Off payroll treatment of self-employed services

edited 30 November -1 at 1:00AM in Small Biz & Charities' MoneySaving
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Trying_to_be_goodTrying_to_be_good Forumite
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edited 30 November -1 at 1:00AM in Small Biz & Charities' MoneySaving
I run a very small sole trader "business" teaching running for beginners and improvers.

I provide services to two councils to teach groups as well as to individuals/my own groups.

One of the councils has moved me to their payroll (as apparently they have for all service providers) for tax purposes as I'm considered an off payroll provider. They deduct tax at source (BR code). The other council haven't changed the prices, I still invoice them and I'm paid with deduction of tax.

There's one question about which council is right, and another about where I include the tax deducted (and associated gross income) on my tax return.

The business currently just about breaks even, profit is less than £50 per annum for the last two years.

Any thoughts, please?

Many thanks
Mortgage Free thanks to ill-health retirement

Replies

  • martindowmartindow Forumite
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    I think I would be questioning whether to consider this as a business at all with £50 p.a. profit. Might it not be simpler to volunteer your services to the councils and leave the finance side to them?
  • Trying_to_be_goodTrying_to_be_good Forumite
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    Thanks, the turnover is over £1,000 but the travel expenses and training courses currently cost almost as much as the income. So it does need to be declared.
    Mortgage Free thanks to ill-health retirement
  • edited 11 April 2018 at 10:04PM
    00ec2500ec25
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    edited 11 April 2018 at 10:04PM
    neither council is right until someone ends up in court

    meantime any public sector organisation paying people for services delivered as "self employed" is under immense pressure from "the Govt" to automatically threat them as falling "inside IR35". That is a bit of legislation designed to ensure that people who are really employees can't hide behind the tax advantages of being self employed, whilst doing work that an employee should and would be doing in the olden days.

    The council that is taxing you is doing what its been encouraged to do, play safe. The council that isn't is yet to make up its mind how closely it will apply the instructions it has been given. Neither is right, neither is wrong.

    meantime you have a business in its financial infancy which, as suggested, appears to be a hobby, not a trade undertaken with a view to making a profit. Therefore, unless your financial affairs improve over the next 2 - 3 years, HMRC may decide you are not entitled to claim any expenses anyway.

    do you have an accountant? Are they experienced with contractors/personal service companies/ IR35 and how to deal with that for your sole trader?

    have a read:
    https://www.gov.uk/guidance/ir35-what-to-do-if-it-applies
  • Savvy_SueSavvy_Sue Forumite
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    Just checking:
    One of the councils has moved me to their payroll (as apparently they have for all service providers) for tax purposes as I'm considered an off payroll provider. They deduct tax at source (BR code). The other council haven't changed the prices, I still invoice them and I'm paid with deduction of tax.
    Did you mean without deduction of tax?

    Next question, are you employed anywhere else, ie is this income on top of your normal salary?

    Because if this is your only or main source of employed income, you could get your tax code changed with the council who have put you on BR. It would mean speaking to HMRC and stating that this is your only or main EMPLOYMENT. More money in your pocket now, less tax to sort out at the end of the tax year.

    Then, if council no. 2 also put you on their payroll, and your taxable income remains lower than your taxable allowance (assuming you can estimate it reasonably well), you can ask to have the tax allowance split between the two different employers.

    I'm guessing that you do also have a day job (because how would you pay your bills otherwise), but looking to the future if you're able to expand the business this is worth bearing in mind.
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  • Trying_to_be_goodTrying_to_be_good Forumite
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    Thank you.

    I'm ill-health retired, my pension is my main source of income and the lead for my tax code. The council treating me as IR35 is paying me AFTER DEDUCTION OF TAX, but there's nowhere on my tax return to put this as self-employed income.

    Income is currently re-invested into the business (plus travel costs) in buying kit etc, the new financial year is likely to see the first >£50 profit.

    I'm a fully-trained tax inspector of 18 years ago, when CIS was first around. I don't employ an accountant, which would more than wipe out the small profit, I'll give up working for the council before paying an accountant - it's less than £15 per week income before expenses.

    They're making life difficult, I work for multiple councils and other people, so it's a genuine self-employed business.
    Mortgage Free thanks to ill-health retirement
  • Trying_to_be_goodTrying_to_be_good Forumite
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    00ec25 wrote: »

    Thanks, but that link is for private sector, with intermediaries, not public sector without an intermediary.
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  • 00ec2500ec25
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    Thanks, but that link is for private sector, with intermediaries, not public sector without an intermediary.
    ok, so click one page back then and select a more relevant page

    https://www.gov.uk/topic/business-tax/ir35

    your issue is one council has decided you are an off payroll worker. If your background is as a tax inspector why can't you sort this yourself? You need to argue with that council over your "worker status" based on the answers to the HMRC questionnaire:

    https://www.gov.uk/guidance/check-employment-status-for-tax
  • Trying_to_be_goodTrying_to_be_good Forumite
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    00ec25 wrote: »
    ok, so click one page back then and select a more relevant page

    https://www.gov.uk/topic/business-tax/ir35

    your issue is one council has decided you are an off payroll worker. If your background is as a tax inspector why can't you sort this yourself? You need to argue with that council over your "worker status" based on the answers to the HMRC questionnaire:

    https://www.gov.uk/guidance/check-employment-status-for-tax

    Because I now have acute anxiety which has lead to me being medically retired. I can't do conflict anymore, hence wondering if anyone here could help if it's obvious. Thank you for trying to help :-)
    Mortgage Free thanks to ill-health retirement
  • martindowmartindow Forumite
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    Because I now have acute anxiety which has lead to me being medically retired. I can't do conflict anymore, hence wondering if anyone here could help if it's obvious. Thank you for trying to help :-)
    It doesn't need to be face to face and it is best to discuss this in writing in any case so there is a record and to avoid any conflict.

    I would write to HMRC detailing the issue and seeing if they will put a decision in writing to you. This would allow you to post a copy of the letter to whichever employer is not correct.

    What you don't want is to let this drift and come a cropper during a VAT inspection. It needs to be sorted out as soon as possible.
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