Invoicing an employer

kissmeimposh

I an employer has offered to take someone on for a 1-month's trial period and has asked that the employee invoice the employer for that month (and then once the month is successfully completed wages will be by standard regular PAYE payslips), can the employee just make up a one-time invoice and does that create an obligation to report that invoiced month to the tax authorities?
Clearly the employee would not want to register as a business for a one-time one-month invoice.

LittleVoice

If you invoice an "employer" then the employer should be paying the worker as an employee (PAYE). In my books, if you invoice someone for work done, they are a client, not an employer.

Conor_3

kissmeimposh wrote: »

I an employer has offered to take someone on for a 1-month's trial period and has asked that the employee invoice the employer for that month (and then once the month is successfully completed wages will be by standard regular PAYE payslips), can the employee just make up a one-time invoice and does that create an obligation to report that invoiced month to the tax authorities?
Clearly the employee would not want to register as a business for a one-time one-month invoice.

Completely and utterly illegal under IR35.

cash99

Conor wrote: »

Completely and utterly illegal under IR35.

IR35 only applies where an intermediary is involved e.g. a personal service company.

The arrangement does sound like tax evasion on the part of the employer. I would ask the employer to pay the amount for the first month as wages under paye.

Conor_3

Sorry, you're right. Been around intermediary companies so long it's an automatic answer - lol.

Savvy_Sue

Why would you WANT to do this? Just by taking someone on for a month's trial you don't gain any advantage by asking them to invoice you rather than putting them through PAYE, it doesn't make it more or less easier to get rid of them if it doesn't work out, and it opens a whole HUGE can of worms!

If I was the employee, I'd walk away so fast you wouldn't see me for dust ...

noyk

As far as i know there is nothing wrong with doing this, lots of self-employed people do this all the time. The only things to remember are make sure they don't add VAT otherwise that is VAT fraud and tell them to fill out the self-employed section of the tax return at the end of the year.
If they want simplicity and no hasle of filling out tax return they can also work through an umbrella company (google it) for a month, but umbrella companies charge a bit so do the sums and see if it makes sense before signing up.
It's also nothing to do with IR35.

Savvy_Sue

yes, but self-employed people do this because they are self-employed.

The OP is offering to employ someone on a trial basis but doesn't want to put them on PAYE. Or describing that situation. Maybe the OP is the potential employee?

I'd suggestion a call to the local HMRC office.

LittleVoice

noyk wrote: »

As far as i know there is nothing wrong with doing this, lots of self-employed people do this all the time. The only things to remember are make sure they don't add VAT otherwise that is VAT fraud and tell them to fill out the self-employed section of the tax return at the end of the year.

Just to clarify, it is not fraud if you are self-employed and VAT registered! (In fact, of course, it would be wrong not to charge VAT in those circumstances.)

There are areas of work which can be done on a self-employed basis but which also an organisation could pay for under PAYE. So working for a period on a self-employed basis and then becoming an employee is not entirely unreasonable, particularly as the length of time and exclusivity can be relevant.

Savvy_Sue

Re-reading the original question, I would say that the 'employee' would not need to become a business, but WOULD need to declare it to HMRC, ie register as self-employed. But I would be interested to see if HMRC thought this was an OK thing to do!

fengirl_2

I agree with Savvy Sue. the very fact that this employer has offered employment and stated that the person will be employed after the first month, proves that even the employer knows its an emploer/employee relationship. If they are trying this on, in what other ways would this employer try and wriggle out of their responsibilties? Its the employer's responsibilirty to operate PAYE, so no come-back on the employee for tax and NIC.