How do you employers stay on the right side of the tax man?

[Andy Collins]

Well it looks as if its all going to become irrelevant sooner or later, HMRCE look like they are gunning for all industries to comply with PAYE regulations, and supply a leaflet called "Use of Labour Providers...advice on due diligence". And yes it also looks like they will attempt to re-coup unpaid taxes from employers if they feel you should be employing staff on the books as opposed to using the self-employment status many fly under at the minute, this isn't necessarily unpaid taxes of the self-employed, but the evasion of the taxes and NI contributions the employer would have made had the staff been on the books.

[Hodge]

Well it looks as if its all going to become irrelevant sooner or later, HMRCE look like they are gunning for all industries to comply with PAYE regulations, and supply a leaflet called "Use of Labour Providers...advice on due diligence". And yes it also looks like they will attempt to re-coup unpaid taxes from employers if they feel you should be employing staff on the books as opposed to using the self-employment status many fly under at the minute, this isn't necessarily unpaid taxes of the self-employed, but the evasion of the taxes and NI contributions the employer would have made had the staff been on the books.

 

They have no idea about reality! If I employ my Groundie then I might as well just shut up shop as I can't afford to employ anyone. This is because the last time I did it put me over the vat limit and I do not want to be vat reg as 90% of my customers are domestic and in my area most of the other tree firms are not vat reg. if I employ someone again I have to charge more to cover all the benefits that employees get (ppe, holiday pay etc) I also have to Pay my accountant more and have to cover my tax NI side of things which cost. The state the country is in they should be trying to help us employ not put us out of business.

[Andy Collins]

I wholeheartedly agree with you, the basic increase in costs to a business to employ one man on the books is around £3500, it's not just the extra tax and NI, but holiday entitlement of 29 days and sickness, introduction of workplace pensions and a payroll system.

[Kev Stephenson]

They have no idea about reality! If I employ my Groundie then I might as well just shut up shop as I can't afford to employ anyone. This is because the last time I did it put me over the vat limit and I do not want to be vat reg as 90% of my customers are domestic and in my area most of the other tree firms are not vat reg. if I employ someone again I have to charge more to cover all the benefits that employees get (ppe, holiday pay etc) I also have to Pay my accountant more and have to cover my tax NI side of things which cost. The state the country is in they should be trying to help us employ not put us out of business.

 

Therefore you are evading the additional taxes (VAT included) by using self employed vs employed. This is exactly what the HMRC are trying to stop.

 

I fully understand what you are doing and it is only necessary due to others in your area doing the same but it doesn't make it right. Don't take it the wrong way, I am not having a go it is just you wrote the exact reason the HMRC are having a tighten up.

[Paul Jenks]

I pay no wages at all. All guys who work for me bill a client for a job or 2 every week. I explain to client the situation and they get bill from one my guys for the tree work or logs they then give them a cheque. Simple.

 

Which is tax evasion, if it can be proved.

[Paul Jenks]

They have no idea about reality! If I employ my Groundie then I might as well just shut up shop as I can't afford to employ anyone. This is because the last time I did it put me over the vat limit and I do not want to be vat reg as 90% of my customers are domestic and in my area most of the other tree firms are not vat reg. if I employ someone again I have to charge more to cover all the benefits that employees get (ppe, holiday pay etc) I also have to Pay my accountant more and have to cover my tax NI side of things which cost. The state the country is in they should be trying to help us employ not put us out of business.

 

HMRC are there to ensure that the correct taxes are paid. They enforce legislation. The legislation is the same for eveyone. Those who choose to circumvent legislation for the purpose of financial gain are breaking the law. Depending on the situation they are sometimes applauded and sometimes berated. Either way the law of the land has been broken.

 

As hard as it may sound, if your business model is unsustainable without circumventing current tax legislation I'd say it's the wrong model.

[Hodge]

Therefore you are evading the additional taxes (VAT included) by using self employed vs employed. This is exactly what the HMRC are trying to stop.

 

I fully understand what you are doing and it is only necessary due to others in your area doing the same but it doesn't make it right. Don't take it the wrong way, I am not having a go it is just you wrote the exact reason the HMRC are having a tighten up.

 

Thing is I really don't want to employ anyone and find it hard to understand why they can tell me I have to?? If someone is self employed and they pay tax then what's the problem?? If I pack in then they won't get any tax and I will be another statistic claiming benifit. I don't want to pack iron but ultimately that's what I may have to do or get 4 different groundies.

[Hodge]

HMRC are there to ensure that the correct taxes are paid. They enforce legislation. The legislation is the same for eveyone. Those who choose to circumvent legislation for the purpose of financial gain are breaking the law. Depending on the situation they are sometimes applauded and sometimes berated. Either way the law of the land has been broken.

 

As hard as it may sound, if your business model is unsustainable without circumventing current tax legislation I'd say it's the wrong model.

 

I don't see that I am gaining financially, I am making a living. What they don't get is that domestic jobs which is 90% of my custom would then have to have VAT charged on top, the customers don't want to pay VAT and use a non VAT company, I loose. I have been through this before on many threads and I know hat works for me in my area. I really feel that the small business man get shafted not helped.

[nick channer]

Which is tax evasion, if it can be proved.

 

how can that be... only person i'm evading is myself as when i do my end yr accounts i have no invoices for any labour thus my profit looks more than it would do if i had invoices for £40000 for labour...

my accountant said there was no problem in doing this and had tax inspection 2 yrs ago and they did ask why i had no labour invoices. i explained, no problem. all my guys are self employed obviously..

[Paul Jenks]

I wholeheartedly agree with you, the basic increase in costs to a business to employ one man on the books is around £3500, it's not just the extra tax and NI, but holiday entitlement of 29 days and sickness, introduction of workplace pensions and a payroll system.

 

IMO, the benefits in sustainability and staff continuity far outweigh the extra costs. The legislation for employing personnel is very clear and simple for employers and employees alike. That for subcontractors is vague and open to abuse at the expense, predominently, of the subcontractor and HMRC.

It's very difficult for subcontractors to follow a career path as it's expensive and time consuming. If employers wish to engender loyalty from their staff they should develop them and do this within a PAYE structure. (Just my view, and I know it doesn't suit everyone. Employers and employees alike. I also realise that this a subject for a different thread.)

 

And don't forget all the training, PPE and machinery costs Andy.