Employee wanting to be paid as a contractor

Hi

Hope this is the right place for this

I have an employee who says she does not want to be paid as an employee and instead direct into her company as if she is self-employed.

She doesn't want to pay any tax or National insurance on her wages as she wants to put this through her tax return as though she is self-employed and not employed by us.

How does this work?
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Comments

  • Owain_Moneysaver
    Owain_Moneysaver Posts: 11,357
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    It doesn't.

    If she is an employee you as her employer have a legal responsibility to pay her through the PAYE scheme and make the appropriate deductions.

    Calling her 'self employed' will not change her status and you run the risk of having to make up the back payments of tax and NI which you will not be able to reclaim from her.

    If she doesn't want to be an employee that suggests she isn't committed to working for you, and if she wants to make an illegal declaration of self-employment to defraud HMRC that suggests she isn't a very honest person.

    Personally I'd request her resignation in writing to bring her contract of employment to an end, which is required before you can appoint her on a contractor basis, then simply not re-appoint her as a contractor.
    A kind word lasts a minute, a skelped erse is sair for a day.
  • aj9648
    aj9648 Posts: 1,372
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    Hi

    Thanks

    She does have a legitimate business as she has provided all the details etc

    I assume she would just be paid outside of PAYE.
  • She needs to give you an invoice whenever she wants paid.

    The other poster has a point... sounds a bit dodgy but we don!!!8217;t know the
    Full story.
  • maisie_cat
    maisie_cat Posts: 2,059
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    Even if she has a legitimate business, check the employed versus self employed checklist on HMRC. does she use your equipment, do you direct her work and do you dictate her hours etc? If she does not satisfy the self employed then you have no choice in the matter
  • tacpot12
    tacpot12 Posts: 7,894
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    If your 'employee' wants to be work as an independent contractor, and you can make this work, there are benefits for both of you, but you need to be ready to demonstrate to HMRC that she is self-employed - she decides when she works, where she works, how she works. This will be easy if she is contracted to deliver a specific thing like a manual for a computer system, or a training course, but impossible if she comes to work and sits in a team of employees who all do basically the same thing.
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • Pennywise
    Pennywise Posts: 13,468
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    People are missing the most important point here. In an earlier post, the OP mentioned "company". So does the "employee" have their own limited company? If so, just get them to invoice you, and you pay their limited company. The onus on employment status etc is transferred to the worker if they're operating via their own limited company so you don't have the risks etc of false self employment coming back to bite you. If it's not genuine self employment, it's the "employee" who'll get stung by HMRC for IR35 etc not the OP.
  • unforeseen
    unforeseen Posts: 7,272
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    And of course only give her short contracts with short notice periods. Easy to get rid of her then.
  • aj9648
    aj9648 Posts: 1,372
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    Thanks

    I!!!8217;ve told her to invoice me
  • prowla
    prowla Posts: 13,125
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    There is a big difference between employee and contractor.


    A contractor is your employee and is not entitled to paid leave, sick leave, paid bank holidays, job perks, career development, pension, and so-on.


    The contractor does work (provides services) as agreed, typically either on a time & materials basis, or on agreed deliverables.



    The relationship is not employer-employee, but client-supplier, just as if you hired a contractor to pave the company car park or suchlike.


    Under this B2B (business-to-business) relationship, the contractor may be required to provide their own equipment, depending upon the particulars of the role.


    The contractor would invoice the client for work/services provided at defined intervals (typically monthly, but possibly weekly) with 30 days payment, and include VAT if they are VAT registered.



    Typically contracts are made for set durations (eg. 3 months), with a defined notice period (eg. 1 month), and there is often the expectation of renewing for another period on a rolling basis.


    For termination, you just have to give the contractor notice, no considerations of redundancy and suchlike.


    Typically the contractor will charge a higher rate than an equivalent employee's salary, but the employer doesn't pay NI, nor provide all of the aforementioned employee benefits.


    From the contractor's perspective, they may perefer to work that way and, depending upon the work they do, how many clients, etc., they may have some tax advantages from running their business.


    Many many companies source workers in that way and it is to the advantage of the country as a whole to have an available flexible workforce.


    A written contract is essential.
  • unforeseen
    unforeseen Posts: 7,272
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    edited 9 June 2018 at 12:00PM
    I bet she doesn't claim this role as inside IR35 which it clearly is if she is doing her old PAYE job without significant changes.

    This is just tax evasion not avoidance and personally I wouldn't allow her to do it.
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