArReLs said:
Thank you Smokin - I get this answer."You need to pay the worker’s earnings in full, without deducting Income Tax and National Insurance contributions."
We faced an identical situation - albeit in a different industry.
Two years ago, we were investigated by HMRC into incorrect hiring procedures, which came about as a result of a disgruntled former business partner trying to muddy our reputation for his own ends. He believed we were hiring temporary staff on a freelance basis but those people were not officially freelance.
HMRC came knocking and looking and found nothing untoward but made it perfectly clear that the hiring of staff had to be done on a PAYE basis unless a person was officially a freelance in the capacity for which you have hired them.
So, your accountants are correct.
Two years ago, we were investigated by HMRC into incorrect hiring procedures, which came about as a result of a disgruntled former business partner trying to muddy our reputation for his own ends. He believed we were hiring temporary staff on a freelance basis but those people were not officially freelance.
HMRC came knocking and looking and found nothing untoward but made it perfectly clear that the hiring of staff had to be done on a PAYE basis unless a person was officially a freelance in the capacity for which you have hired them.
So, your accountants are correct.
RegMolehusband said:
Eric Mc said:
Are they genuinely self employed individuals who operate a business as sole traders?
No Eric, they are full time employed by another company. They would do work for us at weekends only.To prove they are self employed, , you would need to ensure that you treated them differently to your normal employees and that the manner in which they behaved exhibited the "badges of trade" i.e. they carried out their work for you in a way typical of those who are running their own business.
If they cannot exhibit sufficient "badges of trade", they will fail any "self employment" test and would have to be engaged as "employees" by you - even if they are part time or casual.
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