Self employment issue.

sar050680

Hi guys, hoping someone can help!

My brother and I have been employed by a company for 6 months or so, when we arrived at our yard Monday morning we were called in to a meeting (all the employees were individually) and asked/told that we can either go self employed or take a 20% reduction in our wages as the company is not making money as it was/should be.

As we have never been self employed we are obviously wary, I have no problem doing it and am willing to look into it to get it right.

I have a few questions if anyone can offer any answers or advice I'd be really grateful, thanks Paul.

1. Can a company just do this and want an answer by the end of the day?
2. I know I have to register to go SE but do I have to register for VAT?
3. Will my company have to pay me for holidays accured from Jan 1st to next week, which is when we go SE? (I have some left)
4. We were given a leaflet on a CIS company, who will sort out our TAX should we reqiure them to, I was told it costs £160 per year, then read on thier website it more like £16 per week, my bro in law pays £20 a week for different company. Is £160 a year plausable?

Thats about all I can think of now, I've probably more to follow.

I apologise for going on, Paul:)

claret_mike

Basically, if it is the same job you were doing, I doubt that HMRC would agree that you are self employed. It looks like a ploy to avoid having to pay NI and other costs of employing people.

http://www.hmrc.gov.uk/employment-status/

The rights of an employed person and self employed are massive and far wider reaching than what goes in your pocket each week/month.

For example - if the company liquidates and you are employed, you can claim wages from the government. If you are self employed, you just become another creditor against the company.

Do you have sick pay/paid holidays? Will you still get these on a self employed basis?

The fact that the company is asking you to do this, doesn't look good.

306chris

All I can say is that I was once self employed but only working for one company and never again.

No (paid) holidays, No sick pay, no guarantee of work. When the business was doing well then I earned well if we went through a quite patch then so did I. Christmas was an awful time as my wages dropped to the equivalent of less than £4 an hour for the work done.

As for as sorting out tax then it's quite easy. If you are basically getting paid for the work you do and dont have sales, stock, assets, staff etc then a self assesment is easy to do.

sar050680

We did get paid holidays but they will stop next week I believe, never had sick pay though. What happens if HMRC doesn't agree that I'm self employed?

claret_mike

I would imagine they would find them liable for a bil for unpaid employers NIC contributions and maybe a fine.

If they are going to pay you the same rate then why not take a 20% pay cut or offer to work 4/5ths of your contracted time and find another way of making money on your day that you dont work?

What happens if they simply turn around and say there is not enough work this week, sorry.. You will not be paid.

Self employed is the last thing I would be considering

silverjay

Generally if you are working a set amount of hours for an hourly/weekly rate of pay HMRC will class that as employed. On the HMRC website there is a checklist for employers to run through to see if a person is employed/self-employed.

sar050680

claret_mike wrote: »

I would imagine they would find them liable for a bil for unpaid employers NIC contributions and maybe a fine.

I would be responsible for paying my own NIC though wouldn't I?

In the meeting it was put accross to us we would be better off going self employed than taking a 20% pay cut, better off with the money too. We work in the water maintenance industry and they are always crying out for us to get the leakage down, so the work should (I hope) be a plenty.

Does anyone have any info on CIS?

claret_mike

Just forget about what you have been told for 1 second...

Your employer is wanting to reduce their financial liability. They are going to "sell" the benefits to you. An employer has to pay NICs to HMRC aswell as the NICs that you pay. They are also responsible for paying your tax.

There are also other costs to an employer such as paying Statutory Sick Pay, holiday pay, pensions, potential redundancy costs if they need to make redundancies etc.

You know your situation, you know your industry better than me but when an employer starts telling their staff, we want to convert you to self employed, alarm bells ring.

Just remember that their motivation is to reduce their liabilities but if HMRC find that they are doing this to avoid paying NICs etc and that they believe that you are employed, then regardless of what contracts are in place, your employer will become liable. If they don't pay - then winding up issue ordered could be close to follow.

Their motivation is not to put you in a better off position. Even if they may be technically right in that you may be slightly better off from a take home pay point of view.

When you go self employed, your NIC class changes and that may impact on benefit entitlements in the future etc. I would be seeking professional advice on this topic.

I havent a clue about CIS.

Have all of your colleagues accepted this - what happens if some do and some dont?

silverjay

You need to register with the HMRC Construction Industry Scheme to get a UTR number so that your employer can validate you prior to releasing any payments to you. The validation from HMRC will tell your employer whether to deduct tax at 30% or 20% rate.

Yes you will be responsible for paying your own NIC but by being self employed you save your employer paying the Employers NI on your earnings

anamenottaken

sar050680 wrote: »

We did get paid holidays but they will stop next week I believe, never had sick pay though. What happens if HMRC doesn't agree that I'm self employed?

I don't suggest you do go down the SE route but if you were to do so (or if you left their employment) they would have to pay you for the value of holiday accrued (earned) but not taken up to the final date of employment.

paddedjohn

If you take the 20% reduction and stay employed they can't take away you right to paid holidays. I would avoid s/e and try to negotiate a better deal for myself, maybe a shorter week and a 10% drop rather than 20%.