IR35 - Self Employed or Employed

sarah_holmes33

I am trying to get to the bottom of a bizarre loophole regarding SEISS or furlough. I am 100% self employed as far as I am concerned. Just under 50% of my work is for various private sector companies, just over 50% is for the MOD. All my work (both private sector and MOD) has been cancelled for the foreseeable future and has been since March. However, for the MOD I am on PAYE. I am classed as an "employee for tax purposes only", however I am actually self employed. I am not eligible for any sick pay/holiday pay etc. But on my yearly self assessment I have to put my MOD PAYE into the employed section as there is not a section for it under the self employed. Because of this I have assumed that I am not eligible for SEISS (since just over 50% of my work is for the MOD). I have asked the MOD if they can pay me for the contracted work I do for them or be put on furlough, they have said no because I am not an employee.  I have appealed this to quite high up and have been told again, no, because I am not an employee. The MOD have provided a letter stating I am self employed and told me to use that for the HMRC to claim SEISS. However, there is no way to contact HMRC about it. I have tried to call but have not be able to get through, I just get cut off when I select any relevant option. I have tried the webchat but all I get told is they can't help. How can I be employed according to HMRC and self employed according to the MOD? I have had no pay since March and am getting so desperate. How can I determine what I am eligible for? Surely I should be able to get support for at least something, I am now literally on £0 per month.

calcotti

If needed look at eligibility for Universal Credit https://www.citizensadvice.org.uk/benefits/universal-credit/. 

There are online calculators to help you assess entitlement  https://www.gov.uk/benefits-calculators

Be aware that claiming UC will end any Tax Credits, Housing Benefit or other means tested benefits you currently get.

You will be excluded from UC if you have savings over £16,000.

Jeremy535897

Calcotti has said what you need to look at in the short term. Your question is a very difficult one.  Dealing with the easiest part first, the MoD will not furlough you. They cannot do so.

Next, you should carefully check whether you can pass the 50% test for SEISS for either 2018/19, or 2016/17 to 2018/19, as the figures currently stand. The guidance states:

"Who can claim

You can claim if you’re a self-employed individual or a member of a partnership and you:

• have submitted your Self Assessment tax return for the tax year 2018 to 2019
• traded in the tax year 2019 to 2020
• are trading when you apply, or would be except for coronavirus
• intend to continue to trade in the tax year 2020 to 2021
• have lost trading profits due to coronavirus

You will need to confirm to HMRC that your business has been adversely affected by coronavirus. HMRC will as usual use a risk based approach to compliance.

Your trading profits must also be no more than £50,000 and more than half of your total income for either:

• the tax year 2018 to 2019
• the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019

If you have not submitted Self Assessment tax returns for all 3 years find out how we will work out your eligibility."

If you fail that test, or even if you pass it (because the size of grant may be affected), the next step is to consider whether you have an argument that your MoD income is really self employed trading income, despite what you have declared. The guidance does not address difficult issues like this, although it does say it will ignore (for SEISS) amendments to SA returns, so that won't help. At some stage, the Government is going to have to issue a Treasury Direction for SEISS as it has done for CJRS. What qualifies as self employed trading income will be set out there, and there is no point in speculating in advance. People got hung up about what "on the payroll" meant for CJRS, and when the CJRS Direction was published, none of that mattered, as it was an employee's first FPS date that determined the issue.

The main reason that people declare self employed trading income from which PAYE has been deducted as employment income is because it is not obvious how to do anything else. The answer to this I believe is to complete SA103F, rather than SA103S, not least because you will have to adjust profit for Class 4 NIC (see later). The other problem is that there is nowhere to record the tax deducted on SA103S. I would probably include the gross pay in box 16, and enter the tax (not NI) deducted in box 82. I would put the gross pay in box 102 so I wasn't charged Class 4 NIC. I would explain what I had done and why in box 103. I would also check that I got the right answer before submitting.