wages and tax advice please help

richardofengland

Hi
I have always been an employee so I am asking for my son who is just starting in the world of plumbing.

He recently started work for a company who have paid him cash a couple of times, then taken 20% tax and given him no wage slip. Then they said as he has not given them a UTR number they will take 30%, then even suggested he invoices them. They are not a big company and are very good in all other respects and clearly have to resolve this.

My question is how should he progress this so it works correctly for him. He is not earning big money so tax could well be claimed back but he wants his proper and above board. He is also incurring other costs himself i.e. tools, fuel, van etc.

I was told by his friend that you give your employer a UTR number and they tax you 20%. They should give you a letter confirming wages etc and that you should get a wage slip.

Please help thanks

Rich

viktoriya

Hi Richard,

by the sound of it it looks like your son is being treated as a sole-trader, i.e. a self-employed person, by the company he has done work for. the UTR is a unique tax reference that HMRC give to every person working in the construction industry and who has registered with them. it is this number that contractors use to forward the deducted 20% tax.

And because they are treating your son as a sloe trader they will want to be invoiced by him for the money they are paying him and in this invoice your son should aslo state any deductions by the contractor.

Wether your son will be better off working as a sub-contractor or as an employee of the company for tax and benefits purposes is not very easily determined as it depends on too many variables. Each has its perks and disadvantages. If he is confused about what to do I would advise he goes to see a local accountant (around this neck of the woods the first hour of consultation is usually free of charge).

I hope this helps some.

PlutoinCapricorn

This all sounds very confusing.

He should be working either as an employee on PAYE or on a self-employed basis, not a mixture of the two.

20% deductions apply to employees, who should definitely get a payslip, not to mention holiday and sick pay etc and a contract of employment.

Self employed people invoice their clients and look after their own tax affairs: they need to register with HMRC as sole traders. They can offset expenses against their income to reduce tax liability. The UTR is the reference number given by HMRC to people who self-assess.

His status seems very uncertain: does he work regular hours? Can he decide to turn work down? Can he set his own hours? The answers determine whether or not he should be an employee of the company.

richardofengland

Thanks for replies:

He works almost every day on work they have coming in.
He will buy and his own van, take out insurance and pay his own petrol, buys tools etc.

We just want to ensure he is set up in the best way for tax and claiming back expenses. He does not have a letter of employment.

thanks

villabadger

richardofengland wrote: »

Hi
I have always been an employee so I am asking for my son who is just starting in the world of plumbing.

He recently started work for a company who have paid him cash a couple of times, then taken 20% tax and given him no wage slip. Then they said as he has not given them a UTR number they will take 30%, then even suggested he invoices them. They are not a big company and are very good in all other respects and clearly have to resolve this.

My question is how should he progress this so it works correctly for him. He is not earning big money so tax could well be claimed back but he wants his proper and above board. He is also incurring other costs himself i.e. tools, fuel, van etc.

I was told by his friend that you give your employer a UTR number and they tax you 20%. They should give you a letter confirming wages etc and that you should get a wage slip.

Please help thanks

Rich

Hi,

No need to panic - this is usual practice within the construction industry. It appears that the company is treating your son as a sub-contractor, not an employee. Effectively, your son is trading as a sole trader business and 'selling' his time to provide plumbing services to the company (or any other company or private customer who may need his skills).

Your son needs to contact the HMRC to register as a self employed sole trader and a CIS Sub-contractor. He will be issued with a UTR number which must be given to every company who he does work for. The company will use this number to deduct 20% of his earnings which will be paid as tax to HMRC on his behalf. The company should provide him with a monthly statement that records his earnings and deductions. At the end of the tax year, he must complete a Self-Assessment which is where the Accountant comes in.....an Accountant will work out and offset any business expenses against the total tax paid for that year and, hopefully, your son will find that he gets a tax rebate.

If your son isn't registered for CIS then the employing company must deduct 30% - a good reason to get sorted sooner! It may be that your son qualifies for CIS gross status which means that he doesn't get anything stopped but must set aside money from his income for his future tax bill. In my experience, 20% deductions work best for most young men so that it doesn't get spent on girls, beer or cars!

Your son doesn't need to submit an invoice to the employing company but can do if he wants to or if the company asks for one. If he does private work then he should submit an invoice so that he has a record for himself of his income - of course, he won't take cash without declaring it as income!

The thing he needs to do TODAY is get himself some Public Liability Insurance - he won't need Employer's Liability though.

If he doesn't want to do the above then he'd better check his actual employment status with the company - employment contract etc.

Hope this helps.