Employed or Self-Employed

Griffta

Please be aware.
As a small business employer I have learn't a hard lesson. I had a driver who I thought was ok to take on a self employment basis as he only worked on an ad-hoc basis delivering my goods as I got orders. He had no set days or hours to work and he had to agree to the hours I offered him and only did so if he was available. He ended working 2-3 days a week for about six months. I paid him a set hourly rate ageed by both of us.
After a random investigate by the Inland Revenue I was told that this drivers status should have been a CASUAL WORKER which means I should have been paid over his tax and NI plus employers NI. I have just had to pay them over £1000 (Employers NI and employees NI), got this reduced from over £2000 after I argued my case, ie I made a genuine mistake and it can be very confusing if someone should be employed or self employed. If in doubt check with the Inland Revenue. Whether my driver had declared his income from me or not this is irrelevant - it is up to the employer to find out if someone should be self employed or employed. I could have saved my self alot of money if I was aware of these tricky rules.
My existing driver is definately on the books!

pchelpman

A timely warning indeed. This "reclassification" of people is something of a money spinner for the Revenue for the reasons you have outlined.

All employers should take note of this experience and learn from it. Not just small employers.

Some "guidance" from the Revenue (i.e. their view on how to distinguish one from the other) is here ......

http://www.hmrc.gov.uk/pdfs/ir56.htm

That said - as Griffta points out - each case can be argued on its own merits.

Nothing is set in stone.

Best of luck but, if in doubt, get professional advice from someone who is a tax specialist - not just an accountant. My recommendation is someone who is qualified as CTA or ATT (or both). Websites for those organisations here.....

CIOT > http://www.tax.org.uk/

ATT > http://www.att.org.uk/

DavidT

pchelpman wrote:

A timely warning indeed. This "reclassification" of people is something of a money spinner for the Revenue for the reasons you have outlined.

All employers should take note of this experience and learn from it. Not just small employers.

Some "guidance" from the Revenue (i.e. their view on how to distinguish one from the other) is here ......

http://www.hmrc.gov.uk/pdfs/ir56.htm

That said - as Griffta points out - each case can be argued on its own merits.

Nothing is set in stone.

Best of luck but, if in doubt, get professional advice from someone who is a tax specialist - not just an accountant. My recommendation is someone who is qualified as CTA or ATT (or both). Websites for those organisations here.....

CIOT > http://www.tax.org.uk/

ATT > http://www.att.org.uk/

Please be aware the Revenue guidance link is the subject of much current comment. Many believe it be be incorrect in many places. I've just been on a course where it was pulled to pieces. Basically some of the questions on the checklist do not work and and are contradictory. Use that guidance with extreme caution. In some cases none of the possible answers apply.

There is no black and white answer in many cases as "it depends on the cirumstances in each case". The "employer" has to weigh them up and decide on the balance of probabilities. Madness!

I know of one professional (the fact he makes a living from resolving employed v self-employed status disputes should tell you something!) in these matters who is dealing with two cases which are indentical as they both work for the same company on the same project doing the same job. However the two people are dealt with by two different tax offices and one accepts one is self-employed the other insists the other is employed!

The OP is correct in that it is the "employer" who has to decide and the "employer" who takes the hit for getting it wrong. Then you get Income Tax, Er's and Ee's NIC + interest and penalties.

I've seen so any cases where you would never think the Revenue would accept self-employment status and yet they do and others where it seems obvious they are self-employed only for the Revenue to disagree.

If you think its bad now wait until the new construction industry scheme comes in next year.

To the OP, did he supply his own van or was it yours?

pchelpman

DavidT wrote:

Please be aware the Revenue guidance link is the subject of much current comment. Many believe it be be incorrect in many places. .......... Basically some of the questions on the checklist do not work and and are contradictory. Use that guidance with extreme caution. In some cases none of the possible answers apply.

There is no black and white answer in many cases as "it depends on the cirumstances in each case". The "employer" has to weigh them up and decide on the balance of probabilities. Madness!

That's exactly why I said ..... (and note the quote marks round the word "guidance"....

Some "guidance" from the Revenue (i.e. their view on how to distinguish one from the other) is here ......

http://www.hmrc.gov.uk/pdfs/ir56.htm

That said - as Griffta points out - each case can be argued on its own merits.

Nothing is set in stone.

Best of luck everyone.

Debt_Free_Chick

As I understand it, the rules for a casual worker are very different to the IR35 "employed or self employed" issue. It's OK to employ a casual worker with no need to deduct tax provided that the amount you pay them in any one tax year is below a certain amount. Above that amount (and I'm sorry, I can't remember what it is) then you MUST deduct tax.

BFG_2

One way of helping to protect yourself is to get anyone who is coming to work for you as self-employed to provide a letter from their accountant proving that they are actually self-employed.

In addition get a clause into the contract saying that they will be liable to reimburse you if IR fiunds them as employed cf self employed.

pchelpman

BFG wrote:

...provide a letter from their accountant proving that they are actually self-employed.

Ah ... if only it were possible! Methinks any accountant/advisor with any knowledge of this subject would never write such a letter. It would leave the advisor open to incurring wholly unknown legal difficulties at some indeterminate time in the future. Who knows where the letter would end up or how the "client" would use it. I'd never write such a letter.

Still .... I guess you could always try!

Debt_Free_Chick

BFG wrote:

One way of helping to protect yourself is to get anyone who is coming to work for you as self-employed to provide a letter from their accountant proving that they are actually self-employed.

In addition get a clause into the contract saying that they will be liable to reimburse you if IR fiunds them as employed cf self employed.

Many of us who are self-employed don't use an accountant and consider that we don't need one. Controversial I know ... but true

Griffta

Answer to DavidT - it was our own van which didnt help. We tried every avenue to argue but nothing worked - at least I got the amount we did pay down by over half by having my say.

Conor_3

Griffta wrote:

After a random investigate by the Inland Revenue I was told that this drivers status should have been a CASUAL WORKER which means I should have been paid over his tax and NI plus employers NI. I have just had to pay them over £1000 (Employers NI and employees NI), got this reduced from over £2000 after I argued my case, ie I made a genuine mistake and it can be very confusing if someone should be employed or self employed.

I am a self employed HGV driver and basically drive lorries for customers on the same basis as your driver did - at first I couldn't see the problem but came up with the following:

1) Was he registered with the IR as S/E?
2) Did he only do work for you or a couple of companies?
3) Did he invoice you?

I think the crux of the matter is that he did 2-3 days for 6 months but didn't work anywhere else so their argument is that he didn't meet the rules for being Self Employed.

I drive for several companies, never long term with any of them and I also have a contract which we both sign stating terms of business and rates. I also invoice them as well.