Can you take someone on, on a self employed basis?

TAG

Hi
The title says it all really.

My husband has started up a small business which is going really well at the moment.

However, he needs to take someone on to help with the lifting and spotting of items to progress the business further. Oooo that sounds a bit iffy put like that. But honestly it's not.:)

Anyway, can he take someone on on a self employed basis or would they need to be employed by him? Obviously if he employed him there would be employers liability ins plus anything else?

Any help would be appreciated.
Many thanks

fengirl_2

Will the person be working the hours your OH dictates in the way he dictates, using your preimses and equipment? If yes, they are probably an employee. Can the person send someone else to do the job and are they risking their own cash? If no, then they are probably an employee.
The penalties for getting this wrong are not worth the risk. Contact the status inspector at your tax office for advice.

Owain_Moneysaver

An alternative may be to use an employment agency to provide an appropriate member of staff as and when required.

Employee liability insurance may still be required, though.

paulofessex

Owain_Moneysaver wrote: »

An alternative may be to use an employment agency to provide an appropriate member of staff as and when required.

Employee liability insurance may still be required, though.

Thats sounds like a good idea.

oompahloompah

fengirl wrote: »

The penalties for getting this wrong are not worth the risk.

Sorry to hijack the thread, but this caught my attention.
A close friend has been doing some work as a consultant for a company on a self employed basis for a while now. They pay her a set monthly fee, regardless of how much she does in that particular month - e.g. whether she works for 10 days or not at all, she gets the same value cheque each month. They also pay her telephone each month, and any associated expenses (travel, materials etc) with a particular project, so she's not out of pocket for anything. She doesn't do work for anyone else.
I've said I think she should be employed by them, but she's insisting because she fills in her tax returns and pays via self assessment she's fine (although to my knowledge neither her nor the company have confirmed this with HMRC). She is also in receipt of benefits for her disability, and the benefits agency know she works. (not sure if that is relevant or not)
Can you elaborate a bit more on the penalties please? I'm worried for her now. Thanks.

anamenottaken

Hi,

You picked up on fengirl's comments about the penalties for getting it wrong.

Because she is completing tax returns, what you describe your friend doing would not mean she would face any penalties - other than not benefiting from employment rights like statutory sick pay or redundancy pay.

There is no reason why a self-employed person cannot be paid a retainer - but does she invoice for that as well as her expenses?

The penalty for getting it wrong, ie the employer not operating PAYE if your friend were actualy an employee, would all fall to the employer - and your friend could even get a tax rebate as that retainer would be considered as having been paid net of tax and NI and the employer would have to pay HMRC.

oompahloompah

anamenottaken wrote: »

Hi,

You picked up on fengirl's comments about the penalties for getting it wrong.

Because she is completing tax returns, what you describe your friend doing would not mean she would face any penalties - other than not benefiting from employment rights like statutory sick pay or redundancy pay.

There is no reason why a self-employed person cannot be paid a retainer - but does she invoice for that as well as her expenses?

The penalty for getting it wrong, ie the employer not operating PAYE if your friend were actualy an employee, would all fall to the employer - and your friend could even get a tax rebate as that retainer would be considered as having been paid net of tax and NI and the employer would have to pay HMRC.

Thanks. The employer pays her regardless of holidays, sick days etc; she does invoice them monthly for her fee; the telephone bill is sent directly to the company, she doesn't even see it, and she lets them know what materials etc she needs for a project and they buy on her behalf, travel expenses are given out of petty cash when she hands over tickets or receipts.
I'm relieved to know she shouldn't receive a penalty, thanks for that.

TAG

Thanks for that fengirl,

Just to clarify a bit further in view of the query that oompahloompah has raised.

If my husband is invoiced by this person at the end of every week for the work that has been provided. And, if this person freely chooses when he works with my husband then he wouldn't be directly employed by my husband would he?

I've looked on the Business Link website but there doesn't appear to be much clarity on the situation.

Thanks again

Annisele

HMRC publishes guidance as to how to decide whether somebody is self-employed.

If the person your husband takes on (I'll call him 'Joe' for ease) can freely choose his own hours, then that's a factor that points towards Joe being self-employed. However, it's not conclusive. If your husband requires Joe to do the work himself (and not, for example, send his brother to do it) then that would be a stronger factor suggesting that Joe is in fact employed.

Have a look at the questions on the HRMC link, and see if they help you decide where Joe falls.

schneckster

There was a courier company down south that got into trouble... in fact, this put it under. They had a load of drivers who were all self employed and all submitted invoices. But none of them worked for anyone else. Some had their own vans, others used company vans. But all did self assessment returns.

HMRC decided all should be employees and reassessed their taxes for the preceeding however many years... and demanding backdated taxes as a result. The company got hit harder... they had backdated employer NI to pay plus interest, and a large fine!! They went bust.

As a self employed driver myself, at the time, I rang HMRC to make sure of my status. I had my own van and did self assessment, but unlike the drivers at the now deceased company, I also had a client list and regularly invoiced several different companies, plus ad hocs when I could get them. And I could decide when to work or not (obviously, I rarely turned a job down, but it was still up to me).

The Helpline gave me a useful rule of thumb...work for more than one client (preferably 3, she said) in a year, and you're self employed. Only work for one, and you should be an employee. My 7 regulars and 15 ad hocs kept me clear of such problems.

I hope this was helpful, but since this was about 5 years ago, people may say things have changed and this is wrong. Fair enough. But I think that rule of thumb I was given may still be relevant.

Best of luck, anyway.

Schneckster

Savvy_Sue

I think that rule of thumb doesn't really go far enough in either direction. After all, plenty of people are employed in more than one part-time job - what makes them employed rather than self-employed is that they have to turn up when they've agreed, and they can't send anyone else.

Equally, you might have only one 'job' or client, but still be self-employed. Might be harder to establish, but should be possible in some situations.

I doubt the OP could get away with a 'self-employed' person, however.