Tax problem - working as freelancer, but treated as employee

RayWolfe

Lifeisbutadream wrote: »

Do you work for the tax office by any chance? :rolleyes:

See my above post where it says that it bugs me when people assume that everyone with their own business is rolling in it.

Not at all. But I am a tax payer.
If a business cannot get added value from an employer after paying salary, taxes and insurance then clearly, it cannot be worth employing that person.
I bet the chimney cleaning companies moaned just like you when they were prevented from employing small boys!

Lifeisbutadream

RayWolfe wrote: »

Not at all. But I am a tax payer.
If a business cannot get added value from an employer after paying salary, taxes and insurance then clearly, it cannot be worth employing that person.
I bet the chimney cleaning companies moaned just like you when they were prevented from employing small boys!

You really have no idea what you are talking about do you? I am a taxpayer. I pay tax on the profit I make. I am not evading tax. Anyone contracting any work from us ends up with almost as much as we do anyway, when you take into consideration advertising, insurance and administration costs.

I find it extremely offensive that you would compare me to someone employing children. Our business is nothing like that. We are genuine hard-working people who do things above board. We do not work 'cash in hand' and we pay our accounts on time.

As a tax payer, you are probably also the same type of person who wants your kitchen fitting for pennies, or your doors hanging for nothing???

We dont 'employ' anyone, if you read my post then you will see that. We give customers a price for doing what they want doing and because we are good at what we do we are very busy. We therefore contract some of the work out so that the customer doesnt have to wait long.

Sometimes we even make a few pounds as profit from that! :eek:

Nobody forces the joiner/plumber/electrician to go and do the work! they give us a price, we give them the job, they do the job, we pay them we are not paying them small amounts either - I have an invoice in front of me from an electrician for £370 for less than a days work (I am making £30 profit on that, which is not much considering I am taking the risk of whether the customer pays us or not and it will be me the customer rings if there are any problems) if we were trying to make rakes of money we would simply take someone on and pay them the minimum wage. I can assure you we are not making thousands of pounds in profit (and in fact this will be the first year that we will make a profit and do not have to live on savings). As in my post above, I find it very very annoying when people automatically assume that because they have their own business, the must be loaded.

BrianM1975

Calm down people!!

The fact is there is case law based upon the badges of trade which lead to quesions mentioned on the HMRC website. If people are genuine self employed then they should pay their tax that way.

However, it seems to me from the opening poster's comments that he shoudl really be an employee in this situation. Whether you believe that is fair on the employer doesn't really matter. The opening poster could easily shop his employer by telling HMRC. Rogue employers seem to forget this can happen.

BTW I'm an accountant in practice and deal with this sort situation on a weekly basis from my clients.

Lifeisbutadream

BrianM1975 wrote: »

Calm down people!!

The fact is there is case law based upon the badges of trade which lead to quesions mentioned on the HMRC website. If people are genuine self employed then they should pay their tax that way.

However, it seems to me from the opening poster's comments that he shoudl really be an employee in this situation. Whether you believe that is fair on the employer doesn't really matter. The opening poster could easily shop his employer by telling HMRC. Rogue employers seem to forget this can happen.

BTW I'm an accountant in practice and deal with this sort situation on a weekly basis from my clients.

Sorry if it appears that I am ranting.

I feel very strongly about this. I can obviously only speak for myself and my OH, but we have worked very hard and put all of our savings into our business.

My OH works over 70 hours a week and I work around 45. We have 2 small children and often work well into the night on quotes and working out how we can make our business work.

Last tax year we made £16,500 before tax. That money supported a family of 4. We do not spend any more than we have to. We cannot afford a new car even though we need one and we seriously need a new van for the business. We know though, that we will work for these things and we will get them eventually. Our projections for this year are better and I hope the year after better still, but that did not just happen overnight, we have sweated and bled for that.

We have never knowingly not done the right thing. As soon as I found out that I should be paying a percentage of our subbies tax, I sorted it out and will do that from now on.

No tax has ever not been paid as all our subbies have paid their own tax previously.

The one subbie that we may have had a query on makes himself a lot of money. Some jobs he does for us gets a lot less, but that is because he works on a price - if we lose, so does he, but if we win then he does too. We are certainly not knowingly evading tax and we are not making excess money from him!

I was very, very offended that someone could compare our business to one that made money from children, as though we are using people for our own gain.

Admittedly I was probably harsh with the first poster, but I still do not understand what he/she would gain from reporting someone? surely if you are unhappy working for someone, then speak to them about it or dont work for them any more? If any of our subbies didnt like the way we operate, then nobody is making them sub-contract to us.

Our house, everything we have worked so hard for, is on the line should anything happen to our business. Last year a customer did not pay us £1400. We had to suffer that loss. We could lose everything is one feel swoop after working so hard, but yet someone compares us to a low-life tax evader? can you understand why I am upset?

RayWolfe

Lifeisbutadream wrote: »

Our house, everything we have worked so hard for, is on the line should anything happen to our business. Last year a customer did not pay us £1400. We had to suffer that loss. We could lose everything is one feel swoop after working so hard, but yet someone compares us to a low-life tax evader? can you understand why I am upset?

If you are "employing" someone, as in the case of the original poster then the law is clear; tax, NI, holiday pay, etc. is due. No argument. No question.
If you are sub-contracting work and you ensure that you have seen and got copies of the sub contractors certification, then these payments are not applicable. No argument. No question.
The OP was asking for help on his way forward. He got that.
All we have had from you, however is an emotional rant that added nothing to his quest and had no basis in fact or law.

Lifeisbutadream

RayWolfe wrote: »

If you are "employing" someone, as in the case of the original poster then the law is clear; tax, NI, holiday pay, etc. is due. No argument. No question.
If you are sub-contracting work and you ensure that you have seen and got copies of the sub contractors certification, then these payments are not applicable. No argument. No question.
The OP was asking for help on his way forward. He got that.
All we have had from you, however is an emotional rant that added nothing to his quest and had no basis in fact or law.

However, it is perfectly acceptable for you to make personal comments that add nothing to my quest and had no basis on fact, law or even common sense?

I bet the chimney cleaning companies moaned just like you when they were prevented from employing small boys!

swanny65

Lifeisbutadream wrote: »

Do you know what - it may be harsh, but I am really really fed up of people assuming that because you have your own business, then you must be rolling in it.

Perhaps the business owner has no idea that they should be paying PAYE?

Thats why HMRC are there to advise not to be ignored...

perhaps they simply cannot afford it and consider that they would rather keep people in work than the alternative of 'letting them go'.

So it's OK then lets pay everyone cash in hand and not record it? Come on most people struggle to get by day to day. If their business cant afford it that no excuse to break the rules. Prehaps their business plan needs re-evaluating. RayWolfe hits the nail on the head.....


Holiday and sickness pay is all well and good if you have a huge business with a huge cashflow, but when you are only making enough profit to feed your own family, and working 124 hour days/7 days a week for the privilage of it, it starts to feel a little bit painful if you are paying a sub-contractor more than you are getting yourself.

Have you considering offering the sub-contractor the chance to buy into a partnership with you... Or becoming an employee if life is that difficult

I also think it is harsh to say that your brother got a £10000 tax bill doing 'something similar' to what I was doing. You make it sound as though I am a tax dodging criminal!

That wasn't what i was suggesting. My brother lost his sub-contractors payment cerificate books (sorry dont know their correct name.) As a result that income was taxed as his own income as he couldn't prove he had paid it to his subbies.

I pay my taxes, I pay my VAT, anyone that we contract work to pays their taxes. We are a very small business, working very very hard. I was merely pointing out that if someone wasnt happy working for someone, they should leave.

I agree he COULD leave. He SHOULD NOT leave if the employer is putting one over on him.

One day this person may have the boot on the other foot.

I refer you to the final line of my post and hope that HMRC treat you fairly allowing for your provious good payment record etc....

Sorry had to have my say - i could start on about the bosses of agency workers but it's the weekend.....

Glad to see the OP's actual question has been answered amongst all our chatter. All that ranting because of one comment in the initial reply. Chill Pills all round please - are they tax deductable?

Lifeisbutadream

Swanny65 - thanks for your reply.

Our business is very new. Our projections show that we will make money, but at the moment we are only making enough to survive, simple as that.

With regards to our subcontractor becoming a partner - in much of the sense he already is - i.e. he gets a share of the profit of each job, rather than a wage. Unfortunately there is no way we could put a price on what he would pay. We set up the business around 4 years ago and worked at it whilst both in employment. We put both our redundancy payments in to buy a van and tools etc. We spend extra hours pricing, setting up computer systems and investigating when we find out such as the CIS payments that we should have been paying. Also he has been bankrupt and has a bit of a spendthifty wife. I certainly would not like her anywhere near the business account! Also we just pay ourselves a 'wage' rather than profits, whereas he likes to spend the money and worry about his taxes later. It would be a recipe for disaster!

johnllew

Lifeisbutadream wrote: »

No tax has ever not been paid as all our subbies have paid their own tax previously.

How can you be so sure?

Lifeisbutadream

johnllew wrote: »

How can you be so sure?

Because I know them all personally. We are a quality business who is picky about the sort of people we would want associated with us. I get a full invoice for any works done so if we were ever investigated there would be a trail - it would not be in their interest NOT to pay tax.