Does this mean I am employed, or self-employed?

MANDYWOO

Hi, please could someone help?
I have been doing some exam marking, I say how many papers I can do, there's a set fee per paper and a deadline. I then send in an invoice and they pay me. 
Income tax and national insurance are being deducted from the pay as shown on the payslip, but the company say I am self-employed and wanted me to sign a contract that says that (and other things).
But I disagree with some of the contract terms, and when I spoke to HMRC they said I was employed as the company was paying tax and NI on my behalf.

Confused, and would appreciate your views on the situation. Initially the company wanted me to set up a limited company, but I am not doing that much work and only just earned enough to pay tax last year. Just need to know if I should have a self-employed status or separate bank account. 

Many thanks

tizerbelle

I think you would be classed as a "worker" rather than an "employee" - so not self-employed. 

Businesses do pay Tax/NI for workers as well as employees. 

This link may help - no reason for picking this one, was just one of first in my search results (difference between employee and worker uk)    

DullGreyGuy

There is no legal requirement for self employed to have a separate bank account as legally you and the business are one and the same entity. That said, the T&Cs of many personal current accounts say they cannot be used for business purposes (though most turn a blind eye to it whilst everythings going fine). 

Worker, as per https://www.gov.uk/employment-status/worker may be the best alignment to your situation which is somewhere between an employee and a self employed person. 

Are the hours you are working measured in any way? The one thing about workers -v- self employed is the fact you have to be paid NMW, get holiday pay etc whereas a self employed person doesnt but they shouldnt collect taxes on a self employed person. 

Undervalued

MANDYWOO said:

Hi, please could someone help?
I have been doing some exam marking, I say how many papers I can do, there's a set fee per paper and a deadline. I then send in an invoice and they pay me. 
Income tax and national insurance are being deducted from the pay as shown on the payslip, but the company say I am self-employed and wanted me to sign a contract that says that (and other things).
But I disagree with some of the contract terms, and when I spoke to HMRC they said I was employed as the company was paying tax and NI on my behalf.

Confused, and would appreciate your views on the situation. Initially the company wanted me to set up a limited company, but I am not doing that much work and only just earned enough to pay tax last year. Just need to know if I should have a self-employed status or separate bank account. 

Many thanks

Generally they do and not always correctly! There is (was?) a questionnaire on the HMRC website which supposedly helps you to establish your employment status. Most people agree it is well skewed towards saying employee.

It is perfectly possible to end up in a situation where HMRC takes a different view to an employment tribunal as to an individual's status. Neither is binding on the other!

Have you asked the exam board their reasoning? Presumably they "employ" a lot of people such as your self?  

MANDYWOO

Thanks, yes they say that under IR35 it's there responsibility to make sure I pay tax, so they are making the payments to ensure no issues. However, the contact issued appeared too generic, stating that I would need indemnity ins, and would be liable for a 15% fee if I needed them to pay tax on my behalf and other issues if I were unavailable for more than 10 consecutive days in a 52 week period. I just want to be sure that I'm not creating a problem. As I see it, as long as my tax and ni is being paid that's the main thing. 

DullGreyGuy

MANDYWOO said:

Thanks, yes they say that under IR35 it's there responsibility to make sure I pay tax, so they are making the payments to ensure no issues. However, the contact issued appeared too generic, stating that I would need indemnity ins, and would be liable for a 15% fee if I needed them to pay tax on my behalf and other issues if I were unavailable for more than 10 consecutive days in a 52 week period. I just want to be sure that I'm not creating a problem. As I see it, as long as my tax and ni is being paid that's the main thing. 

IR35 only applies to a person involving a third party... namely where the person doing the job is operating via their own limited company. If you are self employed IR35 doesn't apply.

If you were assessed under IR35 and determined to be inside then the client does have a liability to ensure that you are taxed in a similar way to an employee if using a third party but the normal way of doing this is requiring you operate via an Umbrella or become an FTC. They cannot unilaterally deduct taxes and the IR35 element goes out the window when you are self employed.

saker75

If you are self employed IR35 doesn't apply.

It does apply if you are self-employed. I was a sole-trader with contracts with several large higher education institutions and most treated me IR35. It was annoying at first but ultimately everything evened out.

DullGreyGuy

saker75 said:

If you are self employed IR35 doesn't apply.

It does apply if you are self-employed. I was a sole-trader with contracts with several large higher education institutions and most treated me IR35. It was annoying at first but ultimately everything evened out.

its not what the law states

https://www.gov.uk/guidance/understanding-off-payroll-working-ir35

The rules apply if the worker who provides services to a client through their own intermediary would have been an employee if they were providing their services directly to that client.

Looking at the actual legislation:

https://www.legislation.gov.uk/ukpga/2003/1/part/2/chapter/10

The whole chapter is headlined as:

CHAPTER 10 Workers' services provided through intermediaries to public authorities or medium or large clients

As a self employed person there is no intermediary; the law only applies to those proposing to use a LTD/PSC or umbrella 

IR35 is just used as an excuse by many to drive behaviours they wanted and most dont know the law well enough to push back... not that it matters, if a client doesnt want self employed contractors they have no obligation to take them, its just should be something they say rather than blaming IR35

Undervalued

DullGreyGuy said:

saker75 said:

If you are self employed IR35 doesn't apply.

It does apply if you are self-employed. I was a sole-trader with contracts with several large higher education institutions and most treated me IR35. It was annoying at first but ultimately everything evened out.

its not what the law states

https://www.gov.uk/guidance/understanding-off-payroll-working-ir35

The rules apply if the worker who provides services to a client through their own intermediary would have been an employee if they were providing their services directly to that client.

Looking at the actual legislation:

https://www.legislation.gov.uk/ukpga/2003/1/part/2/chapter/10

The whole chapter is headlined as:

CHAPTER 10 Workers' services provided through intermediaries to public authorities or medium or large clients

As a self employed person there is no intermediary; the law only applies to those proposing to use a LTD/PSC or umbrella 

IR35 is just used as an excuse by many to drive behaviours they wanted and most dont know the law well enough to push back... not that it matters, if a client doesnt want self employed contractors they have no obligation to take them, its just should be something they say rather than blaming IR35

You may be right but my experience with colleges / universities (admittedly a good few years ago) was that they operated the way saker75 and mandywoo have described. Part of that time I was VAT registered and that would persuade some, but not all, such bodies to treat me as "genuinely" self employed.

Unless people qualified to do what mandywoo does are in very short supply she probably has little alternative but to go along with them and claim any excess tax back from HMRC. Providing she declares the income and tax has been paid somewhere any comeback for getting it wrong will be on the "employer".

Many years ago one of the largest universities (and probably lots of others) got caught for many millions in tax having got into the habit of paying all kinds of "staff" ranging from cleaners to visiting professors in full, based on a "invoice" scribbled on the back on an envelope. It was around the time the construction industry was cleaned up!

Unless the situation or skill set is almost unique you won't change them. It will be their way or the highway!

DullGreyGuy

Undervalued said:

DullGreyGuy said:

saker75 said:

If you are self employed IR35 doesn't apply.

It does apply if you are self-employed. I was a sole-trader with contracts with several large higher education institutions and most treated me IR35. It was annoying at first but ultimately everything evened out.

its not what the law states

https://www.gov.uk/guidance/understanding-off-payroll-working-ir35

The rules apply if the worker who provides services to a client through their own intermediary would have been an employee if they were providing their services directly to that client.

Looking at the actual legislation:

https://www.legislation.gov.uk/ukpga/2003/1/part/2/chapter/10

The whole chapter is headlined as:

CHAPTER 10 Workers' services provided through intermediaries to public authorities or medium or large clients

As a self employed person there is no intermediary; the law only applies to those proposing to use a LTD/PSC or umbrella 

IR35 is just used as an excuse by many to drive behaviours they wanted and most dont know the law well enough to push back... not that it matters, if a client doesnt want self employed contractors they have no obligation to take them, its just should be something they say rather than blaming IR35

You may be right but my experience with colleges / universities (admittedly a good few years ago) was that they operated the way saker75 and mandywoo have described. Part of that time I was VAT registered and that would persuade some, but not all, such bodies to treat me as "genuinely" self employed.

Even before IR35 changes no FS company would accept a self employed person because there was far too much risk of them turning around at some point in the future and claiming they were a concealed employee/worker and so entitled backdated holiday, sickpay or redundancy etc

Using a contractor via a PSC or Umbrella gives a clear break between person and service provider so mitigate that risk. Obviously IR35 introduced new risks instead and hence some have moved again and now wont accept PSCs.

Unfortunately people are lax with their language, in many places, and so agencies state a company "has made a blanket inside IR35 determination for all contractors" which if true would be illegal. Instead the company has actually simply decided to only hire contractors via compliant umbrellas which is perfectly legal (but its a fine nuance between the two)

saker75

It’s interesting in that I performed the same function for seven universities and five treated me as IR35, the other two didn’t. When I worked for a private university we had a blanket ban on all sole-traders, resulting in a couple of my suppliers creating LTDs and others just not continuing to sell their services to us. The ban became greyer as time went on.