Self-employed but only working for one company?

Uncertain

tony1947 wrote: »

Hopefully this posting isn't seen as hijacking the OPs thread but as all the comments are so recent and very relevant to my wifes future working arrangements hopefully it won't be frowned upon.

My wife is currently employed as a director of a small family company with all the "normal" remunerations and taxes that go with being employed. Until a few days ago we had always assumed she would simply retire next year when she is 60. I have posted on other threads seeking advice on if we should defer her private pension and live off my income etc, she will only be eligible for state pension when she is 61yrs 3 months. Our view has always been that she will leave her employment and be retired either with or without a pension.

The reason for the post is that her employer has asked "would she mind doing a few days a month to help with the transition" Until reading Kikis post re the HMRC definition of being self employed we had simply assumed she would be as she is no longer working in the same sense as she was before. The problem is that she doesn't seem to fulfil all the criteria for either being employed or self employed.

The best laymans description of what she would be doing is a non executive director but I am not sure if that means anything to HMRC. We understand she will have to pay tax on any earnings but what is quite galling is that the employer and my wife would have to pay NICs (we think!). This doesn't seem right when if she simply stops working as we always thought she would she already has sufficient contributions to obtain her full state pension.

I understand the comments about getting advice from the company accountant but we don't want to be in a situation where there is any ambiguity with HMRC so how does one go about finding out the best way for the company and my wife to structure the arrangement that benefits all concerned including the government who potentially will get more tax than they would have.

We would be quite happy to raise invoices and keep accounts etc and complete all the other minutiae associated with being self employed.

Thanks for any comments and apologies to the OP if this posting takes us off piste.

The other approach here is just to do it if the firm are happy with the idea and your wife is willing to do the self employed record keeping.

The may sound hard but if HMRC take issue (unlikely for a few hours per week for a year or two) it will be the firm that is in trouble and not your wife. Providing she declares the income she is acting correctly.

Who knows, she may be asked to do some similar work for other firms which would help the self employed argument.

KiKi

Tony1947

Re NI: as a PAYE employee she would stop paying Class 1 NICs when she reaches state pension age. As a self-employed person she would stop paying Class 2 NICs at state pension age (£2.40 a week) and stop paying Class 4 NICs (proportion of her earnings) at the beginning of the next tax year. Either way, she won't have to pay NI, so don't worry about that.

More here on NI if you need it: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/NationalInsurance/IntroductiontoNationalInsurance/DG_190048

Re the set up: if it is only a few hours and for a set period of time, then HMRC are unlikely to take issue with it either way. I'd say you have a choice. If they are happy to keep her on PAYE, then she will get the company benefits of sick pay, AL etc. On the other hand, as Uncertain says, being SE means she can claim expenses and increase her non-taxable pay that way, and also gives her the set up to do other SE work if she wants (as a consultant etc).

I wouldn't recommend a PAYE zero hours contract as she would lose some benefits associated with employment such as leave, but if her hours are irregular and unpredictable then she may have no choice (a zero hours contract means the company can ask her to work as and when required, with no guarantee of work).

HTH, ask any more questions if you need to.
KiKi

getmore4less

I wouldn't recommend a PAYE zero hours contract as she would lose some benefits associated with employment such as leave, but if her hours are irregular and unpredictable then she may have no choice (a zero hours contract means the company can ask her to work as and when required, with no guarantee of work).

Absolutly no need to lose any benifits you can have what you like included in your terms and some will be statutory anyway.

The NHS Zero hours include holiday pay, ssp, pension and maternity and probably more.

Retire and retrun on zero is a common approach in the NHS.

KiKi

getmore4less wrote: »

Absolutly no need to lose any benifits you can have what you like included in your terms and some will be statutory anyway.

The NHS Zero hours include holiday pay, ssp, pension and maternity and probably more.

Retire and retrun on zero is a common approach in the NHS.

Fair enough - I wasn't aware that some zero contracts hours include those. Many council ones and private company ones don't include any benefits at all!

I wouldn't say that you have have 'what you like' included, though - that depends on whether the company are happy to give them to you!

KiKi

anamenottaken

tony1947 wrote: »

My wife is currently employed as a director of a small family company with all the "normal" remunerations and taxes that go with being employed. Until a few days ago we had always assumed she would simply retire next year when she is 60. I have posted on other threads seeking advice on if we should defer her private pension and live off my income etc, she will only be eligible for state pension when she is 61yrs 3 months. Our view has always been that she will leave her employment and be retired either with or without a pension.

The reason for the post is that her employer has asked "would she mind doing a few days a month to help with the transition" Until reading Kikis post re the HMRC definition of being self employed we had simply assumed she would be as she is no longer working in the same sense as she was before. The problem is that she doesn't seem to fulfil all the criteria for either being employed or self employed.

The best laymans description of what she would be doing is a non executive director but I am not sure if that means anything to HMRC. We understand she will have to pay tax on any earnings but what is quite galling is that the employer and my wife would have to pay NICs (we think!). This doesn't seem right when if she simply stops working as we always thought she would she already has sufficient contributions to obtain her full state pension.

If she is employed, rather than self-employed, then she would no longer be liable for NI contributions. [Note that "would" means when state retirement age is reached, not immediately if that age has not been achieved.] Even if she were 99, the employer would still have to pay employers NI.

If she were self-employed, her income would be assessed for NI until the end of the tax year in which she reached state retirement age.

As far as having already made sufficient contributions to obtain a full state payment - NIs are not just for pension purposes.

tony1947

anamenottaken wrote: »

If she is employed, rather than self-employed, then she would no longer be liable for NI contributions. Even if she were 99, the employer would still have to pay employers NI.

I am afraid this is not correct. As my wife only reaches state pension age when she is 61 and 3 months if she went back to work when she is 60 she will pay Class 1 contributions. I think the confusion is because since she was in her 40's she always assumed she would "retire" at 60. In fact to be more accurate she wasn't retiring next June but simply finishing work.

However, I think we have resolved the questions I raised earlier as I contacted HMRC and described the scenario as honestly as I could and got an unequivocal response that she was self employed and we should notify them once she finished work in June. She would then go onto Class 2 NI contributions (£2.40 per week) plus 8% on anything over £5750 (I think that was the figure but may be wrong)

Thanks for all the comments. Hope this helps anyone else in the same position as us.

getmore4less

KiKi wrote: »

Fair enough - I wasn't aware that some zero contracts hours include those. Many council ones and private company ones don't include any benefits at all!

I wouldn't say that you have have 'what you like' included, though - that depends on whether the company are happy to give them to you!

KiKi

I think they should include holidays and people should insist on this based on hours worked(rolled up is OK as long as it is itemised and you do actally take time off).

AFAIK SSP is also compulsory for all workers but in many cases it seems to be the practice that sick people don't get given work, but if you work regular hours then you should be getting SSP.

Not sure on the pension rules.