Going self employed

highlandgurl

My OH is a tradesman working for a small business. As the construction industry is so unreliable at the moment his boss has asked if he will go self employed. He will get a higher hourly rate but be responsible for paying his own tax, etc. I guess this benefits his employer as he can then employ him when he has work but not have to worry about issuing P45s and whatever else when they dont have work on. He has worked for this company for over two years but they have been in and out of work since last November. There are also benefits to my OH by being self employed such as claiming tax back on tools and other expenses and also being able to take on other work.

I'm trying to find out how this will affect his CSA payments. He currently pays weekly in cash pay ins at bank (with arrears). If he becomes self employed how will the CSA calculate what he is due to pay? Will they give him some time to establish himself as a business and then look at his accounts? A benefit of his doing this now is we are having a baby soon so will probably be due a reassessment because of that anyway so might be as well doing this at the same time but after the length of time it took to get his first assessment done, don't want him to build up even more arrears waiting for another.

Anyone got any experience of going from being employed to self employed while paying CSA? Thanks

marksoton

Is he setting up as a limited company or is he going to be CIS4 ?

highlandgurl

Sorry have no idea - don't know what that means!

marksoton

It's the two different types of self employment in the construction industry. Depending on which one he uses will affect what he can claim for tax wise and therefore his child support liability.

If you go to the CSA website that has details about how they calculate child support before the first years accounts are done.

highlandgurl

Ok, will have a look there. Thanks

marksoton

Here is the link :

http://csa.gov.uk/en/setup/self-employment.asp

CIS4 status allows you a lot less leeway in how you conduct your tax affairs. Your OH is probably a lot better off setting up as a limited company. But i guess that depends on whether the firm he is doing the work for are happy with that.

Light_Speed_Cruiser

highlandgurl wrote: »

Anyone got any experience of going from being employed to self employed while paying CSA? Thanks

In 1998-2001 I was employed by a holiday park as an professional entertainer later becoming the manager and paid CSA by DD. I became s/e and had an agent assign my work. The DD continued with minimal change and eventually reasessed on certified tax accounts.

That worked well until the CSA decided that employing people as stage-hands and co-performers is classed Diversion of Income. They also construed I am in a sexual relationship with a backing singer and this is classed as Living Together for the purpose of housing costs. The CSA ultimately ended up with zip, and a rather large bill of costs to pay.

Somebody on this forum did comment about income for the purpose of income tax is different from income for the purpose of child support suggesting the CSA can disregard certified tax accounts. The CSA may have its own rules on determinining what counts as income, so get expert advice, it's available everywhere.

Light_Speed_Cruiser

marksoton wrote: »

Your OH is probably a lot better off setting up as a limited company.

And make sure his Ltd Co is not supplying just one client.

highlandgurl

Yes we will take care to consider all options before changing things. We are well aware of the hassle CSA can cause. He already had problems from when he was first assessed as he has a part time business that he is self employed in already (totally seperate from his construction work) and as he hadn't made a profit in the tax year the CSA were interested in he didnt declare it as income on the form and is now being taken to court for fraud.

We won't be ignorant like that again.

LittleJohn

Light_Speed_Cruiser wrote: »

And make sure his Ltd Co is not supplying just one client.

Sorry, do not want to hijack this thread completely, but could you expand on what you mean by this comment and how it affects payments?

Many thanks

LJ

Soubrette

LittleJohn wrote: »

Sorry, do not want to hijack this thread completely, but could you expand on what you mean by this comment and how it affects payments?

Many thanks

LJ

I think it's to do with whether HMRC would consider you as employed or self employed.

IR35 allows HMRC to 'see through the veil' of incorporation and you can be judged as an employed person if you do not fulfil certain 'tests'. These used to be something like:

1. Intention of both parties
2. Does one person have to do the work or can the Ltd company supply anyone.
3. Amount of risk undertaken by the company - do they have to correct work done incorrectly for free.
4. Amount of investment undertaken by the company - do they use their own tools etc.
5. Is there any obligation for work to be offered (by the employing company) or to be taken (by the ltd company).

None of these tests are a standalone get out of jail but a company does not have to have passed them all to be deemed as offering a contract of services. Things are also slightly different for those in the building industry.

Things may have changed since I dealt with this issue 10 years or so ago.

Sou