Employer pays b&b direct, do I have to declare as earnings? I'm self employed

Dubberucky

Hi folks,

I'm self employed and working away from home on a new job. I get 30 a night for hotel/b&b. All the other guys pay their stay directly to the hotel, then bill our employer for the 30 per night. They get taxed on that.

I'm tight for cash so my employer is paying the b&b directly for me. That money never hits my bank or pocket. Do I still need to pay tax on the amount he pays the b&b?

On my last job we got 40 a day for overnight and never got taxed on it... although that was PAYE. My work is like that sometimes, I'm registered self employed but some companies still pay me as PAYE.

Anyway, would appreciate any advice on this. Thanks.

Laurajo_2

Yes, the thirty pound will be included as income, but then you can deduct it as an expense, so there will be no 'profit' on it, so no tax to pay.

agrinnall

Except the the OP refers to it as a payment from the 'employer', so if HMRC believe they are employed rather than self-employed then I think it would be a Benefit In Kind and would be subject to tax.

uknick

Dubberucky wrote: »

Hi folks,

I'm self employed and working away from home on a new job. I get 30 a night for hotel/b&b. All the other guys pay their stay directly to the hotel, then bill our employer for the 30 per night. They get taxed on that.

I'm tight for cash so my employer is paying the b&b directly for me. That money never hits my bank or pocket. Do I still need to pay tax on the amount he pays the b&b?

On my last job we got 40 a day for overnight and never got taxed on it... although that was PAYE. My work is like that sometimes, I'm registered self employed but some companies still pay me as PAYE.

Anyway, would appreciate any advice on this. Thanks.

When you say they treat you as PAYE on occasions, do you get a P45 when you finish your work with them? i.e. you are an actual employee and they pay all the costs that entails.

If you are truly self employed in the case you ask about and the employer pays your B&B direct, I'm not sure you need to declare it. The employer no doubt will be showing it as a deductible expense in their tax computation.

I can't see how you can deduct it as an expense as you have no receipt for it, as you never paid the costs.

If you do declare the income and expense, and the company declares it as well, the HMRC will have two deductions against the one expense. I'm sure tis is not allowed.

I think we need to know more details as to how exactly your business is conducted to advise on the correct tax treatment.

Laurajo_2

Ah, I was taking the reference to 'employer' as the person who contracted the expenses.

If it is your actual employer, you don't need to declare it, although it may be a p11d benefit which would need to go on your tax return...unless the employer has a dispensation in place.

Dubberucky

Hi all and thanks for the replies.

I am registered as a self employed sole trader under "construction". I have been mostly working on the railways for different companies. The last was PAYE for which they automatically paid my tax and NI. Never got a p45 just a wage slip.

This particular company are not PAYE and are to be invoiced on a weekly basis. My employer is a terrible communicator, I haven't spoken to him on the phone once and he only texts, usually responding many hours later or not at all. This is a big part of the problem. I need the work so I have to just plod on and do the best I can with the info he drip feeds me.

The guys at work invoice him with the following:

UTR Number
NI Number
No. of days worked at x rate
No. of overnight payments at x rate

Then they total this, minusing 20% for tax, which the accountant pays HMRC directly. They mentioned something about "CIS" which I never quite caught.

Hope that sheds some more light on the situation. Oh and I can't get a receipt for the b&b since I don't pay it.

Thanks again

agrinnall

You see, this is where you make a problem for yourself, you refer to the organisation with which you have a contract as your 'employer', whereas they are really your 'client'. If you can't tell the difference then maybe HMRC won't either, and they will regard you as employed (I know construction is a bit different to other sectors, but I would expect the underlying principles of deciding whether work is employed or not to be similar).

Edited to add: If you've never heard of CIS I would question your claim that your work is construction.

chrismac1

For the benefit of the last poster, it is very common in the construction sector to refer to the contractor as an employer. Whilst this language may not impress HMRC it is "commonsense" so that is no doubt why HMRC can't understand it.

However, on the basis of the OP's post the person you are invoicing is in law not your employer. You will have been hired under a contract "for services" - in this case the work you are doing on the railway - as opposed to one "of service". By comparison, most HMRC contracts are typical contracts "of service" where your bum is on a seat and gets to stay on the seat regardless of how poorly you do your job.

The way CIS operates is you invoice, let's say £1,200 made up of £1,000 labour and £200 materials. The contractor deducts £200 - 20% - of income tax from the labour element and so pays you just £1,000 on your £1,200 invoice. Keep those CIS deduction statements as a £200 statement is just as good as having 10 crisp new £20 notes in your pocket.

This is because in April - hopefully - you'll submit your 2013-14 tax return. This will have your self-employment accounts and arrive at a "tax and NI due" figure, let's call that £3,000. This is what you'd be paying by 31 Jan 15.

But now you get to tally up all those deduction statements dated between 6 April 13 and 5 April 14. Typically they'll come to £5,000 against the £3k tax bill.

Great news! HMRC owes you £2,000. You key in your bank account details and press submit and what should happen is that 4 weeks later the £2k arrives.

More likely HMRC will hold this up for "security checks" which is known as "cynical slow pay" to the rest of us. Once you've chased them on what the security checks are and offered to help them on any specific checks they desire, they cave in and cough up.

Dubberucky

I registered as self employed around July/August. When I described what I do for a living the lady on the phone said construction was the closest match. I abseil and drill/mesh railway embankments.

Thanks for the info Chris. Seems my contractor just wants me to invoice him for the daily rate and ignore the overnights. So I'm happy with that. At some point I'm going to get an accountant I think. I don't want to overlook anything, being new to the industry and self employment.

And yeah, hopefully I'll be owed so money at the end of it all!

chrismac1

It's worth pointing out that in agent surveys of HMRC my normal score this year has been 2 out of 10. On the phone when the person doing the survey queries this score I can usually convince her - it's almost always a her - that in fact 2 out of 10 is pretty generous.

But there is NO WAY the CIS area of HMRC even makes 2 out of 10, 1 out of 10 would be pretty generous. The smallest inaccuracy can result in ridiculous paper chases and delays in repayments, dealing with people who make other HMRC staff look like they are fast and efficient.

You don't have to take my word for this, Google "CIS reclaim problems" or similar and you'll soon be reading some horror stories. In my opinion HMRC have made the construction recession significantly worse than it needed to be as otherwise sound businesses have gone under because HMRC would not give them partial repayments whilst they pratted around on the two or three statements where the problems lay.

Unless you have prior experience of this, it is a good move to get an accountant on board. Ask him or her for 2 or 3 references who are clients in the CIS field. You can always move on to DIY in future years once you properly understand the system, so long as you can follow what the accountant has been doing.

Dubberucky

Yeah it's looking like I'll need to.

What makes it more compicated still is that abseiling can take you into a wide variety of fields,

So my very first job was the railways where I got taxed 30% because i wasn't self employed. After that I was told by the guys to get myself registered and get a UTR number.

I called HMRC and advised them that as well as railways I could potentially be working on wind turbines and oil rigs. I ended up coming under the umbrella of construction.

My second job was railways again, but PAYE for which I paid no tax but NI contributions were made. Not sure why.

After that It was a wind turbine job, where I was a sole trader but paid no tax or NI.

Last job was railways, PAYE and I paid tax and NI. Got tax free overnight pay.

Current job is sole trader, tax only!

So at first it seemed easy, I thought I'd just give my UTR and pay 20% instead of 30%. Little did I realise I'd have all these different types of contracts and issues around expenses. Ah well, at least I'm happy in my work and I've been keeping all my remittances/wage slips and as many receipts as possible. It'll all work out!

Cheers