Self-employed but paying PAYE

beefturnmail

Hi,

My wife has started self-employment about 6 months ago. She has several clients and in most cases invocies them direct and gets paid gross without any tax deduction. However she has one client who she has worked for one evening per week for the last 3 months or so. She invoices them, but then she gets paid through their payroll and has PAYE deducted. I checked and she actually has a written contract from them stating she is a 'casual worker', with no obligation to be offered work or to take work offered. We are just wondering how this works for tax purposes - I presume the tax paid under PAYE will be deducted from total tax liable, but what about claiming for expenses with regards to work fot his client- i.e. travel to the client?

Have trawled the HMRC website and web and can't seem to find a straight answer - is this a 'grey'; area? Any advice much appreciated!

George2000_2

Any tax paid will be deducted when the SA return is processed, as for expenses she needs to speak to her local office but its likely she can claim mileage from the employer as a benefit and they will feature this on the P11Db they submit in May and she will then pay tax on these benefits.

PasturesNew

If they're paying her on PAYE, she should be getting paid holidays too ... so check that.

PlutoinCapricorn

Many people do self employed work on top of being employed and paying income tax and NI under PAYE. When they self assess, there is a section for income from employment and tax paid during the tax year: the figures come from the P60 or P45. Deductible expenses relate to non PAYE work: employees are expected to meet normal travel costs out of their own pockets. However, they do get sick pay, holiday pay etc.

The only strange thing here is invoicing for 'casual work': employees do not normally invoice their employers, although they may fill in timesheets if they work irregular hours.

Pennywise

Being a "casual worker" doesn't make her self employed. The "employer" is responsible for deciding who is and who isn't an employee, subject to the HMRC rules. Just because she is self-employed for one job doesn't mean she's self employed for them all.

"Self employed" is actually a very bad term. For tax purposes, "self employee" means being in business.

By putting her through the payroll, they've decided she's an employee. By doing so, they've also left themselves open to be liable to pay her holiday pay, sick pay, etc.

As an employee, she can't claim travel expenses from home to work.

She needs to talk to her "employer" and find out why they're doing it - it could so easily be a mistake in the accounts/payroll department!

usedandabused

sounds to me like deemed employment, alot of self employed people at my old work place was added to the payroll to avoid the company getting into trouble with HMRC about avoiding correct NI.

beefturnmail

Thanks all for help. The client is a bit useless administratively, so I've no doubt they've either put her on the payroll by mistake or are just doing it to cover themselves. However, I notice on the tax return, that there is a box 81 - 'other tax taken off trading income' - can the tax paid not simply come off here?

fengirl_2

There are situations where an employment is considered to be an office, ie the Parish Clerk, where the office exists even though no one is filling it at the moment. This happens a lot in academic situations, so if your wife is doing some lecturing at the lcoal college or Uni, the institution may have been instructed by HMRC to treat all lecturers and the like as office holders and thererfore be subject to tax deduction at source. Many large univeristies have a speacial 'sub-payroll' through which they run these payments. If this is the case, then the usual self employed expenses cannot be offset against this income and the noromal Schedule E 'wholly exclusively and necessarily' rules would apply.
In this situation, the fess need to be shown under the other casual earnings section, along with the tax deducted. They cannot be included with trading income. Of course, nothing to stop you slipping the associated expenses in with the other self employed expenses and hoping you dont get invesitagated. The worse that can happen is having to pay the tax and interest.