Tax Inspection Coming and Freelance Workers Concerns

Savvy_Sue

I think it's quite rare to be jailed for tax fraud. I'd say you have to try really hard for that: if you cooperate then yes, you could be fined, but not jailed!

Horace

Your events business isnt the only one that is struggling - many of us are in the same boat, I have worked for next year but none for this so I am scratching around looking for work, signing on and doing what I can to keep going until next year when I will have work around the Olympics. I wouldnt walk away from the business altogether - sure we have tough times but things will certainly be picking up next year.

antrobus

What's done, is done. HMRC are coming next Friday, so there is no earthly point in doing anything until they have been and issued their pronouncement.

Irn_Bru wrote: »

...
I have done a bit more digging; the majority of people, who do work for other companies as well, have been invoicing us for the amount due to them so it looks as if this is all okay - all but one has a VAT number on it so I assume this means everything here is above board. However there are about 9 individuals who are either students (who work part time, e.g. in bars, shops etc so I assume PAYE) and full time employees of other companies (again PAYE, I assume) who are paid as I described in my post. All but one has been paid by cheque. We know everyone's name, address and telephone number but have no NI numbers....

So you've scoped out your 'problem'. There should be no issue where you have invoices; HMRC will be interested in those 9 individuals you have hired as 'casual labour'. Those are the ones they will ask about. Be 100% open and honest with them, give them everything they ask for. And await their response. Which may well arrive in writing sometime after the visit.

On the facts stated, you will not be prosecuted for tax fraud. There's actually no point in getting worried about what might or might not happen until HMRC have made their decisions. The worst case scenario is that they will ask you for some money, and until they've carried out their work there is no way of knowing how much (if anything) they will ask for.

Savvy_Sue

That sounds like very good advice. To which I'd add, get the person responsible for this in to meet the tax man too. Far better to have them giving clear answers than you saying "err, umm, not sure, Fred always does this and said it was OK to do it this way." Even if Fred is giving the wrong answers, at least they should be clear answers.

vax2002

No genuine self employed person would have any problem supplying you a national insurance number unless they are pulling a scam, it is for record purposes only and will only be used in the event of a tax investigation.
The failing to notify the tax office is not on their heads, it is on yours, without a provable link as to who you have paid this money to they will simply knock it off your accounts so you pay the tax.
If they are unhappy to provide you with a NI number then they will have 30% tax deducted at source, it soon persuades them to offer one up.
I have had all sorts of clever comments why paying freelances such as, why are you paying my national insurance stamp, to which I reply, no if you can provide me with a class 4 ni certificate, which will have your NI number on, if not then yes I will be as you will be paid PAYE and tax deducted at source.
An invoice is not sufficient to prove identity and neither is a lot of ID sources these days, they can feasibly be bought .
A NI number traces that person in the event of a tax enquiry and as long as they are registered self employed and paying class 4 NI what on earth could they have to worry about ?
I think you will find that those harping off or refusing to provide one will also be unable to provide you proof of self employment and as you can be Goaled for employing people self employed who should be paid PAYE as they are not self empolyed, I prefer to make sure that both I am correct in paying this person as self employed which is a tax status not a kudos one and I am not going to end up paying their tax for them when the Inland revenue can not find them and assume I made them up to avoid my tax liabilities.

theesel1994

I think a mountain may being made out of a molehill here. This sounds more like a random "Business Records Check" than a tax investigation. And I'm fairly certain they have said there will be no fines to pay in the first phase of this new scheme. Merely advice on keeping records correctly.

FatAndy

vax2002 wrote: »

No genuine self employed person would have any problem supplying you a national insurance number unless they are pulling a scam, it is for record purposes only and will only be used in the event of a tax investigation.
The failing to notify the tax office is not on their heads, it is on yours, without a provable link as to who you have paid this money to they will simply knock it off your accounts so you pay the tax.
If they are unhappy to provide you with a NI number then they will have 30% tax deducted at source, it soon persuades them to offer one up.
I have had all sorts of clever comments why paying freelances such as, why are you paying my national insurance stamp, to which I reply, no if you can provide me with a class 4 ni certificate, which will have your NI number on, if not then yes I will be as you will be paid PAYE and tax deducted at source.
An invoice is not sufficient to prove identity and neither is a lot of ID sources these days, they can feasibly be bought .
A NI number traces that person in the event of a tax enquiry and as long as they are registered self employed and paying class 4 NI what on earth could they have to worry about ?
I think you will find that those harping off or refusing to provide one will also be unable to provide you proof of self employment and as you can be Goaled for employing people self employed who should be paid PAYE as they are not self empolyed, I prefer to make sure that both I am correct in paying this person as self employed which is a tax status not a kudos one and I am not going to end up paying their tax for them when the Inland revenue can not find them and assume I made them up to avoid my tax liabilities.

I think this advice is more relevant to the construction industry than the events organising industry. There's no equivalent to the CIS scheme so outside of the construction industry there's no mechanism in place to deduct tax from suppliers and make payments to HMRC on their behalf.

I don't think there's any real need to get an NI number from any freelancers either. It's quite likely in this day and age they'll be incorporated anyway so you'll be employing a limited company rather than a sole trader and limited companies don't have NI numbers.

If in doubt ask for an invoice and tell them you'll make the payment by sending a cheque to the address shown on the invoice.

Students employed on a casual, part-time basis will unquestionably be employees and should be treated as such (i.e. request a P45, P46 or ideally a P38(s)).