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Oops, I've failed to tell HMRC I'm self employed

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Comments

  • The arrangement described in this question sounds like employment where the employer is evading PAYE obligations and ignoring entirely UK employment law. The employer may be prosecuted at some stage for these failures.

    The person providing the services is losing basic UK employment rights including holiday pay, sick pay and minimum wage and redundancy pay.

    I would ask to be placed on the payroll retrospective to the date of commencement as deduction and payment to HMRC of PAYE tax and NIC are not the employees responsibility. I would also ask for an employment contract as this is long overdue.
  • HappyMJ wrote: »
    The link says the relationship and what the parties call it doesn't matter but it says an independent contractor is self employed.

    In my work as a computer support engineer the answers to all the first lot of questions are YES and the answers to the second lot of questions are NO so really it point to being employed. I have been provided with a computer and a mobile phone by a client to be able to access the clients helpdesk system and to receive calls from the client's employees due to free calls between company phones. However, I sign a contract for services am self employed and pay class 2 and 4 NI contributions.

    If the OP is providing a contract for services in providing web development services for the company concerned invoicing them monthly and taking on some risk and does not get sick or holiday pay then I would say that points to self employment and the OP should be paying class 2 and 4 NI contributions on the profit of his business.

    Yes - that's the point. You are not 'really' self employed. You are pretending to be so that your employer can get out of their responsibilities. That's why the HMRC have those yes and no questions - so that you can work it out for yourself.
    If you haven't got it - please don't flaunt it. TIA.
  • John_Pierpoint
    John_Pierpoint Posts: 8,396 Forumite
    Part of the Furniture 1,000 Posts
    edited 7 November 2012 pm30 7:05PM
    Employed just like a hair dresser who has to rent the chair, and pays for the materials and gives a commission to the "employer".

    Or at taxi driver in a similar situation?

    The OP might want the "freedom" of not being in a master and servant relationship - in which case I would advise getting more than one customer on the books.

    Naturally a Government, deep in debt, would prefer to have its citizens in a servant relationship, when that generates more tax.
  • HappyMJ
    HappyMJ Posts: 21,115 Forumite
    10,000 Posts Combo Breaker
    edited 7 November 2012 pm30 7:32PM
    Yes - that's the point. You are not 'really' self employed. You are pretending to be so that your employer can get out of their responsibilities. That's why the HMRC have those yes and no questions - so that you can work it out for yourself.
    Luckily for me the courts do not agree with your viewpoint. Andrew Tilson was a part of the Alstom business being virtually like an employee with an ID card from the client, a PC from the client and asking for leave from the client and effectively being told what to do and how do it by the client even given the right to hire and fire employees of the client and was deemed by the employment tribunal to be an employee of Alstom and when his contract was terminated and he was seeking unfair dismissal compensation however the courts eventually overturned that decision and declared him self employed nullifying any employment rights that he had including the right to unfair dismissal. Lord Justice Elias summarised it saying, “This argument repeats the error of asserting that because someone looks and acts like an employee, it follows that in law he must be an employee.”

    In this case the OP's business is web development and I would see him as self employed...I'd advise him to get some more clients and correctly register for tax purposes. It's not too late to do that as the tax due on business profits is not due until January next year.
    :footie:
    :p Regular savers earn 6% interest (HSBC, First Direct, M&S) :p Loans cost 2.9% per year (Nationwide) = FREE money. :p
  • Hi guys, I know there has been quite a bit of discussion here, and I thank you all for helping with the thread.

    It seems after registering and been honest with hmrc there was no mention of any penalty they just told me to get on with it asap, now after 4 weeks I have registered as sole trader and have a self assessment to submit..

    cheers,
    phil
  • persa
    persa Posts: 735 Forumite
    webdev wrote: »
    Hi guys, I know there has been quite a bit of discussion here, and I thank you all for helping with the thread.

    It seems after registering and been honest with hmrc there was no mention of any penalty they just told me to get on with it asap, now after 4 weeks I have registered as sole trader and have a self assessment to submit..

    cheers,
    phil

    I've never seen any late registration penalties levied as long as you get your first tax return in on time, together with settling your income tax and Class 4. There are penalties for filing late and for paying income tax and Class 4 late, but AFAIK, there's no penalty as such for paying Class 2 in arrears. If you're late in paying that, you may need to pay catch up at the current year's rate, but chances are, that will be a whopping 10p extra per week, so barely a penalty. I think that's buried in a Statutory Instrument somewhere, but I don't fancy looking it up on Christmas Eve.

    Re the late notification penalty however, I did get my hands on the below fairly easily:
    Q41. Why did HMRC remove the £100 fixed penalty for Class 2 National Insurance contributions?
    Before 1 April 2010 there was a fixed £100 penalty if someone notified, more than three months late, that they had commenced self-employment.

    During the Powers Review consultation in 2008, customers, accountants and representative bodies stated that this penalty was counter-productive. It could, at a crucial stage, damage relations between HMRC and customers.

    Although the fixed penalty reinforced the obligation for early notification it did not encourage people to come forward. It often meant the first response from HMRC to a new business that approached it was to impose a penalty.

    The new system is more proportionate because a penalty will be related to the amount National Insurance contributions unpaid because of late notification.

    Hope you have a lovely Christmas. :)
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