New self-employed guidance

GavB79

I am led to understand that self-employment rules are changing, or at least being enforced more strictly.

Is it the case that a self-employed person who works for only one company can be considered to be employed by said company (I believe this is true) and that if the self-employed person then fails to declare earnings and pay tax, the tax liability falls to the employer? (This is the bit I am unsure on.)

I would be grateful for a brief summary of this scenario, in laymans terms.

Thanks.

Uncertain

GavB79 wrote: »

I am led to understand that self-employment rules are changing, or at least being enforced more strictly.

Is it the case that a self-employed person who works for only one company can be considered to be employed by said company (I believe this is true) and that if the self-employed person then fails to declare earnings and pay tax, the tax liability falls to the employer? (This is the bit I am unsure on.)

I would be grateful for a brief summary of this scenario, in laymans terms.

Thanks.

Yes, you are absolutely right.

Basically it is HMRC who decide (for tax purposes at least) whether somebody is an employee or self employed. There are a number of criteria and it is explained in some detail on their website. There is (or used to be) an interactive questionnaire to help you work out what view they are likely to take.

What the employer and "employee" decide has nothing to do with it.

As you say, if the employer gets it wrong they can be liable for the tax and NI the "employee" should have paid.

For this reason a lot of larger employers will only pay invoices for an individual's time if they first deduct tax and NI. If the person really was self employed then he has the hassle of claiming the money back from HMRC.

Interestingly it is possible to have a situation where HMRC take the view that somebody is an employee but an employment tribunal says they are self employed so can't claim employment rights!

GavB79

Thanks. And the self-employed person can choose to form a limited company to invoice through to avoid uncertainty, correct?

Uncertain

GavB79 wrote: »

Thanks. And the self-employed person can choose to form a limited company to invoice through to avoid uncertainty, correct?

At the moment yes. There is talk / rumour that this may be tightened up on but who knows.

It used to be that becoming VAT registered was sufficient but the current thinking is that is no longer enough if the person is in most other respects an employee.

PlutoinCapricorn

GavB, where did you hear this? Surely it would not apply to someone who worked intermittently for just one client i.e, did small assignments for different amounts from time to time?

Uncertain

PlutoinCapricorn wrote: »

GavB, where did you hear this? Surely it would not apply to someone who worked intermittently for just one client i.e, did small assignments for different amounts from time to time?

As stated, it depends on a whole number of criteria. For example, did they supply their own tools and materials, did they work for other "clients", who paid for time and materials spent correcting mistakes, did they have a job title, was it the type of work normally done by an employee etc etc.

Have al look at the HMRC website.