Just become a Sub-Contractor......... What now?

Kelticfox

My boss has just made me a Sub-Contractor for the company as he needed my desk space for 2 new people (and I could work from home).

Anyway I have no idea what I have to do.
Obviously I have to sort out my own Tax & N.I. now but how do I do that?

I know I've got work sorted for the next year or so (I've got 5 e-commerce shops to make, populate with products and then adminstrate), but I'm more worried about screwing something up with the Government or something.


Any help would be greatly appreciated.


Jay

fengirl_2

You cant just be made a sub contractor on your boss's say-so. Has he cleared this with HMRC? I suggest you check on this before you go any further.

Kelticfox

He employs a lot of Sub-Contractors as he owns a building company (about 120 sub-contractors at the mo)

I was employed in January to create Online shops for another business and look after the office IT. I was more worried about losing my job completely (as I have a wife & kids).

Do I ring HMRC and ask them the score?

Pennywise

There is a deal of difference between subcontract contruction workers and subcontract office workers. The former are usually genuinely self employed using the HMRC "badges of trade", but the latter seldom are. Having said that, I wouldn't worry too much about your status - HMRC would go after the employer for tax and NIC if they decided you were still an employee, so you'll not be the one facing the bill!

What I would be concerned about is your loss of employment rights, i.e. paid holidays, SSP/SMP, reduced state benefit rights, redundancy payments, etc. They are saving a lot of overhead, not to mention no longer paying 12.8% employers NIC on your wage.

What are you getting out of it?

I would hope that your hourly rate has been increased substantially to reflect their savings. I go for a ball park figure of an hourly rate 50% higher for being self employed compared with the employed hourly rate. That covers your unpaid time (holidays, sick, etc), plus your overheads, i.e. cost of providing your own equipment, heating/lighting your home, extra insurance, travelling, accountancy fees, etc., not to mention the time and hassle of paperwork etc for being self employed.

At the end of the day, by becoming self employed, you are saving them a lot of money and it is going to cost you more money and time, so you need a differential in hourly rate to reflect that.

You need to register with HMRC as newly self employed - you have three months to do that from the date you started being self employed. You need to learn about book-keeping etc so that your end of year accounts and self employed tax return will be easier to complete, and you need to get into the habit of putting money safely away in a savings account to pay your tax bills - never be tempted to spend the tax money on anything else.

fengirl_2

By accepting the position and signing up as self employed, you are putting yourself to a lot of trouble and losing employment rights - as well as encouraging your employer to do this to more people!
Also, if you pay your tax and NIC as a self employed person and HMRC then discovers that you should really be an employee, your employer will need to pay your tax and NIC, but you are unlikely to get back the contributions you have made, meaning tax and NIC has been paid twice. There was a tax case about this a couple of years ago when it was ruked that just because the 'self empployed' person had paid his tax, it did not mean that HMRC could not also go after the employer.

Kelticfox

I've just registered with HMRC, which was surprisingly easy and straight forward!

The HMRC have also signed me up for Self-Employed Workshops which teaches me how to do book-keeping, fill in tax forms etc. Luckily my wife has AAT Qualifications (Accounting) so she can finally put it to some good use :P

I was on £7.70 per hour, but I've raised that to £15 (which is still damn cheap apprently!). Les at the HMRC also advised that if I put away about 20% for tax I'll have no nasty surprises come assessment time. My wife is currently setting up a savings account to shift the Tax money into (no card account thank you very much!)

He also explained about NIC which were a hell of a lot lower then I expected! Only £2.30 a week which also pays towards pension and sickness benefits.

Kelticfox

fengirl wrote: »

By accepting the position and signing up as self employed, you are putting yourself to a lot of trouble and losing employment rights - as well as encouraging your employer to do this to more people!
Also, if you pay your tax and NIC as a self employed person and HMRC then discovers that you should really be an employee, your employer will need to pay your tax and NIC, but you are unlikely to get back the contributions you have made, meaning tax and NIC has been paid twice. There was a tax case about this a couple of years ago when it was ruked that just because the 'self empployed' person had paid his tax, it did not mean that HMRC could not also go after the employer.

I started in early January, I have pretty much no employments right anyway (especially as I was still in probationary period). He could have simply said "It's not working out", which was apprently the other option.

He's also done it to another guy (who does the Health & Safety testing on all the power tools).

TBH as long as I pay my taxes and NI, I'm not too bothered if they go after the company. However if they do I will want my money back

keithff15

yes then you have a contractor sub contractor basis work, my brother David is working as a sub contractor for bostonmageneralcontractors.com Boston general contractors , so my brother is a sub contractor and he too gets a small commission on the products he provide

schneckster

If you're going to accept this situation, then turn it into a proper business in it's own right.

1. You've made a start by registering with HMRC. I would put 30% aside, though, as I think your contact has forgotten that you may have an NI bill on top of your tax. NI is approx £2.75 per week for Class 2 (used to be known as your Stamp). Class 4, which is actually a stealth tax and contributes nothing towards your pension or health care, is based on your profits and is approx 10% of taxable income upto £32k, and 1% after that.
2. Get a book called Tax Tracker from Collins. It's like a diary and helps you keep track of all expenses and income. Very useful come tax assessment time
3. Register to file your self assessment online
4. Find similar services to your's online and have a look at their terms & conditions. Get something similar to that. When you give your boss, who is now your client, an invoice, make sure those terms & conditions are printed on the back... you know the score, light grey text, very small type! Ensure you have payment conditions on there and what happens in the event of non-payment. If he's playing fast and loose with your employment, I bet he will do with your payment, too.

5. The most important of all!!! Get other work away from this guy. If he can turn you into a subby at the drop of a hat... something, I'm certain, is in breach of employment law... then he can get rid of you just as quick now you're self employed. A good rule is to never have more than 33% of your work with one customer. If that customer says bye bye, your business is gone.

Despite the shoddy way you've been railroaded off his books, I actually think he may have done you a favour. You can go on from this and build a business where you can support yourself forever more.

Best of luck, what ever happens,

Schneckster

slipp_digby

keithff15 wrote: »

yes then you have a contractor sub contractor basis work, my brother David is working as a sub contractor for bostonmageneralcontractors.com Boston general contractors , so my brother is a sub contractor and he too gets a small commission on the products he provide

Boston USA very useful. Two posts and two spams nice work.:rotfl: