Self-employed: my customer made me an employee rather than a supplier

MarktheHarp

My wife did some work for a university and invoiced for it. They sent back a notification of payment with some tax deducted, which was a bit of a red flag as normally of course you'd get the full invoice amount and deal with your tax / expenses during your accounting cycle. Included with it was a p45 indicating that they'd basically made her an employee for the 2-week or so duration of the project.

This has never happened with any of her or my customers in the past and it's mystifying. So I want to know (before I go and jump up and down):

1) Is it even legal for them to do this?

2) might this cause unforseen problems?

Savvy_Sue

Did she invoice them as Mrs Harp, or as something like Harp Associates? 

If the former, then them putting her on the payroll (albeit just for two weeks) seems reasonable: they'll do this to avoid any suspicion of tax avoidance, contractors who really aren't etc etc etc. 

However, did they ask for proof of her Right to Work in the UK? A passport would be enough for this. Employers shouldn't employ people who can't demonstrate this right, and I'd expect a university to be absolutely on top of this: I know for example that ours spells out how important it is that students on visas with restrictions as to the no. of hours worked don't exceed this. 

I can't see that it will cause unforeseen problems. At the end of the tax year, she'll include this in the employment section of her tax return, include the tax she's already paid, and add up all her taxable income, whether it's from employment or self-employment. She'll enter the tax already paid, and that will reduce what's due. If it means she's overpaid tax, she'll get a refund. 

Has she worked for a university before? They have a lot of short-term / casual staff ... 

General_Grant

Savvy_Sue said:

Did she invoice them as Mrs Harp, or as something like Harp Associates? 

If the former, then them putting her on the payroll (albeit just for two weeks) seems reasonable: they'll do this to avoid any suspicion of tax avoidance, contractors who really aren't etc etc etc. 

However, did they ask for proof of her Right to Work in the UK? A passport would be enough for this. Employers shouldn't employ people who can't demonstrate this right, and I'd expect a university to be absolutely on top of this: I know for example that ours spells out how important it is that students on visas with restrictions as to the no. of hours worked don't exceed this. 

I can't see that it will cause unforeseen problems. At the end of the tax year, she'll include this in the employment section of her tax return, include the tax she's already paid, and add up all her taxable income, whether it's from employment or self-employment. She'll enter the tax already paid, and that will reduce what's due. If it means she's overpaid tax, she'll get a refund. 

Has she worked for a university before? They have a lot of short-term / casual staff 

Not unforeseen but the problem is that the university isn't paying her the expenses she would have been able to set against the invoiced amount - eg travel to where she worked and subsistence.

OP - how was the offer of work made?

saker75

Looks like they are treating her as IR35.
I work self employed for several universities, doing the same sort of work for each. Some put me as IR35 and some don’t. It’s not consistent. Yes it balances out at the end of the tax year and I was due a refund but it was crippling initially.

Jillanddy

saker75 said:

Looks like they are treating her as IR35.
I work self employed for several universities, doing the same sort of work for each. Some put me as IR35 and some don’t. It’s not consistent. Yes it balances out at the end of the tax year and I was due a refund but it was crippling initially.

This^^^ I also have contracts for lecturing at several universities. In some cases they are required to deduct tax, and that is then worked through at the end of the tax year. It depends on the arrangements the universities have set up with HMRC, and my understanding is that it is HMRC driven because the evidential requirement for the "employer" is often too risky to allow contractors to resolve their own tax as liability remains with the university. It is, in my experience, a common arrangement.

Undervalued

MarktheHarp said:

My wife did some work for a university and invoiced for it. They sent back a notification of payment with some tax deducted, which was a bit of a red flag as normally of course you'd get the full invoice amount and deal with your tax / expenses during your accounting cycle. Included with it was a p45 indicating that they'd basically made her an employee for the 2-week or so duration of the project.

This has never happened with any of her or my customers in the past and it's mystifying. So I want to know (before I go and jump up and down):

1) Is it even legal for them to do this?

2) might this cause unforseen problems?

Yes and it is normal practice with such organisations. The same used to happen to me.

The only way round, if she is determined to avoid this happening, it is for her to become a limited company.

To be honest it is not a problem and she just includes this payment in the correct part of her tax return and it sorts itself out. If she has overpaid tax (in total) she will get a refund.