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This doesn't feel right, self-employed status

8K views 31 replies 17 participants last post by  The Cueball 
#1 ·
Ok, I know nothing about employment law so any help is much appreciated,

My son has been offered a job but only if he accepts it being on self-employed basis doing contract work and being reasonable for filing his own tax returns.

Is the owner of the company simply trying to avoid his responsibilities? I am concerned that my son would have little or no protection that an employee would have.

Is this common?
 
#7 ·
As mentioned this is becoming really common place. Gets the company out of paying numerous things, Not sure on NI but i would imagine so. No sick, Holiday etc.

However, note a recent court case regards Pimlico plumbers in London who are all self employed, yet have been taken to tribunal regards working hours.

I myself would never do it - but, for some i guess it works well!
 
#12 · (Edited)
The monthly contribution for NI is only a small amount, but then you get a big hit of NI included in tax statement after your return! Hit me in the backside the first year i was s/e, I thought i was so much better off only paying a few quid a month, then the unexpected NI entry in the tax bill arrived!

You can't claim tax relief on everything you buy either, only business related expenses.

As for the OP, if he is only working for the one company and nobody else then it is a tax job by the employers, no company NI to pay, no holiday pay, no sick pay, no pension and no employee rights. Very common place, but many companies go into liquidation when the IR catch up with them and give them a nice backdated bill.
 
#16 · (Edited)
I work for HMRC and I think you need to use some common sense here.

Who sets the terms and conditions of the engagement/contract?

Who sets the rate of return (pay)?

Basically being self employed can be determined if the following is true......

Checking if they’re exempt from PAYE

Someone is probably self-employed and shouldn’t be paid through PAYE if most of the following are true:

they’re in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit

they can decide what work they do and when, where or how to do it

they can hire someone else to do the work

they’re responsible for fixing any unsatisfactory work in their own time

their employer agrees a fixed price for their work - it doesn’t depend on how long the job takes to finish

they use their own money to buy business assets, cover running costs, and provide tools and equipment for their work

they can work for more than one client

If ALL the above applies then probably self employed.

If the opposite applies to the above statements, then the person "offering the job" is controlling the terms of engagement and therefore trying to avoid accounting for PAYE.....when in reality the person being offered the job should be classed as an employee and subject to PAYE as such.

EDIT: the following is also true if someone is truely self employed....

they put in bids or give quotes to get work

they’re not under direct supervision when working

they submit invoices for the work they’ve done

they’re responsible for paying their own National Insurance and tax

they don’t get holiday or sick pay when they’re not working

they operate under a contract (sometimes known as a ‘contract for services’ or ‘consultancy agreement’) that uses terms like ‘self-employed’, ‘consultant’ or an ‘independent contractor’


So OP taking ALL of the above into account, is your son going to be self employed?
 
#17 ·
I did it.

Request a UTR number from the tax office. My employer stopped my tax at source and then I simply did a self assessment and got it back.

Self employed is common as if work dries up the employer has no obligation to pay. Generally No sick pay, no holiday pay no pension
 
#18 ·
Andy has put the main questions to think about in his post but an important point is understanding that whether you are employed or self-employed is a question of fact and not a choice. If an employer demands that an employee reports their status as self-employed, this does not terminate the employment relationship from a tax perspective and you risk a significant tax bill in the future.
 
#20 ·
I understand your thoughts and feelings and I’ve been self employed recently after years of PAYE.

Quite a lot more companies are doing it. There are advantages and disadvantages for both but in my opinion there’s nothing sinister about it. If he was PAYE they may have workplace pensions, holiday pay, sick pay, training courses etc to pay for him but self employed they don’t alve that to contend with. So yes he doesn’t ge that as such but with a good accountant he can still have lots of benefits and remain within the legal framework.
 
#24 · (Edited)
I understand your thoughts and feelings and I've been self employed recently after years of PAYE.

Quite a lot more companies are doing it. There are advantages and disadvantages for both but in my opinion there's nothing sinister about it. If he was PAYE they may have workplace pensions, holiday pay, sick pay, training courses etc to pay for him but self employed they don't alve that to contend with. So yes he doesn't ge that as such but with a good accountant he can still have lots of benefits and remain within the legal framework.
It isn't within the legal framework if he is actually an employee on the facts but submits his tax return on a self-employment basis. Sick pay, holiday, etc. are employment rights not privileges and cannot be avoided by an employer for the sake of convenience. Any competent tax professional or accountant with a tax qualification will be reviewing this as part of their advisory to their clients, if not then they are not qualified to be advising on tax matters.
 
#23 · (Edited)
A long time ago (decades....) I became involved in what was then called "categorisation" i.e are you an employee or self employed.

It's not a "choice" by the "employer" and beware of putting the cart before the horse.

The first question is are you legitimately self employed?

If so then you don't get sick pay, holiday pay etc. etc.

One of the big questions (it may well have changed) was....

If you don't turn up who pays for the work you should have done?

If you are self employed it's......YOU, not the "employer" because you have a contract to provide whatever it is so it's up to you to make sure it happens.

The "employer" can quite happily sue you for whatever it cost them to get the job done as you didn't do it.

Also beware that if there is an investigation and you are found to be an employee HMRC certainly used to come after those "self employed" people for all the tax & NI that was now "owing."

Be careful and do you legal homework.

Great advice from Andyg_TSi.

Good Luck.

Andy.
 
#26 · (Edited)
And a bit more....

What about public liability insurance?

If you are self employed and a member of the public gets, say, injured because of something you have/haven't done it's you the "Have you ben involved in an accident that wasn't your fault brigade" will come after.

Are you fully up to speed with Risk Assesments? You'll struggle to prove to a court that you weren't negligent if you haven't got all the paperwork to show the risks and how you avoided/minimised them. And even then.......

People have lost their house and more.

I think some insurances are a legal requirement? :confused:

Shiny is undoubtably much more capable & knowledgeable than me on insurance issues but you get the idea.

It's not just about being able to potentially reduce your tax bill.

Be careful.

Andy.
 
#28 ·
And a bit more....

What about public liability insurance?

If you are self employed and a member of the public gets, say, injured because of something you have/haven't done it's you the "Have you ben involved in an accident that wasn't your fault brigade" will come after.

Are you fully up to speed with Risk Assesments? You'll struggle to prove to a court that you weren't negligent if you haven't got all the paperwork to show the risks and how you avoided/minimised them. And even then.......

People have lost their house and more.

I think some insurances are a legal requirement? :confused:

Shiny is undoubtably much more capable & knowledgeable than me on insurance issues but you get the idea.

It's not just about being able to potentially reduce your tax bill.

Be careful.

Andy.
You don't need written RA's unless you employ 5 or more people.

Public liability is only needed if you're limited company I'd say.

There's a big difference between self assessment, self employed and limited company.

The OP and his son need to do their homework and see what is beat for them which is partly what this thread is about.
 
#29 ·
Lots of people go self employed legitimately.

What im getting at is if an employer is advertising for staff......but they insist the role is self employed.

However.....the employer is:

Setting the rate of pay
Setting the times you must attend the workplace
You cannot work for anyone else, because effectively your working full time hours week in-week out for the same company

Simple tests like that indicates you should be an employee
 
#30 ·
Public Liability Insurance is not a compulsory insurance, but should be in place. Employers Liability is compulsory by law and the main contractor must have this in place for labour only subcobtractors.

Bona-Fide Subcontractor (BFSC) - a BFSC generally works under their own direction and provides their own material and tools, invoicing work on a per-job basis, including costs for materials etc. A BFSC would need their own Public Liability Insurance in place and it is normally a condition of the main contractor's own liability insurance policy that checks are made in this respect and that the level of indemnity covered is, as a minimum, the same as the main contractor's policy.

Labour only subcontractor (LOSC) - a LOSC generally works under the direction of the main contractor and, as the name suggests, provides their services on a labour-only basis and are generally paid a labour rate. For the purpose of insurance, a LOSC is classed as an employee and it will be necessary for the main contractor to arrange appropriate Public Liability Insurance and also a statutory legal requirement to ensure Employers' Liability Insurance in place.
 
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