Employee Status?

lebowski1980

Hi all

Quick question - i think i know the answer to this but want to double check:

I have a friend who works for a company 5 days a week, 8 hours a day in an office. This is her only job and she is required to work at their office performing duties prescribed by them using their equipment.

They have asked her to invoice them as a sole trader weekly and they then pay her as per said invoice. She is the only person in the firm not on PAYE as far as i am aware.

Should the company not be treating her as an employee and running her through their payroll system? This seems like a way of them trying to avoid their duties.
I'm not sure if she has a contract but I was under the impression that the HMRC test sets a precedent that overrides any said contract normally?

We used the HMRC tool and it said her status is employed.

Or am i just getting mixed up with the whole Ltd/IR35 issue?

Thank you

BoGoF

She is an employee based on the limited info

xylophone

From the information given I'd say she's an employee.

TheCyclingProgrammer

BoGoF wrote: »

She is an employee based on the limited info

Agreed.

OP - IR35 isn't relevant here as that only matters if working through an intermediary but broadly, the tests for false self-employment are similar. The main difference is that it is the employer who faces the consequences if a self-employed worker is found to be an employee.

The "employer" is avoiding paying employer national insurance contributions and also their other duties and responsibilities towards your friend in terms of employee rights, pension etc.

lebowski1980

Thank you all for your replies
I will talk to her and advise her to discuss with the company in hand.

lebowski1980

I forgot to ask something else
If it is the case that she is classed as an employee, is the company liable to pay backdated NI or similar? She has worked for them from Feb 18
From the sounds of it, the company are a bit shady so it may rock the boat further...

Sea_Shell

The downside of rocking the boat, is that as she's not worked there long, she can be dismissed very easily.

lebowski1980

Sea Shell - agreed. I think it's knowing what she should be entitled to and then weighing up those options.

TheCyclingProgrammer

If your friend is happy with the lack of rights as a non-employee, as well as having to submit a self-assessment each year as a sole trader, then I see no need to rock the boat. If HMRC investigate it won't be her problem.

If a situation ever comes up where it would be more beneficial for her to be considered an employee (i.e. they try to get rid of her for no reason) then she might have some leverage.

Robster88

Does she mind missing out on pension contributions from her employer?

tebthereb

OP, slow down a little.

For your “friend” being treated as self employed is a pretty good thing. Less NIC, more flexibility to deduct expenses in computing taxable profits, possibility of recovering VAT, no benefit in kind tax charges... to name a few.

It’s the company’s responsibility to assess status and could be difficult for them to recover any underpayments from the individual.

OK the downsides are more personal admin (tax returns, payments on account, etc.).

The benefits in employment law of being an employee (sick pay etc) are not determined by whether the employer has classified an individual as employed or self employed for tax purposes.

Pension contributions is an interesting one. I thought that this obligation would also be a separate matter to tax status. Not sure.