I have not registered as self employed

1984student

Hello, I have not registered as self employed yet I am working for a company in which you have to be self employed. I didn't understand that I had to pay national insurance tax/contributions every month and as I assumed I would be earning under the amount that requires you to pay tax I never looked in to it.
Now it has been made clear to me that I should be paying N.I contributions no matter what I am earning and that I should be registered officially as self employed either way I am deeply worried about the mess I've gotten myself in to.

Can I have some advice on cleaning this mess up?
I have been working as an 'actor' for a company on and off for 1 year. I started July 2011, and finished September 2011, I returned briefly for one week in October 2011, I then returned for a 3rd time to work there in April 2012 and have been working there up until now. All the while I should have been registered as self employed and I haven't been.

I have been paid by check each time I have worked for them by 'invoicing' at the end of the month.

In total I would estimate that I have earned not much more that £5,000 from then although that is an estimation.

I have just enrolled to be a part time student again and have used the money I earned to pay the fees.

I need to sort this out but I don't know what step to take next and I'm terrified there will be huge fines or I will face prison for tax avoidance.
Can someone please advise me on what to do?

Thank you for any help.

* I might add that the periods in which I wasn't working for this company I was either unemployed or working as an employee for another company where my tax and national insurance was paid by that company.

PlutoinCapricorn

Firstly, forget about going to prison. Deliberate fraud on a huge scale with VAT included might result in a prison sentence, but someone who does not earn enough to pay tax would not be treated like that.

When did you return for the third time: was it after April 6th 2012?

1984student

Hello, thank you for your help...It would have been after the 6th of April 2012, more towards the end of the month.

PlutoinCapricorn

You can certainly afford to spend a little more time getting to the bottom of this and making some decisions. There will be no huge fines or interest charges as you have not earned enough to pay tax, but there could be a penalty for late registration. There are also just 2 tax years involved, one of which is only half way through. The deadline for the 2011/2012 tax year is Jan 31st 2013.

You may not know that while people who get income from which tax has not been deducted at source are required to self assess i.e. complete a tax return, they are not always required to register as self employed. A one off or two off payment with no intention of actually looking for any more such work does not require registration, but anyone who hopes to continue getting this work

So the next question is whether or not you hope/expect to get any more of this work. Will it carry on for some time?

1984student

Yes, I would like to continue to be employed by this company and I am now classed by them as core staff rather than seasonal meaning I will work for them every month of the year.

This will mean that I will have to be registered as self employed yes?

Can you advise on any of these questions?

I am almost certain I will not have earned enough to pay tax, but how will my missed N.I contributions be calculated?

I understand I will have to pay a fine for not registering, but I have cleaned my self out by paying my course fees. Will I be able to pay this fine in stages?

Does my status as a part time student have any affect on this?

Will my company be made aware that I have not registered my self as self employed? I am worried that this will result in me being 'let go'

Should I just phone the HMRC and confess all? I am concerned they will ask me for details of all my incoming and out going money over the past 2 years and I haven't a clue how I will prove all that.

Thank you again

PlutoinCapricorn

I think that the penalty for late registration is £100, but you can sometimes get this waived - but ignorance of the law is no excuse!

In your position, I would register as self employed - you can do this via HMRC's website, over the phone or via a form you can download. http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1097427618&r.l1=1073858805&type=PIP

The start date would be the date you actually started working in July 2011. This is the current tax year where self assessment is concerned. They will then ask you to complete a tax return for 2011/2012. If you do it on the phone, you could explain that you didn't know if you would get much work or thought that as no tax was due it was not necessary. It is very important to keep all paperwork: P45s, P60s, benefits received, invoices, bank statements, evidence of business expenses etc.

You have raised another point: if you work for the same company every month with no end date, HMRC might classify this as "false self employment". Some companies try to avoid their responsibilities by telling their staff to look after their own tax and NI: this way they do not have to pay holiday pay, sick pay etc. HMRC does not like this. So if you are core staff, why are you not on the payroll?

1984student

I have a very strong feeling that that is what my company is doing, it is something that non of the 'actors' (I use the actors in quotation marks as we are not classed as actors on contract to avoid them having to answer to Equity) are happy about but I can't complain as I don't want to be 'let go' I really need this job.

I was seasonal staff, as in contracted to work the high tourist season of summer 2011, and then I was asked back in the school half term high tourist season of October 2011 but I didn't sign a new contract. I was them asked back for a 3rd time for the high tourist season Easter 2012 and I have since been allowed to stay on working there, being given shifts each week and invoicing at the end of each month.

Should I say all this to HMRC? Or should I register as a self employed actor and try to leave my company out of it? I'm pretty sure that isn't the right thing to do as it's all this avoidance of the facts that has led me in to this mess.

I have no filling system what so ever and I'm terrible at keeping track of my documents etc which is why I didn't face that I had to become properly self employed in the first place, I just really needed the work so I kept turning up and invoicing thinking I'd sort it out some day. But then the guilt started keeping me awake at night!

What will HMRC do if I can't provide all the documents they need? I am so worried they will contact my company and I will lose my job, that thought makes me want to bury my head in the sand about it all again...

grey_gym_sock

that fixed £100 penalty has been abolished - http://www.hmrc.gov.uk/about/new-penalties/faqs.htm#41 - so there is now only a penalty if NI (or income tax) is paid late.

if you earned less than £5,315 in the tax year 2011/12 (the year ending 5 april 2012), then you can apply from exemption from Class 2 NI, under the "small earnings exemption". i'm not 100% sure if you can apply for exemption when you're late, but you might as well try registering as self-employed and telling them you want to apply for exemption at the same time. - that's unless you'd prefer to pay Class 2 NI, which some ppl do because it can give you entitlement for some benefits (especially, state pension).

if you can get exemption from Class 2 NI, then you wouldn't have to pay anything. (well, unless you have other sources of income - because the purposes of income tax, all sources are added together.)

if you paid Class 2 NI, it was £2.50 per week in 2011/12, and is £2.65 per week in 2012/13.

if you've been paid by cheque, could you perhaps work out how much you've been paid by looking through bank statements to see what you deposited when? if the total you've received in low enough to have no tax due, it doesn't actually matter if you have no record of expenses. going forward, you should keep basic records of both income and expenses, so you can tell hmrc the total of each and have some evidence to back it up if necessary.

grey_gym_sock

on whether you're really self-employed ... i agree that what your "employer" is doing looks a bit dodgy ... however, when you register as employed, they won't ask who the "employer" is: they just want your details, the nature of your business, and the date you started.

PlutoinCapricorn

Please do try not to worry and panic! Things are not nearly so bad as you seem to think they are. There was a recent case on this forum of someone who had not self assessed for 14 years, and the estimated tax owed was around £100,000.00 - and of course the fines, interest etc, would add a lot to this. Worse yet, he had been charging his clients VAT although he was not registered. There was no money to pay all that would be due, and fraud was involved so he would almost certainly go to prison if he confessed to HMRC.

I hope that you are not worried about your own case now. You need to deal with one point at a time.

1) When you register, HMRC will not want any figures or records. They will just want name, NINO, address, trading name and address (which for actors would be the same) and start date. You will get a letter within a few weeks saying that you will need to complete tax returns and asking for Class 2 NI payments or an exemption claim. You then have a breathing space during which you need to get details of your income from all sources for April 2011/2012.

2) When you complete the tax return for 2011/12 (I advise doing this online for many reasons) you just give totals. You do not need to supply any records, although it is best to have supporting evidence just in case. There are boxes where you can explain anything that might trigger them into enquiring into your affairs.

PlutoinCapricorn

Other points you raised:

if you do decide to register as self employed (which is the norm for actors) then if your 'employer' asks about your affairs, you will be able to say quite truthfully that you are 'legal' and are thinking about sorting out your first tax return as you don't want to leave it until the last moment. You can play around online inputting your figures and submit when you are ready.

HMRC's procedures are mostly automated. They are not interested in the huge number of people who are registered as SE but do not earn much - mystery shoppers and people who buy stuff to sell on eBay for example. What might 'trigger' them is someone who reports a very low income and no benefits - what are they living on? They would be very unlikely to approach your employer. If they decided independently to audit your employer and found core staff being treated as self employed, it is the employer who would pay the penalty.