When is someone a contractor and when an employee?

[drivin_me_nuts]

Can anyone point me in the right direction for some clear advice.

Very soon I want to use the services of someone as a PA/Secretary. For various reasons (including felxibility, convenience less hassle) I want to use their services on a contract basis - I don't think I want any amployees yet. So, what are the pitfalls? What do I have to be aware of?

... where do I start looking to see if this is a viable option .. ?

Any ideas on where to start would be very helpful indeed.

Cheers

[Eric Mc]

What will be the nature of the arrangement i.e. the terms and conditions of the contract?

By and large, the Revenue does not expect secretarial and/or PA type positions to be undertaken by individuals on a "Self Employed" basis. It is just not the "norm" for such a role If they do not work a full day/week/mponth, they are looked on as part-time employees and taxed accordingly. Being employees they would also be subject to all the non-tax related employee regulations as well.

Edited by Eric Mc on Monday 9th February 10:17

[deckster]

Eric Mc said:

What will be the nature of the arrangement i.e. the terms and conditions of the contract?

And, perhaps more importantly, what will the actual working conditions be? HMRC have been known to ignore what is written in a contract in favour of what is actually happening on the ground.

The key really is whether they are 'in business on their own account' - so ask questions like

- do you supply office space, equipment etc?
- do you direct how, where and when they do their work?
- are they paid a fixed rate regardless of the amount of work done?
- do you pay them when there isn't in fact any work to be done?
- do you expect them to be available when you haven't specifically asked them to be working?

All of this and more may or may not be relevant.

As Eric says, PA/Secretary are not generally self-employed positions so it will be difficult to get HMRC to accept that they are not an employee. Another alternative is to use the services of a secretarial company, which will of course avoid all this altogether.

[Eric Mc]

Using a legitiamte secretarial company would be an answer, as mentioned. Using an individual secretary who operates through her own "personal service company" could risk the dreaded IR35.

[skwdenyer]

Eric Mc said:

Using a legitiamte secretarial company would be an answer, as mentioned. Using an individual secretary who operates through her own "personal service company" could risk the dreaded IR35.

That said, if the nature of the engagement with the individual is truly the same as it would be with a secretarial company, it is hard to see how that isn't a valid defence to an attack from HMRC.

As regards a PSC, again, how do you think the secretarial companies got started? The devil is always in the detail. If the arrangement is correct then it is correct. The IT world have spent a long time sorting this out

[Eric Mc]

skwdenyer said:

Eric Mc said:

Using a legitiamte secretarial company would be an answer, as mentioned. Using an individual secretary who operates through her own "personal service company" could risk the dreaded IR35.

That said, if the nature of the engagement with the individual is truly the same as it would be with a secretarial company, it is hard to see how that isn't a valid defence to an attack from HMRC.

As regards a PSC, again, how do you think the secretarial companies got started? The devil is always in the detail. If the arrangement is correct then it is correct. The IT world have spent a long time sorting this out

They have indeed, but the issue hasn't gone away. It's just something anyone who operates through a limited company should be aware of.

[skwdenyer]

Eric Mc said:

skwdenyer said:

Eric Mc said:

Using a legitiamte secretarial company would be an answer, as mentioned. Using an individual secretary who operates through her own "personal service company" could risk the dreaded IR35.

That said, if the nature of the engagement with the individual is truly the same as it would be with a secretarial company, it is hard to see how that isn't a valid defence to an attack from HMRC.

As regards a PSC, again, how do you think the secretarial companies got started? The devil is always in the detail. If the arrangement is correct then it is correct. The IT world have spent a long time sorting this out

They have indeed, but the issue hasn't gone away. It's just something anyone who operates through a limited company should be aware of.

Agreed; sorry if I wasn't clear. I wasn't suggesting the issue had gone away, just that there is an awful lot of knowledge and experience out there on how to get things right, much of it already "battle-tested" against HMRC. Therefore it should be much easier now to establish how to set things up in a compliant manner.

[V8mate]

If you don't want to use a virtual service (because you want the bum on seat in your own office) just use a temp.

[drivin_me_nuts]

Thanks for the replies;

I am loooking for someone to do basic admin, filing, handle cash and banking at times and deal with the booking of venues, hotels etc. I am not sure at the moment if I want a full time commitment and the person I possibly have in mind is alreay working as a 'contractor' / freelancer for other companies. Does her situation make a difference?

Thanks very much for your replies.

[Eric Mc]

drivin_me_nuts said:

Thanks for the replies;

I am loooking for someone to do basic admin, filing, handle cash and banking at times and deal with the booking of venues, hotels etc. I am not sure at the moment if I want a full time commitment and the person I possibly have in mind is alreay working as a 'contractor' / freelancer for other companies. Does her situation make a difference?

Thanks very much for your replies.

Just because someone works part time does not mean that they shouldn't be treated as an employee. Look at all the employees (usually female) who make use of flexible working hours.

The fact that she has other "customers" MAY indicate that she is operating a secretarial service business and therefore it would be of assistance in proving that she is genuinely trading ("trading" is the correct term rather than "self-employed" which as an expression, is in reality, an oxymoron). I say "may" because just because someone has self-employment elsewhere does not automatically mean that she can classify what she does for you as part of the self-employment activity. However, having multiple customers or clients is a strong argument that she is running a bona fide business.

If you do use her in this capacity, make sure she -

provides you with a headed invoice for the work she does - hopefully part of the sequence of invoices she issues to her other custometrs

does not get paid when sick

does not receive any holiday pay

cannot avail of any "perks" or amenities that might be available to employees

uses her own tools and equipment wherever feasible

has a large say in organising her working arrangements

can offer an alternative to herself if she cannot turn up for any reason (this is called "substitution")

is covered by her own insurances for the work she does