PAYE vs self employed

[Paul Jenks]

The costs you can claim against your employment income will depend on what your contract of employment says, e.g. what equipment you have to provide etc. The company is obliged to issue a written statement of employment particulars within two months of starting.

 

I am intrigued as to why your employer has gone down this route because it can be expensive for them with employers NI, holiday pay, sick pay (possibly), pension contributions and the latent liability in the event of redundancies.

 

I have had some battles with HMRC when they have tried to argue that subbies were really employees but what becomes clear during the "discussions" is that (imho) HMRC run the argument to see how robust the defence is. If a company caves in, HMRC will rub their hands and think of extra employers NIC they will collect. When faced with a rigorous defence demonstrating that the indicators of self employment set out in the HMRC's own documentation (see my earlier post above) are being met, they normally accept defeat and move on.

 

The reason the employer has gone down this route is that they were at odds with employment law and risked being challenged for tax evasion.

As has been stated on this thread and many others previously, if a person works for a day rate under the supervision of the employer or an employee, they are technically employed and have the same rights as an employee. Many companies, large and small, across many industry sectors, have been using the self-employed model for years to avoid tax, NI and the usual employer costs. This makes their business model cheaper and more flexible. HMRC have recognized the loop-hole and tightened their definition.

Whether from purely fiscal reasons or perhaps a hint of employee protection is a moot point.

The fact remains that the conventional 'self-employed' business model for companies is shown to be on the edge of, if not completely into, the realms of tax evasion, (individual cases such as your own notwithstanding).

It is, perhaps, why the trend for zero hours contracts started.

[FatherJack]

Forestry company's are now being made to go PAYE ,, one company i do hand cutting for (felling outsider's, brashing , driving there winch tractor ) is having to put everyone on PAYE including me doing 2 or 3 day's a week ,, im self employed but when working for them i will be tax'ed at source as they call it ,, gone from being paid weekly to monthly and will have tax taken off after £850 per month, but when self assesment tax return is done i maybe able to claim money back from the hmrc

Im not sure how it will work out as this is the first month ,

Has anybody else had to do similar ??

 

HMRC will assess each of your 'contracts' individually. If you are a PAYE employee on some then there won't be refund just because you deem yourself to be SE.

[Tom D]

Wether or not an employer pays you on the books or off as has already been said in the eyes of the law you ARE an employee. What this means is that you could, after a while, demand paid holiday and if it went to court the employer would loose. If you were involved in an accident you would have the same rights as an employee too, this is why ALL employers should have employers liability cover...

 

I tend to put "subbys" on a zero hours contract these days, I can still use them when required but we pay a bit of tax and NI on their wages. I do also use "bona fide" subbys who bring their own vehicles and kit and work unsupervised.....

[woodyguy]

To reply to getting tax back

"HMRC will assess each of your 'contracts' individually. If you are a PAYE employee on some then there won't be refund just because you deem yourself to be SE". Yes there will. You will do a tax return at the end of the year, detailing the tax you have paid on PAYE and this will essentially be removed from your SE liability. I am half and half employed and self employed. I don't pay any more tax because of the PAYE half. Now NI is another matter!

[Hodge]

Wether or not an employer pays you on the books or off as has already been said in the eyes of the law you ARE an employee. What this means is that you could, after a while, demand paid holiday and if it went to court the employer would loose. If you were involved in an accident you would have the same rights as an employee too, this is why ALL employers should have employers liability cover...

 

I tend to put "subbys" on a zero hours contract these days, I can still use them when required but we pay a bit of tax and NI on their wages. I do also use "bona fide" subbys who bring their own vehicles and kit and work unsupervised.....

 

 

Hi Tom, I'm in similar situation, I was going to have a lad in zero hours but have been told that this is going to be outlawed soon as unfair to workers. So I'm a bit stumped, other point is how do you go on for providing chainsaw trousers, boots etc as I thought the employee had to have these provided?? Also how about sick pay? The old method of being able to claim back sickness pay has been stopped now and the employer has to cover it. I would be interested to hear your thoughts on the subject. pM if you want as I don't want to de rail thread.

[Inoff the Red]

The fact remains that the conventional 'self-employed' business model for companies is shown to be on the edge of, if not completely into, the realms of tax evasion, (individual cases such as your own notwithstanding).

It is, perhaps, why the trend for zero hours contracts started.

 

I agree that this may be one of the reasons for the growth in zero hours contracts but the distinction between employed/self employed will turn on the facts of each case.

 

As an example, HMRC will accept that labour only subbies on a building site are indeed self employed even though they may be working under the supervision of the contractor.

 

I agree that self employment has been used by companies to reduce costs and you only have to look at the BBC to see how they pushed highly paid presenters into self employed status! In many respects to claim that a news presenter is self employed is something of a joke when you look at the HMRC tests. Unfortunately HMRC do nothing to dispel the impression that they are strong on the weak but weak on the strong.

[bella wood]

Another contractor i used to work for got big checks from hmrc a couple of years ago, he does planting through to tree clearance on bog land (forestry commission), i did saw work for him and he was told that because i bring my saw and fuel i would not have to be PAYE but his planters would be because they only supply labour and he would have to deal with them as Paye ,

But ive been told hmrc have changed there minds now , if i use My tractor and winch i would be classed self employed ,,

 

Ive heard of a couple of other machine harvesting companys that are putting there drivers on paye and its the start of the hmrc clamping down on things,,

 

Im not expecting to get a contract from the people i work for and still class (and think of ) myself as self employed,

Ive got as many days as i want with this contractor (4 machines ) and also work for another contractor as and when need (14 machines )

[doobin]

As I understand it- if you are a labour only subcontractor, the same rules now apply in forestry as in construction, so you are taxed at source under the CIS scheme.

 

Plenty of LOSC were taking the piss and not paying tax- this is why the CIS came into being. If you are genuinely self employed and buying machines/tools to advance your business, all you need to do is provide a UTR to prove you are registered and paying tax.

[kevinjohnsonmbe]

As I understand it- if you are a labour only subcontractor, the same rules now apply in forestry as in construction, so you are taxed at source under the CIS scheme.

 

Plenty of LOSC were taking the piss and not paying tax- this is why the CIS came into being. If you are genuinely self employed and buying machines/tools to advance your business, all you need to do is provide a UTR to prove you are registered and paying tax.

 

 

I wouldn't argue with your point about a potential subby providing UTR to demonstrate "self employed" status, but I question the validity or 'point' of doing so.

 

If I ask someone for their UTR to supposedly fulfil my obligation to due diligence, there is no mechanism for me to confirm they haven't just made up a number and presented it as their UTR. I can't phone HMRC and ask " is Joe Spunktrumpet's UTR 5674568?" They can't tell me because of data protection so it's a pointless exercise!

 

I agree your proposition that seeking the UTR of a prospective subby is supposedly the right thing to do, I just don't see that it makes a toss of difference to anything. If you expand the logic, I should therefore ask Tesco, the local baker, the builders yard to give me their UTR when I buy something from them to "prove" they pay their tax - it's a nonsense!

 

HMRC - I've **** 'em!

[Inoff the Red]

A UTR number does not prove self employed status, nor that the individual/company pays tax it merely shows that they are on the HMRC's system.

 

Forestry work per se is not caught by the CIS regulations unless that work relates to activity on a building site.

 

There are some types of work that aren't automatically treated as construction operations, but can be in certain situations. For example, tree planting and landscaping aren't construction operations if they're part of estate management or forestry work. But HMRC would treat them as work that's covered by the CIS if they were done in the course of building a new housing development.

 

Involvement in the CIS system introduces a new raft of bureaucracy that contractors and sub contractors have to deal with together with a range of penalties for non compliance. If anyone is likely to be involved with work on construction sites it is worth registering with HMRC in advance as a contractor has to verify the tax status of each subbie and if you are not registered in the CIS scheme, the contractor will be told to make a higher rate (30%) deduction from the labour element of your invoice. The standard deduction rate is 20% although some subbies do qualify for gross payment.