Help Please: Paying Income Tax myself - Self Assesment?

Brianqaf81

Hi everyone,

I hope to get some help on here about my current situation as I've no-one I can really ask about it. I'm 27 & should probably know more about this but this is the first I've found myself in this position - I'm normally an fully fledged employee.

First of all, I'm currently working as a temporary IT consultant in Birmingham. I am not employed, but equally - I don't appear to fit the criteria of "self employed" either. Can someone (preferably in the same boat) define me?

I don't currently pay any tax & neither does my "employer" - So I figure someone should be paying the tax; I assume its me?

I work set (unflexible) hours (9-5.30pm), Monday - Friday for a small family company in Birmingham. I don't choose what tasks I do when I get to work or have any freelance choice. I'm not 'on the books' as an employer, I'm classed as a contractor. I get paid £10 an hour and get paid every two weeks (£800/fortnight); to get paid I have to print out my hours and effectively 'invoice' the company for my time.

Am I self employed or employed?

Am I liable to pay the tax myself?

The other thing is, I've worked here for 11 months now (IF I am classed as self employed I've missed the 3 month notification deadline).

Will I get fined?

How do I calculate how much tax I need to pay?

who pays my national insurance?

Can I claim anything back to reduce my tax bill? Car travel to work? etc?

Hope someone can help.

I'd contact the tax office but I'm scared that if they find out who I am they'll take me to court for evasion or something & end up in prison. The thing that annoys me, I'm not a "tax - dodger" - I 'want' to pay the tax I technically owe. It seems like the taxman persecutes the weak & seems to write off the real tax evaders.

If the system was simpler to understand, I would'nt be in this position. Enough of the excuses though, I need to sort this out.

Thanks people!

Bri.

Cook_County

It sounds as if you are employed & your employer has failed to operate PAYE.

I would speak with an employment law specialist.

Velja

You should phone up HMRC and register as self-employed because you are not on your company's payroll hence you are not employed by them.
You will be liable to pay tax on your earnings but equally you could claim some of the expenses paid out for work. I don't think you can claim journeys to work as I remember reading something that says that you can only claim for journeys between offices or between clients etc. But don't take my word for it, it was a long time ago.
It is easy to ring up and explain the situation especially that you are willing to pay your taxes. I assume this is the first time it happened and the amounts of tax unpaid are not great so I doubt you will be carted off to prison!
If you simply fill in the tax return and send it off HMRC will calculate the tax for you but the problem with that you need to do it by Septmeber each year instead of January? Not sure if this is correct so perhaps someone else will advise?

Velja

Cook_County wrote: »

It sounds as if you are employed & your employer has failed to operate PAYE.

I would speak with an employment law specialist.

Isn't this the old status IR35 thing rearing its head again? it's not very clear with IT contractors..
If he doesn't want to loose his job by arguing with his employer he should just register as self-employed.

Pennywise

Velja wrote: »

Isn't this the old status IR35 thing rearing its head again? it's not very clear with IT contractors..
If he doesn't want to loose his job by arguing with his employer he should just register as self-employed.

Agreed. If HMRC investigate and decide that he is really an employee, it is the employer who gets the tax/nic bill, not the "employee". IR35 is irrelevant because he isn't operating through a limited company. It is sound advice to register as self employed, claim allowable expenses and pay tax on the "profit". Let the employer argue his case as to whether or not it is "employment" - don't get involved in that argument.

myrnahaz

Get on to HMR&C immediately - they won't take you to court for this, but the chances are that they'll ask you to pay any unpaid tax and NIC that was due in the last tax year (months up to March 2008) plus any interest due on the unpaid amount - and they'll want it asap. Then they'll probably calculate a paye system for the current year (April 08 to March 09) - but be prepared in case they demand the last 5 months' tax and nics immediately.
They'll probably suggest you attend one of their workshops as well, because it seems pretty likely that you're self employed.

Cook_County

The OP has regular hours, a regular desk and access to the office kettle to make his/her own tea. S/he is an employee & entitled to all of the benefits of employment law. I can't see why anyone should encourage him/her to give them up?

Just because the employer is acting fraudulently does not give the OP the right to participate in this conspirancy. I recommend s/he speaks with a solicitor to cover his/her own potential position.

jimmo

Cook County is, of course entirely correct but after you have consulted with the solicitor you may as well pop into the Job Centre as well. There’s every chance you’ll become a regular there.
That’s the real problem.
Your story is really not unusual and happens in all sorts of areas. I suppose the worst example I can remember was a “self-employed” telephonist in a top quality car dealership.
From the details you have posted it seems perfectly clear that you are, in reality, an employee and your employer is fiddling by calling you self-employed.
Where do you go from there?
1) You can discuss your fears with your employer. You could get sacked on the spot. You could get fobbed off with some sort of waffle telling you that its all above board and you are self-employed. Your employer could take you seriously and be prepared to look again at the contractual relationship and put you on the books.
2) You can go to a solicitor (and then the Job Centre).
3) You can ask HMRC for a status ruling (and then go to the Job Centre).
4) You can have blind faith in your “contractor” and accept that whilst you have doubts about it they are far more likely to be familiar with contract and employment law and you therefore accept that you are self-employed.
If you go along with option 4 then, in declaring yourself as self-employed you will definitely face a penalty (£100) for not registering within 3 months of commencement and you will have to make good the NIC contributions you should have made. Tax is probably OK but you will have a bill for 31/1/09.
However, there is a sting in the tail which could work in your favour. If HMRC eventually catch up with your employer and establishes that you are an employee you will personally be entitled to a refund of all the tax, NIC and penalties you have paid under the self-employed label and your employer will be accountable for all the tax and NIC that it should have deducted from you.
If they get caught out whilst you are still working for them you may feel obliged to compensate them for the deductions they failed to make (out of your refund).
If they get caught out after you have left they will still be liable for all the deductions they should have made. You will still be entitled to repayment of all the tax and NIC you paid as a self-employed person and they will have no legal recourse to you.
You would then be quids in.

Brianqaf81

Oh my gosh! Reading the post's above generally frightens me! lol

Thanks to everyone for all the advice being given.

The people in charge here are "quite"(!) harsh - they've sacked people for a lot less than talking to HMRC about who's employed/self employed.

After reviewing my options above, I think my best bet is to contact HMRC, pay the tax myself & any fine(?) & any interest(?).

If I worked out how much I'd earned would anyone on here be able to work out how much the HMRC would want off me? (inluding fines & interest?) - that way at least I can warn my wallet what the sheriff of Nottingham is about to pinch.

*5 minutes later*

I'm gobsmacked I've 'earned' £21580! *thats the total amount the company has paid me over the course of my self employment.

Thanks once again for all the advice people!

Velja

You will pay the interest and I think the fine for late notification is called surcharge.
I am not sure what the fines are for late notifications but it's not likely to be a lot of money.
Penalties for incorrect returns are linked to how much tax you tried to avoid to pay. But I am pretty sure it doesn't apply to late notification of self-employment.

Llyllyll

IMO you are a employed by this company and they should be operating PAYE. I do however think that the comments about looking after your job are also relevant.

You could report the non-operation of PAYE to HMRC anonymously, after all it may not be only you that is being treated incorrectly. Your employer would not be told where the info came from if they were to be 'visited'.

As Cook_County says, there are legal benefits to being an employee and your employer is getting away with these in addition to not operating PAYE.