choice self employed or company employed

barnaclebill

I may get a job offer soon, I have been told that If I get the job I have the choice to be self employed or employed by the company, either way it will be 12 month contract.
I am unemployed at present receiving my pensions which are enough to pay tax on, the job would mean living in another city through the week but I would receive additional money to use for rent or travel.
For tax reasons could it be beneficial to be self employed?

TheCyclingProgrammer

Anyone telling you that being employed or self employed is a choice is misleading you. Your employment status is largely dependent on working practices and unless the job on offer is genuinely something that can be done on a self-employed basis the employer probably just wants to avoid having to give you employment rights or paying national insurance.

McKneff

It is HMRC who decides who is employed or self employed.

Not you, not the employer, the HMRC....

chrismac1

To the last 2 posts I say Piffle! (Possibly)

It is quite likely that 2 entirely different contracts will be put in front of this person in the event that he or she goes self-employed as opposed to employed. If that is so, then so long as both parties follow the contracts and the contracts are properly drafted, it is quite possible that a genuine contract for self-employment will arise.

Note that the numpty department at HMRC has been let loose on this issue for the past 18 years or so, and a right dog's breakfast they have made of it. As a result, starting from a base of confusion in the late 90s over the distinction between self-employment and employment, HMRC have managed to make that lack of distinction about 5 or 10 time worse.

However, in the process of their blunderings what they have achieved is that most sharp employers are now much more aware of the mess, and much more likely in this situation to be:

1. Putting watertight contracts in front of the poster, and
2. Operating the contract accordingly whichever way the poster goes.

tacpot12

It could, for tax reasons, be better to be self-employed - you would be able to claim the travel and overnight accomoration as expenses incurred wholly and necessarily in the performance of the work. You wouldn't travel to x and stay there were it not for your contract.

But as a self employed person you would be responsible for funding your pension, annual leave, sick pay and potentially a number of other benefits as well, so self employed status should pay at least enough to cover all the benefits the employer isn't paying you. The employer is saving the Employers NI on your wage so they should be paying you at least 13% more to be self employed.

Be careful to check whether "self-employed" actually means operating via a Limited Company. If this is the case, your costs will be greater and require a greater differential between the employed and "self-employed" case.

Pennywise

Also remember that whilst HMRC may dispute your "self employed" status, it is your "employer" who will get the bill for tax/nic from HMRC if HMRC decide you were an employee after all. So you bear very little personal risk of such a challenge as HMRC won't come after you - they go after the "employer".

For the s/e option to be viable, I'd say you need a minimum uplift of 25% on your pay rate compared with employee, but preferably up to around 50% higher to cover your risk, costs and loss of employment rights/benefits. Your "employer" will save employers national insurance, workplace pension, holiday pay, sick pay, pat/maternity pay, and other employment related costs such as training, equipment provision etc.

There's a lot more to it than a glib "you'll save some tax" comment from the prospective employer.