# This doesn't feel right, self-employed status



## AndyA4TDI (May 7, 2012)

Ok, I know nothing about employment law so any help is much appreciated,

My son has been offered a job but only if he accepts it being on self-employed basis doing contract work and being reasonable for filing his own tax returns.

Is the owner of the company simply trying to avoid his responsibilities? I am concerned that my son would have little or no protection that an employee would have. 

Is this common?


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## muzzer (Feb 13, 2011)

Not unusual, my youngest step daughters fella is a self employed painter and decoratorand that pretty much sounds like what he has to do.


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## AndyA4TDI (May 7, 2012)

muzzer said:


> Not unusual, my youngest step daughters fella is a self employed painter and decoratorand that pretty much sounds like what he has to do.


Thanks Muzzer, I have been lucky to have been employed with the same employer for over 30 years so this is new to me.


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## Brian1612 (Apr 5, 2015)

Becoming more and more popular andy. You do have less employee rights, no paid holidays etc but you do pay a lot less tax (20% instead of 40% if your son hits that threshold) and also usually get paid a higher rate than staff.

Sent from my SM-G950F using Tapatalk


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## Naddy37 (Oct 27, 2005)

Get a good accountant, and drill into him that he must keep every single receipt. If the shop doesn’t give him one, make sure he asks for one!!


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## muzzer (Feb 13, 2011)

And then you can claim for pretty much everything, Nick gets a tax rebate once a year and the last one was not far off 3K.


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## davies20 (Feb 22, 2009)

As mentioned this is becoming really common place. Gets the company out of paying numerous things, Not sure on NI but i would imagine so. No sick, Holiday etc.

However, note a recent court case regards Pimlico plumbers in London who are all self employed, yet have been taken to tribunal regards working hours.

I myself would never do it - but, for some i guess it works well!


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## slim_boy_fat (Jun 23, 2006)

davies20 said:


> As mentioned this is becoming really common place. Gets the company out of paying numerous things, Not sure on NI but i would imagine so. No sick, Holiday etc.........


And no pension contribution liabilities either.


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## Droppedit (Dec 2, 2017)

This should help

https://www.gov.uk/employment-status/selfemployed-contractor

Also, the IR35 rules might apply. Have a search on the .gov site.


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## Marve (Jul 5, 2013)

Brian1612 said:


> but you do pay a lot less tax (20% instead of 40% if your son hits that threshold)
> Sent from my SM-G950F using Tapatalk


This is nonsense! The tax brackets are the same for PAYE and Tax Returns.


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## Derekh929 (Aug 28, 2011)

Marve said:


> This is nonsense! The tax brackets are the same for PAYE and Tax Returns.


Yes totally agree , I think the IR would love to Visit Brian soon

I think maybe Brian means the National Insurance is Different and based on set percentage up to set level then smaller percentage above that, plus the good old flat rate.

I have been self Employed for 32 years and I thought wait a minute why are they giving Brian so much special treatment, does he work In East Kilbride


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## Shiny (Apr 23, 2007)

The monthly contribution for NI is only a small amount, but then you get a big hit of NI included in tax statement after your return! Hit me in the backside the first year i was s/e, I thought i was so much better off only paying a few quid a month, then the unexpected NI entry in the tax bill arrived!

You can't claim tax relief on everything you buy either, only business related expenses.

As for the OP, if he is only working for the one company and nobody else then it is a tax job by the employers, no company NI to pay, no holiday pay, no sick pay, no pension and no employee rights. Very common place, but many companies go into liquidation when the IR catch up with them and give them a nice backdated bill.


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## Brian1612 (Apr 5, 2015)

Derekh929 said:


> Yes totally agree , I think the IR would love to Visit Brian soon
> 
> I think maybe Brian means the National Insurance is Different and based on set percentage up to set level then smaller percentage above that, plus the good old flat rate.
> 
> I have been self Employed for 32 years and I thought wait a minute why are they giving Brian so much special treatment, does he work In East Kilbride


Ltd company is what I am talking about.


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## Derekh929 (Aug 28, 2011)

Brian1612 said:


> Ltd company is what I am talking about.


That makes more sense, you had me worried I was losing out, Limited company may be great to limit liability, but the break even point compared to sole trader, is a lot higher threshold since they changed it all in last couple of years, along with a far bigger accountants bill.

I think I looked at examples on both options and £55k+ was showing slightly better on limited, before the changes many lower than this were Limited company for sure.

I suppose it would depend how the monies were drawn from the ltd company as well, if all salary then would be same bands if mostly dividends then yeas different rates for sure.


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## Shiny (Apr 23, 2007)

Ah...but if you are a Director of a limited company, you are an employee, not self-employed


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## Andyg_TSi (Sep 6, 2013)

I work for HMRC and I think you need to use some common sense here.

Who sets the terms and conditions of the engagement/contract?

Who sets the rate of return (pay)?

Basically being self employed can be determined if the following is true......

Checking if they’re exempt from PAYE

Someone is probably self-employed and shouldn’t be paid through PAYE if most of the following are true:

they’re in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit

they can decide what work they do and when, where or how to do it

they can hire someone else to do the work

they’re responsible for fixing any unsatisfactory work in their own time

their employer agrees a fixed price for their work - it doesn’t depend on how long the job takes to finish

they use their own money to buy business assets, cover running costs, and provide tools and equipment for their work

they can work for more than one client

If ALL the above applies then probably self employed.

If the opposite applies to the above statements, then the person "offering the job" is controlling the terms of engagement and therefore trying to avoid accounting for PAYE.....when in reality the person being offered the job should be classed as an employee and subject to PAYE as such.

EDIT: the following is also true if someone is truely self employed....

they put in bids or give quotes to get work

they’re not under direct supervision when working

they submit invoices for the work they’ve done

they’re responsible for paying their own National Insurance and tax

they don’t get holiday or sick pay when they’re not working

they operate under a contract (sometimes known as a ‘contract for services’ or ‘consultancy agreement’) that uses terms like ‘self-employed’, ‘consultant’ or an ‘independent contractor’


So OP taking ALL of the above into account, is your son going to be self employed?


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## Pauly.22 (Nov 15, 2009)

I did it. 

Request a UTR number from the tax office. My employer stopped my tax at source and then I simply did a self assessment and got it back. 

Self employed is common as if work dries up the employer has no obligation to pay. Generally No sick pay, no holiday pay no pension


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## jr2007 (Oct 5, 2016)

Andy has put the main questions to think about in his post but an important point is understanding that whether you are employed or self-employed is a question of fact and not a choice. If an employer demands that an employee reports their status as self-employed, this does not terminate the employment relationship from a tax perspective and you risk a significant tax bill in the future.


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## jr2007 (Oct 5, 2016)

Shiny said:


> Ah...but if you are a Director of a limited company, you are an employee, not self-employed


Not necessarily, though directors can be employees they could also be office holders


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## danwel (Feb 18, 2007)

I understand your thoughts and feelings and I’ve been self employed recently after years of PAYE.

Quite a lot more companies are doing it. There are advantages and disadvantages for both but in my opinion there’s nothing sinister about it. If he was PAYE they may have workplace pensions, holiday pay, sick pay, training courses etc to pay for him but self employed they don’t alve that to contend with. So yes he doesn’t ge that as such but with a good accountant he can still have lots of benefits and remain within the legal framework.


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## danwel (Feb 18, 2007)

Shiny said:


> Ah...but if you are a Director of a limited company, you are an employee, not self-employed


Oh and this 👍😉

Being limited company is a good way of dealing with the tax and also some of the benefts too.


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## The Cueball (Feb 8, 2007)

Derekh929 said:


> ....does he work In East Kilbride


and what's wrong with EK?!?!?  :spam:

:lol:

:thumb:

OP, as Andy said above, I would firstly apply the correct tests to see if your son is actually classed as self employed..... if not, I would wonder what the company is up to.

:thumb:


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## AndyN01 (Feb 16, 2016)

A long time ago (decades....) I became involved in what was then called "categorisation" i.e are you an employee or self employed.

It's not a "choice" by the "employer" and beware of putting the cart before the horse.

The first question is are you legitimately self employed? 

If so then you don't get sick pay, holiday pay etc. etc. 

One of the big questions (it may well have changed) was....

If you don't turn up who pays for the work you should have done?

If you are self employed it's......YOU, not the "employer" because you have a contract to provide whatever it is so it's up to you to make sure it happens.

The "employer" can quite happily sue you for whatever it cost them to get the job done as you didn't do it.

Also beware that if there is an investigation and you are found to be an employee HMRC certainly used to come after those "self employed" people for all the tax & NI that was now "owing." 

Be careful and do you legal homework.

Great advice from Andyg_TSi.

Good Luck.

Andy.


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## jr2007 (Oct 5, 2016)

danwel said:


> I understand your thoughts and feelings and I've been self employed recently after years of PAYE.
> 
> Quite a lot more companies are doing it. There are advantages and disadvantages for both but in my opinion there's nothing sinister about it. If he was PAYE they may have workplace pensions, holiday pay, sick pay, training courses etc to pay for him but self employed they don't alve that to contend with. So yes he doesn't ge that as such but with a good accountant he can still have lots of benefits and remain within the legal framework.


It isn't within the legal framework if he is actually an employee on the facts but submits his tax return on a self-employment basis. Sick pay, holiday, etc. are employment rights not privileges and cannot be avoided by an employer for the sake of convenience. Any competent tax professional or accountant with a tax qualification will be reviewing this as part of their advisory to their clients, if not then they are not qualified to be advising on tax matters.


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## Derekh929 (Aug 28, 2011)

The Cueball said:


> and what's wrong with EK?!?!?  :spam:
> 
> :lol:
> 
> ...


It was ok last weekend when I passed through:lol: No hairy bikers on Harleys to be seen:thumb:

You need to address the pot holes for a start:doublesho

How you doing Quey?


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## AndyN01 (Feb 16, 2016)

And a bit more....

What about public liability insurance? 

If you are self employed and a member of the public gets, say, injured because of something you have/haven't done it's you the "Have you ben involved in an accident that wasn't your fault brigade" will come after.

Are you fully up to speed with Risk Assesments? You'll struggle to prove to a court that you weren't negligent if you haven't got all the paperwork to show the risks and how you avoided/minimised them. And even then....... 

People have lost their house and more.

I think some insurances are a legal requirement? 

Shiny is undoubtably much more capable & knowledgeable than me on insurance issues but you get the idea.

It's not just about being able to potentially reduce your tax bill.

Be careful.

Andy.


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## The Cueball (Feb 8, 2007)

Derekh929 said:


> It was ok last weekend when I passed through:lol: No hairy bikers on Harleys to be seen:thumb:
> 
> You need to address the pot holes for a start:doublesho
> 
> How you doing Quey?


yeah the potholes are wild at the moment eh... 

no riding for me yet, been stuck in the garage rebuilding the Pan... :thumb:

hopefully out soon after the next round of snow heading our way...

:thumb:


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## danwel (Feb 18, 2007)

AndyN01 said:


> And a bit more....
> 
> What about public liability insurance?
> 
> ...


You don't need written RA's unless you employ 5 or more people.

Public liability is only needed if you're limited company I'd say.

There's a big difference between self assessment, self employed and limited company.

The OP and his son need to do their homework and see what is beat for them which is partly what this thread is about.


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## Andyg_TSi (Sep 6, 2013)

Lots of people go self employed legitimately.

What im getting at is if an employer is advertising for staff......but they insist the role is self employed.

However.....the employer is:

Setting the rate of pay
Setting the times you must attend the workplace
You cannot work for anyone else, because effectively your working full time hours week in-week out for the same company

Simple tests like that indicates you should be an employee


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## Shiny (Apr 23, 2007)

Public Liability Insurance is not a compulsory insurance, but should be in place. Employers Liability is compulsory by law and the main contractor must have this in place for labour only subcobtractors.

Bona-Fide Subcontractor (BFSC) - a BFSC generally works under their own direction and provides their own material and tools, invoicing work on a per-job basis, including costs for materials etc. A BFSC would need their own Public Liability Insurance in place and it is normally a condition of the main contractor's own liability insurance policy that checks are made in this respect and that the level of indemnity covered is, as a minimum, the same as the main contractor's policy.

Labour only subcontractor (LOSC) - a LOSC generally works under the direction of the main contractor and, as the name suggests, provides their services on a labour-only basis and are generally paid a labour rate. For the purpose of insurance, a LOSC is classed as an employee and it will be necessary for the main contractor to arrange appropriate Public Liability Insurance and also a statutory legal requirement to ensure Employers' Liability Insurance in place.


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## SteveTDCi (Feb 8, 2006)

One mention of a director and up pop's Cuey


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## The Cueball (Feb 8, 2007)

SteveTDCi said:


> One mention of a director and up pop's Cuey


:lol::lol::lol:

:wave:


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