Is she an employee?
Discussion
I thought I had covered this, but omce again people conspire to frustrate:
I have about 15 people who work for me on an ad hoc part time basis. They all have proper day jobs, but do perhaps a day a month for me. My accountant is happy that the IR won't see them as employees but as self employed because, amongst other things they swop work amongst themselves without reference to me, have to provide their own equipment, collect and deliver their own work, set their own prices (in theory at least) etc. I wrote to them all on the first day they worked for me suggesting they contact the IR (even gave them the phone number) and register as 'small earnings' and add it to their annual self assessment. All OK.
One of them, unbeknown to be, was actually on a career break and only told the IR this week that she had these earnings from my company, who chuntered about the fact she should have told them within 3 months (it was been about 12 months). She has no other earnings and my fear is that she will now be construed as an 'employee' despite all my eforts to ensure these folks were clearly self employed as far as the bits they do for me are concerned.
My fear is that the IR are going to come after me as they might see her as an employee because she has no other clients and that she may have acquired rights as an employee without my knowledge or consent.
Her earnings are under the tax and NI thresholds. What do you think: employee or self employed? Should she be paying self employed NI?
I'll ring the IR this week and clarify it but I think she should just declare the earnings on a self assessment (they are sending her one) and that should do it (I hope).
I have about 15 people who work for me on an ad hoc part time basis. They all have proper day jobs, but do perhaps a day a month for me. My accountant is happy that the IR won't see them as employees but as self employed because, amongst other things they swop work amongst themselves without reference to me, have to provide their own equipment, collect and deliver their own work, set their own prices (in theory at least) etc. I wrote to them all on the first day they worked for me suggesting they contact the IR (even gave them the phone number) and register as 'small earnings' and add it to their annual self assessment. All OK.
One of them, unbeknown to be, was actually on a career break and only told the IR this week that she had these earnings from my company, who chuntered about the fact she should have told them within 3 months (it was been about 12 months). She has no other earnings and my fear is that she will now be construed as an 'employee' despite all my eforts to ensure these folks were clearly self employed as far as the bits they do for me are concerned.
My fear is that the IR are going to come after me as they might see her as an employee because she has no other clients and that she may have acquired rights as an employee without my knowledge or consent.
Her earnings are under the tax and NI thresholds. What do you think: employee or self employed? Should she be paying self employed NI?
I'll ring the IR this week and clarify it but I think she should just declare the earnings on a self assessment (they are sending her one) and that should do it (I hope).
Whether someone is Self Employed or not is determined by the facts of the case, not through choice. From what you are saying, it might appear that these individuals seem to fulfil most of the criteria which would allow them to be "Self Employed". If that is the case, the entire responsibility for declaring their income to HM Customs and Revenue (as it is now) falls on their shoulders.
As you say, they are under an obligation to notify the Inland Revenue that they are Self Employed within three months of the commencement of their Self Emplyment. This is to ensure that they pay their Self Employed Class 2 National Insurance contributions correctly.
However, if you are taking on someone who is going to be paid below the tax and NI thresholds and they do not normally operate on a Self Employed basis (i.e. have no other customers etc), then the safe way to treat them would be to take them on as proper PAYE employees but get them to sign a Form P46. The P46 is a declaration by the new employee that this is their only or main employment. This will, in turn, allow you to pay them without having to deduct tax and NI. Obviously, if they have come to you froma previous emplyment they will have a P45 from that employment and in those circumstances it may not be appropriate to not deduct tax and NI, even if your pay rates are below the thresholds.
I actually dislike the term "Self Employed". Older tax regulations never used this expression but preferred to talk about such individuals as "traders". Using that word, in my mind, gives a much clearer picture of the type of people who should be classified as "Self Employed" i.e trading implies "being in business on one's own account".
In fact, I think the expression "Self Employed" is a bit of an oxymoron.
As you say, they are under an obligation to notify the Inland Revenue that they are Self Employed within three months of the commencement of their Self Emplyment. This is to ensure that they pay their Self Employed Class 2 National Insurance contributions correctly.
However, if you are taking on someone who is going to be paid below the tax and NI thresholds and they do not normally operate on a Self Employed basis (i.e. have no other customers etc), then the safe way to treat them would be to take them on as proper PAYE employees but get them to sign a Form P46. The P46 is a declaration by the new employee that this is their only or main employment. This will, in turn, allow you to pay them without having to deduct tax and NI. Obviously, if they have come to you froma previous emplyment they will have a P45 from that employment and in those circumstances it may not be appropriate to not deduct tax and NI, even if your pay rates are below the thresholds.
I actually dislike the term "Self Employed". Older tax regulations never used this expression but preferred to talk about such individuals as "traders". Using that word, in my mind, gives a much clearer picture of the type of people who should be classified as "Self Employed" i.e trading implies "being in business on one's own account".
In fact, I think the expression "Self Employed" is a bit of an oxymoron.
Yes, that is an issue BUT people who work for you as a Self Employed individual for TAX purposes might be seen to be EMPLOYEES when it comes to Employment Court Tribunals.
There was a case recently where it was held that a business had an employer's duty of care when it came to the health and safety of a self employed window cleaner who was injured when working on their premises. The business tried to claim that they didn't have to look after self emplyed individuals the way they must with employees. They lost the argument.
The bottom line is that tax status is not always followed through in other areas of "employee's rights".
There was a case recently where it was held that a business had an employer's duty of care when it came to the health and safety of a self employed window cleaner who was injured when working on their premises. The business tried to claim that they didn't have to look after self emplyed individuals the way they must with employees. They lost the argument.
The bottom line is that tax status is not always followed through in other areas of "employee's rights".
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